AVCs – not small change
25 Apr 2019
Additional voluntary contributions (“AVC”) are often viewed as the distant relative to core LGPS benefits. You know, the sort of relative that you know exists, and you actually quite like, but you never quite get around to visiting them (this analogy reminds me to say sorry to Uncle Jim - I promise I will visit you this summer). However, due to the unprecedented changes taking place across AVC providers, we’d encourage you to revisit your Fund’s AVC arrangements to ensure they remain appropriate and the governance surrounding any changes to members’ investments is robust.
There have been particularly notable changes at two of the main providers in the LGPS, Prudential and Equitable Life (“Equitable”).
Prudential is the largest provider in the LGPS market. It is in the process of changing a number of aspects to its AVC offering, including amending the minimum fees for With Profits and closing a number of existing lifestyling options. The former is likely to impact a small number of members, but the latter will impact a larger number and has the potential to lead to a number of questions and challenges from members e.g. why the changes took place and whether the new lifestyle arrangements remain appropriate for the member.
Equitable, which has a historic presence across a large number of LGPS funds, is in the final stages of its wind down. At the end of the year, members invested with Equitable will see their assets transferred to Reliance Life (“Reliance”). The precise details of where these assets will be transferred i.e. to which funds, won’t be confirmed until the summer. However, it will be important that members take time to consider if the funds remain appropriate for them. It will be particularly notable for members invested in With Profits fund to understand the Reliance transfer process, as the With Profits Fund and all its guarantees will disappear, while redeeming early will result in them missing out in significantly enhanced pay-outs.
In addition to the above, we have seen organisational change at other traditional providers, including Scottish Widows, Aberdeen Standard and Zurich, all of which has implications for members invested with these providers.
In summary, there are significant changes taking place across LGPS AVC providers. It is important that your arrangements remain appropriate for members’ retirements plans, robust governance surrounds any transfers of members’ assets and engaging communications are in place to help members make informed decisions. Please speak to your Hymans Robertson Consultant for more information.