FSAVC Pension Plans – why they are bad for your wealth
The FSAVC is the pension plan you will likely never have heard of unless you have one.
The Free-Standing Additional Voluntary Contribution pension plan, to give it its full title, was designed for employees to top up their pension savings.
Doctors and teachers were a prime target for the FSAVC salesmen in the 1990s. The NHS Pension Scheme and the Teacher’s Pension Scheme requires 40 years’ service to be completed if maximum benefits are to be paid. But most doctors and teachers do not have a career of this length, resulting in lower retirement benefits.
The shortfall would be made up, according to the insurance industry, by their FSAVC pension plan.
However, that promise has not been kept.
A combination of very high policy charges and very poor investment performance means most FSAVCs will only return a fraction of the retirement fund originally illustrated.
And in an historically low interest rate environment, the amount of pension that an FSAVC fund can provide is often derisory.
It did not have to be this way, however.
Doctors and teachers had other – much better – options to top up their pension scheme benefits and FSAVC salesmen were required by their regulatory body to make sure this was known and understood before making the sale.
But with large commissions on offer from FSAVC providers, many did not follow the rules.
It is not too late, however, to get your pension back on track.
If your FSAVC was mis-sold, the insurer behind it is required to compensate you.
I have found mis-selling was commonplace. The same rule breaches crop up time and again, with doctors and teachers not properly informed of their options or the risks inherent with an FSAVC plan. Many of my clients receive tens of thousands of pounds in compensation to cover the shortfall in their pension benefits. Any doctor or teacher with an FSAVC plan should have the sale reviewed because this hidden mis-selling scandal needs to be put right.