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Guaranteed Annuity Rate Pension

Tymeric
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Guaranteed Annuity Rate Pension

#95382

Postby Tymeric » November 13th, 2017, 4:30 pm

I have a Conventional With-Profits Plan Pension with a Guaranteed Annuity rate that can be taken anytime between 60 and 75. Having paid in for 30 odd years,albeit relatively small amounts, the time is fast approaching when I will be able to obtain the benefits of it.
I have previously asked for a quote but they seem rather coy to give me the information I want, and seem more interested in pushing the current transfer value, possibly in the hope that I might take it elsewhere and lose the GAR ?.(I recently asked for a quote at age 60 and they replied with a quote for 65)
Just a couple of basic questions...
1. What is a reasonable notice period giving them plenty of time, of my intention to take the Pension at the earliest Pension date..?
2.Their last quote gave the "current value" with "final bonus included" being the "current transfer value". It was not clear whether a terminal bonus has still to be applied once the Pension reaches earliest date...?
Having never been in this situation before, just looking for a couple of pointers before I put pen to paper again.
With thanks in advance

Alaric
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Re: Guaranteed Annuity Rate Pension

#95393

Postby Alaric » November 13th, 2017, 5:03 pm

Tymeric wrote:2.Their last quote gave the "current value" with "final bonus included" being the "current transfer value". It was not clear whether a terminal bonus has still to be applied once the Pension reaches earliest date...?


It's likely that the term "final bonus" is their way of describing a terminal bonus.

If they are playing fair, the transfer value they offer should be of a broadly similar value to the annuity you could otherwise elect.

bungeejumper
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Re: Guaranteed Annuity Rate Pension

#95884

Postby bungeejumper » November 15th, 2017, 11:43 am

I have a with-profits pension with Phoenix, a firm who are not best regarded for their generosity, and who have been lambasted in the press for charging huge fees/adjustments. However, when I phoned them recently to ask about transfer values and so forth, they confirmed that I could expect to get the full transfer value (£75K plus) with no exit charges. My aim was (and is) to transfer the fund out into a drawdown SIPP with another provider. Is that what you're trying to do?

Okay, there are three factors that might be relevant here, so don't celebrate too soon. ;) Firstly, AFAIK, the funds are not supposed to levy exit fees of more than 1% these days, and it would be unusual (although not, I think, impossible) to charge a fee for somebody who is at least 55 years old. Secondly, although my retirement age for this policy is 70, I am past the 65 marker already. And thirdly, my policy dates from before 1986, which I believe was a pivotal point for some reason or other that I forget - generally, I think the pre-86 policies were more free and carried better guarantees, but don't quote me on that.

There was, however, a minor snag. I could do the transfer all right, but I would need to get a declaration from an IFA to the effect that he'd advised me before the fund would release the money. That was because (a) my pension plan carried a guaranteed annuity payout (like yours, I think?), and secondly because it was worth more than £30K. The FCA is very anxious not to let mug-punter pensioners move out of any guaranteed pension benefits that they might be due for until they've been advised. I can see the regulator's point.

Anyway, the upshot of this situation is that I have moved all my other pensions out into a Hargreaves Lansdown Vantage SIPP with drawdown, but I'm postponing the transfer of this one until I can get round to getting advised. Too busy at the moment.

BJ

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Re: Guaranteed Annuity Rate Pension

#95888

Postby FredBloggs » November 15th, 2017, 11:54 am

I think the key words to draw attention to are -
Guaranteed Annuity rate

You need to be crystal clear what the guarantee is that you are giving up if you want to move to another pension scheme. I'd do nothing until I understood exactly what my guarantee would give me as an income.

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Re: Guaranteed Annuity Rate Pension

#95889

Postby vrdiver » November 15th, 2017, 11:57 am

Mrs VRD has a pension that will provide an annuity at 62. Based on her experience, I strongly recommend getting hold of the member's handbook for your scheme and working out for yourself what it should be worth if possible. Mrs VRD has had several projections of current and future value, including lump sums, where the projection was way below the handbook's own calculations. When challenged, they have revised their projection to be in line with the handbook, but it is a slow slog.

Ask them what their response time is for queries / replies. I'd expect it to be around the 4 week mark. Once you have the information you need and have decided on your course of action, I'd allow up to 6 months notice to them (but that's just my experience of to-ing and fro-ing via snail mail and challenging the insurance company's first "offer".

Tymeric
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Re: Guaranteed Annuity Rate Pension

#96101

Postby Tymeric » November 16th, 2017, 7:14 am

Many thanks for all the replies...

Apologies for not making it clear but AIUI, I would lose the GAR on any transfer, so I've never considered moving (well that's not quite true. I did, until someone pointed out the error of my ways a few years ago)
I mentioned the transfer value as I definitely get the impression they would like nothing better than for me to move. (Their future forecasts and transfer values are on the first page, and the GAR projection is on the back)

It's likely that the term "final bonus" is their way of describing a terminal bonus.
If they are playing fair, the transfer value they offer should be of a broadly similar value to the annuity you could otherwise elect.

Thanks for that...

...Based on her experience, I strongly recommend getting hold of the member's handbook for your scheme and working out for yourself what it should be worth if possible. Mrs VRD has had several projections of current and future value, including lump sums, where the projection was way below the handbook's own calculations. When challenged, they have revised their projection to be in line with the handbook, but it is a slow slog.

TBH, I found this a bit depressing...after all those years paying into a Pension, with a GAR, you still have to lock horns with these outfits just to get what was clearly laid out in the plan.
Fortunately, I do have the original table of GAR's etc, and interestingly, their latest projection (for 65) was a little short of the value I worked out.

AIUI, and from what I've read, the GAR is the GAR....can they reduce the figure claiming administration charges and the like...???

I'd allow up to 6 months notice to them (but that's just my experience of to-ing and fro-ing via snail mail and challenging the insurance company's first "offer".,

Thanks for that. Based on their response so far :roll: , I've started the process and asked for a revised projection for next year....

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Re: Guaranteed Annuity Rate Pension

#96109

Postby FredBloggs » November 16th, 2017, 8:04 am

I guess I already know the answer to this question, but, is there any figure in terms of % return per year from the guaranteed annuity? Or can you calculate it? I'd imagine any annuity returning (say) 5% a year index linked for life would be the modern day equivalent of a pot of gold?

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Re: Guaranteed Annuity Rate Pension

#96229

Postby DrBunsenHoneydew » November 16th, 2017, 3:12 pm

FredBloggs wrote:I guess I already know the answer to this question, but, is there any figure in terms of % return per year from the guaranteed annuity? Or can you calculate it? I'd imagine any annuity returning (say) 5% a year index linked for life would be the modern day equivalent of a pot of gold?

Many GARs were "flat rate" e.g. 9% of pot, without indexation. So you get a very high initial payment and take the risk with inflation. Or you transfer out to buy an increasing pension but from a much lower starting baseline. That's the dilemma - if the GAR were indexed there would be no need for discussion!

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Re: Guaranteed Annuity Rate Pension

#96288

Postby Tymeric » November 16th, 2017, 6:45 pm

Many GARs were "flat rate" e.g. 9% of pot, without indexation.

Yes...not indexed. Rates (according to the table) starting at 9.3% if taken @ 60 rising to 16.6% @ 75. There are options as yet undefined, for guaranteed payments, spouse etc and also for payments increasing at a "fixed rate" per annum on a "reduced annuity"

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Re: Guaranteed Annuity Rate Pension

#96367

Postby FredBloggs » November 16th, 2017, 11:02 pm

Tymeric wrote:Many GARs were "flat rate" e.g. 9% of pot, without indexation.

Yes...not indexed. Rates (according to the table) starting at 9.3% if taken @ 60 rising to 16.6% @ 75. There are options as yet undefined, for guaranteed payments, spouse etc and also for payments increasing at a "fixed rate" per annum on a "reduced annuity"

Snatch their arm off for 9.3% is my assessment.


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