Transferring an annuity with a GAR

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PeterBalham
PeterBalham Posts: 37 Forumite
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in Pensions, annuities & retirement planning
I have a pension pot with a GAR I obtained from re-assure

The value in the pot is 12k, however with the guaranteed annuity rate I can receive £1k per annum

In order for me to get this sum Reassure will pay Liverpool Victoria £12k the value of the pot plus another £13k .

This is because LV will need £25k to buy the annuity for me.

I asked reassure can you jusy pay me the £25k to put in my SIPP and they said no

Can I get at the £25k or do I just accept the £1k annuity.
Transferring the £12k pot would be just daft
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  • PeacefulWaters
    PeacefulWaters Posts: 8,495 Forumite
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    If it's £12k lump sum or £1k pa for a normal life expectancy take the £1k pa.
  • sandsy
    sandsy Posts: 1,720 Forumite
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    £1K pa is worth more than £12k - Reassure confirm this by telling you it would need £25k to buy £1k.

    So do you want something worth £25k or something worth £12k?
  • dunstonh
    dunstonh Posts: 116,371 Forumite
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    Can I get at the £25k or do I just accept the £1k annuity.
    Transferring the £12k pot would be just daft

    LV supply annuities for Reassure. It is a commercial agreement. You are asking Reassure to break that commercial agreement and to suffer extra risks and costs that are not already factored for in that commercial relationship just for you.

    What they are doing is not daft. Nice try on your part but there is no logic to your argument.
    I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
  • PeterBalham
    PeterBalham Posts: 37 Forumite
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    Well I am a tryer :)

    What I have just been told by Reassure is that at the moment there is £12k in a pot reassure hold on my behalf

    (1) reassure guaranteed me a £1k per annum
    (2) 12k would not buy £1k annuity

    As reassure no longer offer annuites or have in house expertise.

    (3) They have asked Liverpool Victoria to ask a panel of 4 pension providers on behalf of Reassure how much they have to be paid on top of £12k to offer a £1k per annum.
    (4) The best quote on the panel said £13k . So £25k in total

    So reassure will pay over the £12 k they already have on my behalf and add £13k to that.
    This £25k will buy my annuity.

    I have said to both of them just give me £24k and split the £1k saving however you see fit :)

    I can see admin may prevent that as the computer says no :)

    I would far rather the legislation meant I had the option of being given the cash value of the guarntee plus pot if it was under £30k without advice or with advice if over £30k
  • dunstonh
    dunstonh Posts: 116,371 Forumite
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    So reassure will pay over the £12 k they already have on my behalf and add £13k to that.
    This £25k will buy my annuity.
    Correct. If you excercise the annuity option that the plan was set up with at the outset, they have to guarantee you get that amount. Either by paying the rate and suffering on an ongoing cost or take the hit in year one along with a commercial agreement with annuity provider.
    I can see admin may prevent that as the computer says no

    How about breach of contract?
    How would you cover off the cross subsidy lost from the mortality gain?
    I would far rather the legislation meant I had the option of being given the cash value of the guarntee plus pot if it was under £30k without advice or with advice if over £30k

    Without the commercial agreement they have put in place, this figure of £25k would not exist.
    I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
  • GDB2222
    GDB2222 Posts: 24,665 Forumite
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    dunstonh wrote: »
    Correct. If you excercise the annuity option that the plan was set up with at the outset, they have to guarantee you get that amount. Either by paying the rate and suffering on an ongoing cost or take the hit in year one along with a commercial agreement with annuity provider.



    How about breach of contract?
    How would you cover off the cross subsidy lost from the mortality gain?



    Without the commercial agreement they have put in place, this figure of £25k would not exist.

    Forgive me being sightly critical, but it can't be breach of contract. Breach implies one party not doing what they have contracted to do. It is always open to both parties to a contract to agree to change it.

    The OP is entirely logical, and the insurance company is being entirely illogical. Nevertheless, the organisational cost to the insurer of implementing the sensible option is probably much more than £1000. Maybe, if the OP agreed to take £20,000, he might grab the attention of somebody high enough up the system to say yes to that proposition.
    No reliance should be placed on the above! Absolutely none, do you hear?
  • dunstonh
    dunstonh Posts: 116,371 Forumite
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    Forgive me being sightly critical, but it can't be breach of contract. Breach implies one party not doing what they have contracted to do. It is always open to both parties to a contract to agree to change it.

    The two parties are Reassure and LV. LV have agreed terms on the basis of receiving the funds from all the plans with GARs where the GAR is activated. So, Reassure doing something different would be a breach of contract. They are not going to amend a contract because one person wants to break their own pension contract (GARs are a contract event) to get the money as a gift.
    The OP is entirely logical, and the insurance company is being entirely illogical.

    The OP is entirely illogical, and the insurance company is being entirely logical.
    Maybe, if the OP agreed to take £20,000, he might grab the attention of somebody high enough up the system to say yes to that proposition.

    Requiring both insurers to agree it and once you do that with one person, you open the floodgates to everyone which then devalues the contract agreed between the two companies. Who is going to pay for that? Plus, the costs of the changes in actuarial data that would need to be completed again as the insurer would have to price on a new model.
    I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
  • GDB2222
    GDB2222 Posts: 24,665 Forumite
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    dunstonh wrote: »
    The two parties are Reassure and LV. LV have agreed terms on the basis of receiving the funds from all the plans with GARs where the GAR is activated. So, Reassure doing something different would be a breach of contract. They are not going to amend a contract because one person wants to break their own pension contract (GARs are a contract event) to get the money as a gift.



    The OP is entirely illogical, and the insurance company is being entirely logical.



    Requiring both insurers to agree it and once you do that with one person, you open the floodgates to everyone which then devalues the contract agreed between the two companies. Who is going to pay for that? Plus, the costs of the changes in actuarial data that would need to be completed again as the insurer would have to price on a new model.


    I may have misunderstood you. Clearly, the OP has a GAR policy with Reassure, and (I think) we agree that they can come to some arrangement together without it being a breach of contract.

    You state that Reassure has a contract with LV to deal with all their GAR policies. If so, then you are right that Reassure won't want to break that contract. I assumed that it was more flexible than that, which is obviously where we differ.

    How come you have details of that contract between Reassure and LV?
    No reliance should be placed on the above! Absolutely none, do you hear?
  • PeterBalham
    PeterBalham Posts: 37 Forumite
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    Thanks GDB I like the idea of working out a number that might flag up interest to someone senior at Reassure .

    I appreciate your comments :)

    I do have an IFA now who I am using for another matter who is technically competent and charming (well the MSE bar is quite low ) but you know what I mean.

    He said that I should do something along the lines you suggested
    I must say I always though my soft / sales skills as quite poor then I come to MSE :)
  • dunstonh
    dunstonh Posts: 116,371 Forumite
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    edited 13 March 2017 at 9:17PM
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    How come you have details of that contract between Reassure and LV?

    Not specific in details but many providers have signed with annuity providers to be their in-house option. Its fairly widespread and understood.

    The receiving provider (LV) would have agreed terms with Reassure to provide specific terms that allows Reassure to price its liability on the plans with GARs. Those terms would be better than market rates. If Reassure were just picking LV using off-the-shelf rates, then the figure would probably not be £25k but £30-35k. LV have priced their rates on the assumption of getting x% of the total GAR book from Reassure. The contract would not allow Reassure just to give it away in cash. If that happened, it would cost Reassure more. Not save them money as the annuity rate LV offer would be lower and Reassure would have to increase the sums being paid. So, this proposal to save them money is anything but.

    Reassure don't want the costs and insurance liability of the annuity as its not their market. LV do as its part of their business. Reassure already bought most of its book on the cheap. So, can afford to sell its liability at what would appear a loss but its not.

    Bottom line is that if the OP wants the lump sum then it is already cheap at £12k. Why would they want to pay £20k instead of £12k?
    I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
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