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    • Terron
    • By Terron 23rd May 17, 10:28 AM
    • 115Posts
    • 124Thanks
    Terron
    GAR pensions
    • #1
    • 23rd May 17, 10:28 AM
    GAR pensions 23rd May 17 at 10:28 AM
    I am looking to start taking at least some of my pensions in 2 years time when I am 60. I have been talking to a pension advisor, but am doubting some of his advice.

    I have 6 pensions. Three he advised leaving alone - the final salary one and its AVC one, and one with a final salary underpin. Then there is a defined contribution one which is being transferred so it can be used for drawdown. Those seem fine.

    The other two are ones I took out in the 80s. They are with profit schemes with a Guaranteed Annuity Rate of 10.6% if I take them at 60. He advised merging them into the drawdown scheme. But the rate seems too good to give up. It looks like I mught be betteer off making extra contributions rather than taking money out of those schemes.

    These are my two smallest funds. They were taken out with Norwich Union in 1985. One was a lump sum, the other regular pay,ments which I stopped when I moved to a job with a company scheme.

    I am unmarried and have no dependants so the basic annuity would be OK.

    What should I be looking at.
Page 2
    • Terron
    • By Terron 29th May 17, 12:54 PM
    • 115 Posts
    • 124 Thanks
    Terron
    The list includes "Personal Pension Plans" which is what mine are called. It is part of a longer list that appears to be all Norwich Union policies and that section looks the best match for mine.

    I am certain that people were able to continue paying into such policies past 1988 as I continued to make regular payments until 1989.

    I found a L&G document about old policies which says that additional contributions can be made to a type of policy they stopped selling in 1987, which indicates that the government did not forbid such contributions.

    The document appears to be a valuation of Norwich Union made when Aviva took over . I am not allowed to post a link to it.
    • dunstonh
    • By dunstonh 29th May 17, 1:46 PM
    • 89,943 Posts
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    dunstonh
    The list includes "Personal Pension Plans" which is what mine are called. It is part of a longer list that appears to be all Norwich Union policies and that section looks the best match for mine.
    Personal pensions did not exist until 1988. However, it was a term that was borrowed from the marketing name of some products. You do not have a personal pension.


    am certain that people were able to continue paying into such policies past 1988 as I continued to make regular payments until 1989.
    Yes they were. That is perfectly fine. As long as the contribution was in force before they were abolished, you could retain that level of contribution until maturity. If there was indexation on the plan, that was a contractual issue and that could be retained. However, if you stopped paying into the pension, you could not restart them unless there was a payment holiday facility. You could also not increase contributions into them after 1988.

    I found a L&G document about old policies which says that additional contributions can be made to a type of policy they stopped selling in 1987, which indicates that the government did not forbid such contributions.
    As I have said, it can be possible where there is a contractual reason built into the plan. However, it could also be marketing. For example, i recall a provider that said you could top up a S226 but when pushed a bit harder, they actually put the top up into a linked PPP which had no GARs. Since 2006, S226 have been classified as PPPs. So, they share the same rules now.

    If you can find a Section 226 RAC that allows top ups that have the GAR applied to the top up then that is an extremely rare beast. Looking up old documents or internet searches are not going to give you the definitive answer. Only the provider can and the odds are that they will tell you that it cannot be topped up and have the GAR applied to that top up.
    I am an Independent Financial Adviser (IFA). Comments are for discussion purposes only. They are not financial advice. Different people have different needs and what is right for one person may not be for another. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
    • Terron
    • By Terron 29th May 17, 4:52 PM
    • 115 Posts
    • 124 Thanks
    Terron
    Personal pensions did not exist until 1988. However, it was a term that was borrowed from the marketing name of some products. You do not have a personal pension.
    Originally posted by dunstonh
    Yes I don't have a personal pension but the name of what I do have is Personal Pension Plan. The fact that the name was used for something different later does not change the name of what I have, though it adds confusion.

    In the document I was refering to (Valuation Report Prepared by the Appointed Actuary) it is clear that from the context that the meaning is the older one.
    The section that looks most likely to include my plan starts.
    (a) United Kingdom: Group Personal Pension Plan, Individual Personal Pension Plan, Free Standing Additional Voluntary
    Contribution Plan (issued up to 31 December 1994)
    It includes some s226 plans as it says:
    (iv) A monthly plan fee of £3.69, except for the S226 Personal Pension plan which is £2.77, paid by cancellation of units.
    and
    (l) The monthly plan fee is reviewed each 1 April, and increased from £3.65 at 1 April 2002, except for the S226 Personal Pension plans, which increased from £2.74
    That section says new business is not allowed but increments are. It is silent on additional contributions.

    As I have said, it can be possible where there is a contractual reason built into the plan.
    Both my plans have contracts that allowed for additional contributions.

    If you can find a Section 226 RAC that allows top ups that have the GAR applied to the top up then that is an extremely rare beast.
    I topped up the lump sum one once (in 1986) and the GAR applies to that. So unless the law stops it it should still be possible. I doubt the company can change the contract unilaterally.

    Only the provider can and the odds are that they will tell you that it cannot be topped up and have the GAR applied to that top up.
    Which is why I have asked them, but if they say that I will ask for an explanation why.

    The one that started as a regular payment one limits the extra that can be paid in and may allow them to refuse to accept it. However the one that started with a lump sum seems to only give them two reasons to reject an additional payment neither of which seem to be satisfied. Maybe there is a law that allows them to refuse to accept such premiums but I have not been able to find one.

    I have read the relevant part of the 1988 act but can't understand it.
    • Terron
    • By Terron 5th Jun 17, 2:56 PM
    • 115 Posts
    • 124 Thanks
    Terron
    No response to my email, so I phoned today. They are going to get their back office to look at it and I should get a response by the 28th of June
    • Terron
    • By Terron 9th Jun 17, 1:44 PM
    • 115 Posts
    • 124 Thanks
    Terron
    Aviva have sent me an ilusstration of what I might get if I were to pay an extra £3,600 into the policy, thus confirming that I can pay extra in.
    However, they ignored the GAR apart from a note:

    The policy includes a Guaranteed Annuity Rate. We have not taken this into account. This may be a valuable benefit if you take your policy with us.


    The annuity rates used for the illustration were -0.7%, 1.3% and 3.3%. Not the guaranteed 10.6%.
    • Linton
    • By Linton 9th Jun 17, 2:15 PM
    • 8,637 Posts
    • 8,612 Thanks
    Linton
    Aviva have sent me an ilusstration of what I might get if I were to pay an extra £3,600 into the policy, thus confirming that I can pay extra in.
    However, they ignored the GAR apart from a note:

    The policy includes a Guaranteed Annuity Rate. We have not taken this into account. This may be a valuable benefit if you take your policy with us.


    The annuity rates used for the illustration were -0.7%, 1.3% and 3.3%. Not the guaranteed 10.6%.
    Originally posted by Terron
    I think you may be comparing different things. -0.7,1.3 and 3.3 dont sound like annuity rates.
    • Terron
    • By Terron 9th Jun 17, 2:21 PM
    • 115 Posts
    • 124 Thanks
    Terron
    The box at the start of the line contains

    If annuity interest rates when you retire are:

    Then the three numbers follow in separate columns. -0.70% does look strange to me.
    • Linton
    • By Linton 9th Jun 17, 2:35 PM
    • 8,637 Posts
    • 8,612 Thanks
    Linton
    The box at the start of the line contains

    If annuity interest rates when you retire are:

    Then the three numbers follow in separate columns. -0.70% does look strange to me.
    Originally posted by Terron
    There are 2 ways of looking at annuities. The more obvious one is simply to say you get x% of your pot per year when you retire. That is what I think the 10.5% is.

    The other way is to state the gilt interest rate from which an actuary could work out the the annuity rate. -0.7, 1.3 and 3.3 I guess means low, medium and high. I would guess that under each of these numbers there is an amount in £s giving your actual annuity. If so divide the actual annuity by the pension pot size and you should get a comparable number to the 10.5%. I would expect numbers of around 5%.

    The other thing to watch out for is that the 10.5% may well be a fixed annuity with no spouse pension and the guarantee may not apply if you change the conditions. The examples given may be different. So you do need to check you are comparing the same annuity.
    • dunstonh
    • By dunstonh 9th Jun 17, 3:52 PM
    • 89,943 Posts
    • 56,646 Thanks
    dunstonh
    The annuity rates used for the illustration were -0.7%, 1.3% and 3.3%. Not the guaranteed 10.6%.
    They are the example projection rates. Nothing to do with the annuity.
    Aviva have sent me an ilusstration of what I might get if I were to pay an extra £3,600 into the policy, thus confirming that I can pay extra in.
    However, they ignored the GAR apart from a note:

    The policy includes a Guaranteed Annuity Rate. We have not taken this into account. This may be a valuable benefit if you take your policy with us.
    You need it confirmed in writing if the GAR applies to the top up. If it does, then according to FCA PS16/12, they should be including the GAR in the example projection.
    I am an Independent Financial Adviser (IFA). Comments are for discussion purposes only. They are not financial advice. Different people have different needs and what is right for one person may not be for another. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
    • Terron
    • By Terron 9th Jun 17, 3:58 PM
    • 115 Posts
    • 124 Thanks
    Terron
    The pot sizes vary across the columns too.
    The middle one is £24,200 paying £1,090 per year or about 4.5% if no additional contribution.
    With a £3,600 contribution it becomes £27,850 paying £1,255 per year, also 4.5%

    The current transfer value in the yearly statement sent last month was £16,080.
    In the letter they sent warning about the possibility of loosing the GAR they wrote that If I took it today I could get £2,372.63, though I can't actually take it until 2019.

    The 10.6% is on a fixed single life annuity payable yearly in arrears. I have no dependants so that is fine.
    The examples are also fixed single life annuities but payable monthly in advance with a 5 year guarantee. That is not much of an advantage to me.
    • dunstonh
    • By dunstonh 9th Jun 17, 4:31 PM
    • 89,943 Posts
    • 56,646 Thanks
    dunstonh
    The pot sizes vary across the columns too.
    It would do as it is 2% p.a. between each example rate.

    The annuity figure vs pot size suggests that no GAR is being applied to this top up (as it equates to 4.5% and not the 10.6% the GAR is).
    I am an Independent Financial Adviser (IFA). Comments are for discussion purposes only. They are not financial advice. Different people have different needs and what is right for one person may not be for another. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
    • Terron
    • By Terron 9th Jun 17, 5:15 PM
    • 115 Posts
    • 124 Thanks
    Terron
    I have spoken to Aviva and they say that the GAR does not apply to additional contributions made after 1998.

    Using that date I did some googling and found https://www.pensions-ombudsman.org.uk/wp-content/uploads/l00190.doc

    That says that Norwich Union said
    …in view of the current low rates of interest in the market place, it has been necessary for Norwich Union, like many other life offices, to review the terms and conditions of our contracts which currently offer a guaranteed annuity rate.
    Our Pension Plus contract has been included in this review, and the decisions we have taken for these plans are that:-
    · We will continue to meet any existing levels of guarantee, but
    we will not accept any future increases or new entrants into existing schemes

    It also says that in that case
    There is nothing within the policy document that guarantees that premiums/contributions can be increased.

    My policy document say I may "at any time and from time to time, before the benefit date (...) pay further sums to the Society by way of premium. It seems arguable that they don't have the right to refuse to accept premiums on the same terms, except for the reasons listed in the policy.

    Section 4 here is the relevant part.
    http://i68.tinypic.com/2qxx8jk.jpg
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