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  • FIRST POST
    • tomhill
    • By tomhill 9th Jul 17, 10:16 AM
    • 49Posts
    • 11Thanks
    tomhill
    Guaranteed Annuity Benefit?
    • #1
    • 9th Jul 17, 10:16 AM
    Guaranteed Annuity Benefit? 9th Jul 17 at 10:16 AM
    Hello all,

    I wonder whether you can help me? I'm currently in the process of helping my father to get his pensions in order.



    He has various different funds held by several providers that we're trying to consolidate into a single pot to reduce management costs and make them easier to manage.


    One of the pots is with Scottish Widows. Under this scheme he has roughly £40k in a unit-linked part and £20k in a with-profits part. My understanding is that the with-profits component has a Guaranteed Annuity Benefit attached to it.


    While the GAB looks reasonable - if not particularly exceptional - to me, my father is adamant that he doesn't want to take it as an annuity and that he'd like to be able to treat it flexibly as with the rest of his pension.

    Scottish Widows is insisting that he obtain independent financial advice before they'll allow him to transfer his policy. We've received quotes for this and they've come in at the region of £2k, which he's reluctant to pay since he's already decided what he wants to do.

    My understanding is that advice is required safeguarded benefits amount to more than £30k but I'm not sure whether in my father's case whether it's just the £20k GAB that's relevant or whether it's the whole pot of £60k. If the former, then I believe that Scottish Widows is incorrect in stating that he must take advice before he can transfer his policy. Please can you advise as to which interpretation is correct?


    Many thanks in advance for your help,



    Tom
Page 1
    • LOST
    • By LOST 9th Jul 17, 10:50 AM
    • 284 Posts
    • 65 Thanks
    LOST
    • #2
    • 9th Jul 17, 10:50 AM
    • #2
    • 9th Jul 17, 10:50 AM
    There ould be an element of GMP in which case the whole of the plan is counted twoards the £30k threshold
    • xylophone
    • By xylophone 9th Jul 17, 11:01 AM
    • 22,432 Posts
    • 12,935 Thanks
    xylophone
    • #3
    • 9th Jul 17, 11:01 AM
    • #3
    • 9th Jul 17, 11:01 AM
    http://adviser.royallondon.com/technical-central/pensions/transfers/safeguarded-benefits/

    Safeguarded benefits are defined as benefits that are not money purchase or cash balance benefits. This means defined benefits, guaranteed pensions including Guaranteed Minimum Pensions (GMPs) and Guaranteed Annuity Rates (GARs).

    Some people may be surprised by the inclusion of GARs in the above list. This is because the benefits are calculated by reference to the guarantee and not just the plan value.

    The above may be relevant to your father's case.

    If he has a number of pensions that he would like to bring together under one provider, it could be that the advice of an IFA would save him money in the long run by finding a provider with a fee structure lower than would be available on a DIY basis.
    • tomhill
    • By tomhill 9th Jul 17, 11:11 AM
    • 49 Posts
    • 11 Thanks
    tomhill
    • #4
    • 9th Jul 17, 11:11 AM
    • #4
    • 9th Jul 17, 11:11 AM
    Hi Xylophone.

    Thanks for this. I think that the GAR that was quoted was about 9%, which granted is very good, but because it's only on £20k of the pot it isn't life changing. You can't just take the GAR and leave the other £40k. Whether you base the calculation on the £20k pot of the circa £1800 yield it's still well-short of the £30k threshold.

    My father and I have decided to self-manage the pension using Interactive Investor. The fee structure looks very competitive to us and I suspect that an IFA is unlikely to be able to beat that. Even if they were though, the value of having control over his money and understanding what it's doing is worth more to my father than the absolute return on the investment.
    • xylophone
    • By xylophone 9th Jul 17, 11:39 AM
    • 22,432 Posts
    • 12,935 Thanks
    xylophone
    • #5
    • 9th Jul 17, 11:39 AM
    • #5
    • 9th Jul 17, 11:39 AM
    I think your father needs to contact SW in writing and ask the basis for their requirement for him to obtain advice.

    You can then proceed from there.
    • sandsy
    • By sandsy 9th Jul 17, 7:56 PM
    • 1,156 Posts
    • 671 Thanks
    sandsy
    • #6
    • 9th Jul 17, 7:56 PM
    • #6
    • 9th Jul 17, 7:56 PM
    The £30k threshold isn't based on the value of the pot - it's based on the value of the income, e.g. It would cost more than £30k to buy an income of £1800pa. Effectively, an income of £1800pa for life is considered to be worth more than a lump sum of £20k.

    That position will change next year as the advice threshold is expected to change to be based on the value of the pot which is intuitively simpler for people to understand. The expected date of the change is 6 April.
    • Malthusian
    • By Malthusian 10th Jul 17, 10:52 AM
    • 2,627 Posts
    • 3,747 Thanks
    Malthusian
    • #7
    • 10th Jul 17, 10:52 AM
    • #7
    • 10th Jul 17, 10:52 AM
    That position will change next year as the advice threshold is expected to change to be based on the value of the pot which is intuitively simpler for people to understand.
    Originally posted by sandsy
    The position will change because it will allow the big insurers to wriggle out of paying more of those annoying expensive GARs they promised all those years ago - while simultaneously boosting the market for the big DIY firms. FTFY.
    • kidmugsy
    • By kidmugsy 10th Jul 17, 2:05 PM
    • 9,475 Posts
    • 6,250 Thanks
    kidmugsy
    • #8
    • 10th Jul 17, 2:05 PM
    • #8
    • 10th Jul 17, 2:05 PM
    The position will change because it will allow the big insurers to wriggle out of paying more of those annoying expensive GARs
    Originally posted by Malthusian
    Surely the problem is the short-termist mug customers, not the insurers?
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