Standard Life WP

greco_2

I've got about £50k in this fund which guarantees me a 4% return per annum. In the current climate, that's not bad.

However, I still have an MVA of about a quarter of the fund. I should ask SL why but was wondering if others have the same situation. I understood that SL were working towards getting rid of them.

Gatser

greco wrote: »

I've got about £50k in this fund which guarantees me a 4% return per annum. In the current climate, that's not bad.

However, I still have an MVA of about a quarter of the fund. I should ask SL why but was wondering if others have the same situation. I understood that SL were working towards getting rid of them.

I am in the same situation as you greco!
I have mentioned this in my "BEST SIPP" thread, starting at posting No.15, see:
http://forums.moneysavingexpert.com/showthread.html?t=954195

Unfortunately my WP fund is somewhat higher :mad: and it too is under threat of a 25% MVA. I have been told for about 3 years now "...but it should come down". It never has, even as stock markets made a substantial recovery.

It depends on your age, but once you are able to take a pension (at 50 until March 2010, then at 55) SL will allow you to use that WP money to fund an annuity (with SL or another provider) without the MVA penalty.
I do not want an annuity, I want drawdown so they say I must suffer the MVA unless I wait until I get to age 60 (my "normal retirement date")

HOWEVER... not trying to be a scaremonger...but, SL do say in their printed statements that these current rules could change in future. I have put it to them that they could therefore move the MVA to (say) 50% at any time in the future and there will be $£$£-all I can do about it. Reply:"That's very unlikely".

I am considering the responses made on my BEST SIPP thread, before I start to investigate further the legality of an MVA that is imposed if we take a drawdown pension but not if we take an annuity pension.

Perhaps we should join forces? :cool:
Anyone else in the same situation ?

greco_2

The really odd thing is that my wife also has over £50000 in SL WP but there is no MVA in her case. I'm guessing that the reason is that the money's in two separate WP funds - the original WP and the Millennium - and that there's an MVA on the original WP and a bonus on the millennium fund which cancel each other out. In that case I would be looking to get out of the Millennium fund which only has a 2% growth guarantee and leave the original fund for the time being. She's a few years younger than me and we have no plans to touch her pension for another 12 years so it might even be better to accept the hit and put the money into funds with better growth prospects.

I'll be 60 next year when I plan to retire but will live on my ISAs etc for a few years and then take the tax free cash and live on that for another few years. Hopefully, the WP situation will have been sorted out by then but I don't fancy taking a £12000 hit on my fund because of SL's iniquitous conditions.

There must be a lot of people in the same boat who consider that SL are in breach of the FSA's rules on treating customers fairly but the FSA are totally clueless. I used to work for a big financial services company that was expert at ripping off its customers but whose compliance officers ran rings round the FSA simply by wording its T&Cs in a way that sidestepped the rules. I resigned in disgust.

Gatser

The really odd thing is that my wife also has over £50000 in SL WP but there is no MVA in her case. I'm guessing that the reason is that the money's in two separate WP funds - the original WP and the Millennium

Correct. I had a total WP fund split like that. The IFA (via SL) advised me that if I transferred the Millenium (£50k) portion I would suffer a proportionate part of the total MVA. I decided to accept this but only after transferring to external funds did I see that all of the MVA had been left behind attached to the original WP funds! (No-one seems to know what is going on!!) I was however pleased at this result because like you, I wanted to get a better return on the Millenium WP money.

I'll be 60 next year when I plan to retire

So could you take the WP as a pension and avoid the MVA?

There must be a lot of people in the same boat who consider that SL are in breach of the FSA's rules on treating customers fairly but the FSA are totally clueless.

It sounds like it needs raising with some "higher powers" somewhere...

I used to work for a big financial services company that was expert at ripping off its customers but whose compliance officers ran rings round the FSA simply by wording its T&Cs in a way that sidestepped the rules. I resigned in disgust.

Good for you! It is sad to hear this.
...are we surprised about the publics mistrust of pensions etc.

EdInvestor

IMHO it could be a long time before the 25% MVA is lifted off the original 4% WP fund.

The reason is that when SL almost went a*se-up in 2003 and forced the FSA to make the lifecos reserve properly for their guarantees, the company then had to sell much of the equity base backing the 4% fund at a market low and reinvest the money in bonds and cash.Hence there's a sizeable gap between the paper values of the policies and the actual assets backing them.

The FSA did this because it couldn't take the risk that a big lifeco would default on its guarantees, a situation SL was heading for rapidly.The result was that your 4% return is safe, although you are now being charged a fee for it (aren't you?) so it's probably more like 3%. That return will be obtainable from the interest on the bonds.

Unfortunately, you need capital growth as well to get rid of the MVA, and the probability is that this won't happen any time soon because that slice of the WP fund will have little money invested in growth assets such as equities and property.Iin effect the 4% WP fund is a zombie fund like Equitable life and the the other bombed out ex mutuals in the Phoenix/Pearl group.

You could check both the assret mix of the 4% fund and the charges they are making for the guarantee with SL as they are relevant to any decision on moving.

The Millenium fund IIRC does not have a guaranteed investment return - or indeed even a floor.It is very similar to a unit linked managed fund, but has a bit of smoothing.

As I've said before, IMHO SL should be challenged on its refusal to allow people to get out at 50 into drawdown as opposed to an annuity.There is no justification whatsoever now for that rule. :mad:

greco_2

So could you take the WP as a pension and avoid the MVA?

I don't know. Could I?

Gatser

So could you take the WP as a pension and avoid the MVA?

greco wrote: »

I don't know. Could I?

I only suggested that because I know that you can take your 25% tax free sum, then an annuity from the WP fund from age 50... but NOT a drawdown pension ! I wanted to take the latter, thats my frustration.
If you are happy with an annuity... it may be something for you to consider?

greco_2

I'll have to look into that. I understand that it's possible to take a pension as part annuity/part drawdown and if it's possible to just buy an annuity with the WP and leave the rest as drawdown to avoid the MVA, I'd certainly do it.

Gatser

greco wrote: »

I'll have to look into that. I understand that it's possible to take a pension as part annuity/part drawdown and if it's possible to just buy an annuity with the WP and leave the rest as drawdown to avoid the MVA, I'd certainly do it.

In theory, what you suggest should be possible.

The thing that puts me off, is the abyssmal amount you get back with annuities after handing over all those hard earnt savings.
I am going to sit on the WP for the next 10 years and let it grow at the guaranteed 4%.

greco_2

Current rates are around 7% for a single life age 60 for a level annuity. I don't know what SL are paying but that would give me around £3500 and if I've a current life expectancy of another 25 years, that doesn't look too bad.

At 70, the rate is close to 9% which would give me around £7000 per year assuming my fund grows at 4%.

Looks like a toss up to me.

Gatser

greco wrote: »

Current rates are around 7% for a single life age 60 for a level annuity. ...... that doesn't look too bad.

Yes, but I look at it like this: That £50k is YOURS. If you put £50k into a building society at present you can get around 7% interest AND the £50k is still yours. With the annuity...you are handing over your £50k in exchange for ONLY the 7% until you depart this world. ...to me that does look bad.