Transfer of Section 32 pension

MIKE770

I had a tranfer figure more than double you quote, my fund was just below 39,500 on retirement year before last, so you started off with a low tranfer figure, seems you will have to wait and see what happens a few months before retirement as we did, no info prior to that given when asked them.

ozbrit

Thanks again Mike, I'm disappointed you didn't accrue more. I'm certainly not complaining about my section 32's early performance. But I agree with some other contributors here with regards to Norwich Unions behaviour since the share float. Firstly, the guarantee in the Company's correspondence to policyholders prior to the float where they suggested the sale would not adversely affect fund performance. NU followed that up four years later by ceasing to add annual bonuses, before scrapping the policy completely. Then two or three years ago Aviva scrapping the online site displaying the declared final bonus being applied to maturing policies. It occurs to me that Businesses tend to withdraw clarity when it's not in their interest to show their hand. My guess is they know they're squeezing policy holders in order to maximise profits and dividends - as shareholders are their #1 priority. How else could the CEO and Directors justify their huge salaries with all the free shares/options they're gifted, unless they're delivering every possible penny to bottom line? You don't have to be Mensa material to see what's going on.

I do of course recognise the Company needs to be on a sound financial footing, but the division of wealth needs to be equitable.

dunstonh

My guess is they know they're squeezing policy holders in order to maximise profits and dividends - as shareholders are their #1 priority.

Actually, it has more to do with financial stability and solvency so they don't end up following equitable life.

How else could the CEO and Directors justify their huge salaries with all the free shares/options they're gifted, unless they're delivering every possible penny to bottom line?

Because they are one of the biggest insurers and quite rare in that they are probably the only one left that covers all insurance areas. So, they deserve to be rewarded for their performance.

ozbrit

I think I see another anomaly over the way Aviva handle section 32 policy-holders. On my latest statement Aviva have indicated a transfer value of 80k. In 2007 I requested a transfer figure and it was 77k -so hardly any change in four years, I'd have expected ~ 100k. I'm 57 and have a guaranteed final figure of Pds 101,330 plus further locked in annual bonuses of Pds 66,000. This is the minimum amount that Aviva are committed to paying me. I am currently 57 with the pension maturing in 2019 at age 65. The chances of a Man dying between 57 and 65 in this day and age, seems quite low (I'm no actuary), but even in the event of it happening my Wife would still receive a reduced benefit. Some simple projections tells me that Aviva clearly don't want members to move funds elsewhere. So I wait until I'm 65 then they'll have to accept a transfer via a registered broker -168k min. To my Superannuation fund here in Australia, where I'm now an Aussie Citizen and taxpayer.

That means Aviva after say reducing the figure by 5% to allow for me dying - I actually allowed 10% then reduced this by half to factor in that aviva would still have to pay a reduced pension to the Missus. The new figure is a convenient 160,000. I wonder where could Aviva invest 80k to double their money? They'd need close to 10% pa to do it. Returns may return (couldn't resist that) but I doubt the most optimistic would factor in a safe 5% pa. In applying 5% pa the 80k grows to ~ 118k? Am I missing something?

Over here in Oz where the Central Banks minimum lending rate is traditionally higher than the UK's, even in the darkest days of 2008 you could find ~ 4.5% from a Bank term deposit, today It's over 6%.

If I were to move the Aviva section 32 downunder to aan approved fund via a broker I'd see an annual return of ~5%. One big deduction will come in the form of the Australian taxation office who levy 15% on superannuation fund personal deposits. But at age 60, I can then withdraw 100% of the fund and not even have to declare a cent of tax in my annual tax return ever.

My Wife who has Aviva stakeholders is currently in the process of doing such a transfer.

I can't help but feel that Aviva are being stubborn. I could accept that they'd want something for themselves, but most of all you'd think they'd make transfers significantly attractive enough in order to tempt policyholders, if only to do nothing other than to extricate themselves from what appears to be a much greater commitment in 2019.

MIKE770

ozbrit wrote: »

I think I see another anomaly over the way Aviva handle section 32 policy-holders. On my latest statement Aviva have indicated a transfer value of 80k. In 2007 I requested a transfer figure and it was 77k -so hardly any change in four years, I'd have expected ~ 100k. I'm 57 and have a guaranteed final figure of Pds 101,330 plus further locked in annual bonuses of Pds 66,000. This is the minimum amount that Aviva are committed to paying me. I am currently 57 with the pension maturing in 2019 at age 65. The chances of a Man dying between 57 and 65 in this day and age, seems quite low (I'm no actuary), but even in the event of it happening my Wife would still receive a reduced benefit. Some simple projections tells me that Aviva clearly don't want members to move funds elsewhere. So I wait until I'm 65 then they'll have to accept a transfer via a registered broker -168k min. To my Superannuation fund here in Australia, where I'm now an Aussie Citizen and taxpayer.

That means Aviva after say reducing the figure by 5% to allow for me dying - I actually allowed 10% then reduced this by half to factor in that aviva would still have to pay a reduced pension to the Missus. The new figure is a convenient 160,000. I wonder where could Aviva invest 80k to double their money? They'd need close to 10% pa to do it. Returns may return (couldn't resist that) but I doubt the most optimistic would factor in a safe 5% pa. In applying 5% pa the 80k grows to ~ 118k? Am I missing something?

Over here in Oz where the Central Banks minimum lending rate is traditionally higher than the UK's, even in the darkest days of 2008 you could find ~ 4.5% from a Bank term deposit, today It's over 6%.

If I were to move the Aviva section 32 downunder to aan approved fund via a broker I'd see an annual return of ~5%. One big deduction will come in the form of the Australian taxation office who levy 15% on superannuation fund personal deposits. But at age 60, I can then withdraw 100% of the fund and not even have to declare a cent of tax in my annual tax return ever.

My Wife who has Aviva stakeholders is currently in the process of doing such a transfer.

I can't help but feel that Aviva are being stubborn. I could accept that they'd want something for themselves, but most of all you'd think they'd make transfers significantly attractive enough in order to tempt policyholders, if only to do nothing other than to extricate themselves from what appears to be a much greater commitment in 2019.

Be very careful, I pointed out my experiance of the section 32 (mis-sold) policies and the lack of yearly interest updates, but at the end when I claimed the H.M. Revenue pointed out to me that under that section the minimum figure cannot go below GBPxxxxx etc, they were right AVIVA had to make up any shortfall at their own expence, Remember we transferred to section32 because the rouse was given in them days that i.e. you are getting 2.5% TRANSFER NOW YOU WOULD BE GETTING 5%+, only lasted 2-3 years then nothing, so end fund under performed, BUT Aviva had to make it up to contract, have you a guaranteed safeguard there?? be very wary.?

also the Broker who sold the policy had to pay to-wards the shortfall, in my case they set up another Policy with a new Insurance company so the original one could not (if they wanted to) loose the funds (Broker was RBS Bank). so be careful I think you may be jumping the gun here, just my thoughts having been through the mill on this one, also I found out changing to section 32 I lost out on an early pension payments at age of 60 yrs old as the old company retired staff in most cases at age 60, so I lost valuable years monies.

ozbrit

MIKE770 wrote: »

have you a guaranteed safeguard there?? be very wary.?

It appears Mike, that your section 32 was more complicated than mine. I contracted out of the Company pension which Ironically was also run by NU.
The Company pension was the standard 40/60 variety.

So in 1988 my financial adviser applied for the transfer value. Initially, i was offered ~10k. Ironically a friend of mine had done the same thing after he'd worked the same number of years with the Halifax BS and handily had been pulling a similar salary, so I was fortunate in having a real life comparison to go by and his transfer value was ~13k. We requested NU re-look at the value and it was adjusted to ~13.5k, citing a calculating error.

I received a number of illustrations. The one I accepted was tfor benefits to be taken at age 65, with an agreed minimum pension pot of 101,330k. I have to say the illustrations were rather exagerated even for those times ie. You could get x amount if the returns on the fund were 15%. I never dwelled on what were improbable figures.

What did grab my attention however, was the annual bonuses added to the bottom line up till 2001 - these added a further 65k to the account.

Now I wish to move this pension away from Aviva, I feel their transfer offer of 80k to be a bit on the paltry side - only 8 years off maturity. In 2007 NU indicated a 77.5k transfer figure along with the suggestion that any future transfer value could fall as well as rise. Hold the phone!!!! This is not a stakeholders pension with no guaranteed end figure and where pay-outs are conditional on fund performance, but a guaranteed final figure of 167k in 2019.


I'm really keen to consolidate this pension in Oz, I've already seen it's value eroded with sterling falling the way it has and as long as the fund remains in the UK, the longer It stays exposed.

But If Aviva are unable to do the fair thing (imo) and offer a figure in the region of 100k, then I'll just sit it out and then arrange to transfer out the 167k at maturity. As I've already suggested, where can Aviva safely invest 80 or 100k and see it grow to ~160k in eight years?

MIKE770

ozbrit wrote: »

It appears Mike, that your section 32 was more complicated than mine. I contracted out of the Company pension which Ironically was also administered by NU.
That Company pension was the standard 40/60 variety. For every year of contributions you were guaranteed 1/60 of the best one of the final three salaries you received with that employer. The number of years in which you could contribute was capped at 40. Hence that 40/60 terminology.

So my adviser in 1988 when I left employment in the UK applied for a transfer value. Initially, they offered me ~10k. Ironically a friend of mine had done the same thing after he'd worked the same number of years with the Halifax BS and handily had been pulling a similar salary as myself. Well his transfer value was ~13k. We disputed the transfer value given to us with NU and they improved it to ~13.5k, citing a calculating error had been made.

I received a number of illustrations by NU for my new personal section 32 transfer pension. The one I accepted was to retire at 65, with an agreed minimum pension pot of 101330k. I have to say the illustrations were rather exagerated even for those inflationary days (though inflation had been contained by 1988) ie. You could get x amount if returns on the fund were 15%. But I never dwelled on what were clearly 'pie in the sky' figures.

What did grab my attention however, was the annual bonuses being added to the bottom line up till 2001 - these added a further 65k to the bottom line.

Now I'd like to move this pension out of Aviva and feel their transfer offer of 80k to be paltry and only 8 years from maturity, particularly in view of the 77.5k figure they'd already offered me 4 years ago. In their offer letter, they also suggested that any future transfer value could fall as well as rise. Hold the phone!!!! This is not a stakeholders pension with no guaranteed end figure and where pay-outs are conditional on fund performance, but a guaranteed figure of 167k in 2019.

One might think that it'd be in Aviva's interests to offer a sufficiently juicy figure and by doing that decrease their exposure to this type of policy. Insurers inc Aviva have often remarked how concerned they are by future the cost to them will be in having to payout.

I'm really keen to consolidate this pension in Oz, I've already seen a large erosion in potential value with sterling falling the way it has and as long as the fund remains in the UK, the longer I stay exposed.

But If Aviva are unable to do the fair thing (imo) and offer a figure in the region of 100k, then I'll just sit it out and take 167k at maturity. As I've already asked, where can Aviva or me safely invest 80 or 100k and see it grow to 160k in eight years?

You are quoting amazing figures from a low transfer (initial) fund, my transfer fund in 1988 was 22,250GBP,. For such a high possible return your quotes, nothing near I got from any of my personal pensions, still that is how it goes! I suppose.

ozbrit

MIKE770 wrote: »

You are quoting amazing figures from a low transfer (initial) fund, my transfer fund in 1988 was 22,250GBP,. For such a high possible return your quotes, nothing near I got from any of my personal pensions, still that is how it goes! I suppose.

First off Mike, You had a different guarantee to me, yours had a guaranteed minimum pension - mine doesn't, only a guaranteed fund on completion in 2019. I seem to recall that section 32's back in those days had to comply with certain aspects of the pension it derived from. Secondly the figures I gave were off the top of my head and I can now see the actual annual bonuses accrued = £62k

What is puzzling is why annual bonuses ended for you after 3 years, but continued for the rest of us until 2001?

Back in 1988, it was feasible to believe that returns of 7%pa annually on investments were very attainable. 7%pa compounded would double your money in 10 years - @10% would see the principle amount grow by160%. Your policy ended in 2009 - ten years is a significant factor here.

To grow £13.5k to create an end figure of £101.33k over a 31 year term would require a return of ~6.71% compounded.

As a matter of interest £163k derived from the start figure equates to an annualised return of ~8.4% compound.

The best part of the section 32 story is the way inflation has fallen away. £13.5k adjusted for UK inflation is only worth £28k today )

MIKE770

ozbrit wrote: »

First off Mike, You had a different guarantee to me, yours had a guaranteed minimum pension - mine doesn't, only a guaranteed fund on completion in 2019. I seem to recall that section 32's back in those days had to comply with certain aspects of the pension it derived from. Secondly the figures I gave were off the top of my head and I can now see the actual annual bonuses accrued = £62k

What is puzzling is why annual bonuses ended for you after 3 years, but continued for the rest of us until 2001?

Back in 1988, it was feasible to believe that returns of 7%pa annually on investments were very attainable. 7%pa compounded would double your money in 10 years - @10% would see the principle amount grow by160%. Your policy ended in 2009 - ten years is a significant factor here.

To grow £13.5k to create an end figure of £101.33k over a 31 year term would require a return of ~6.71% compounded.

As a matter of interest £163k derived from the start figure equates to an annualised return of ~8.4% compound.

The best part of the section 32 story is the way inflation has fallen away. £13.5k adjusted for UK inflation is only worth £28k today )

As I remember N.U. were one of the 1st to freeze bonuses on these accounts, as you say a bare minimum stepped in on mine but of course the scheme had a shorter length of time to yours before I retired, excuse was returns are very small but Final Bonus should be more as the little profit in those years of no bonus, was put in the Final Bonus Fund, ( which could mean we are not to know if it had not)being scepticle chap I am.

ozbrit

Yes Mike it would seem that NU as a PLC decided that switching the emphasis away from annual bonuses to final bonus arrangement would suit them rather than policy holders.
In the days when they were open about how their/our investments had performed they operated a smoothing process. In really good years they kept some of it back and applied it in the leaner years. Of course, the annual bonuses once added were permanent.
Nowadays, we can't guage how Aviva are travelling, whether they're siphonng off profits to other areas of their operation. We have no way of knowing whether the final bonus payouts are equitable or not, they don't even publish them on their website anymore.

You are quite correct in being sceptical about Businesses who won't show their hand and Aviva are definitely not showing theirs, but I suspect that it's the same story throughout the Industry.