Scottish Widows Reduction On Transfer

swifty_2

In Mar 1989, I started a private pension with Scottish Widows and contributed to it until Jul 1993. I then joined a company pension scheme which I remain in at present. I have now decided to simplify my pensions under the one roof. My statements over the years have continued to arrive from Scottish Widows, the last showing a transfer value of £8330. When the transfer paperwork arrived from Scottish Widows it shows a transfer value of £6951. On quering this figure they say that the policy was not made "Paid Up" until October 2005 and a reduction applies, and that previous statements will not have reflected this reduction. Can you please advise on the following, can they legally do this if the transfer goes ahead and what position would I be in if I leave the policy with Scottish Widows, will the considerable reduction still apply when the policy finishes.

Thank you.

buglawton

Sorry I can't advise on your specific case. I did have an experience with Scottish Widows though: I was suspicious about their procedures due to the fact they'd opened TWO pension schemes for me with different termination dates. Initially I assumed it was a clerical error. When I tried to get them to combine the schemes, insisting that they reveal if commission charges had been taken on BOTH schemes, I never could get a straight answer. Every letter from SW seemed to avoid the point. Due to me never taking no for an answer and replying to every unclear letter with a request for a clear reply, eventually I got a cheque for compensation (a mis-selling situation you see).

So without being able to advise on your specifics, I suggest you take the same attitude as I did.

dunstonh

Can you please advise on the following, can they legally do this if the transfer goes ahead and what position would I be in if I leave the policy with Scottish Widows, will the considerable reduction still apply when the policy finishes.

What you explained in your post sounds like a conventional with profits policy. Without documents or confirmation from you, we cannot be sure. If it is, then some of the value would have been accrued in a guaranteed sum assured which is based on you paying premiums until maturity. If you dont continue until maturity, then you lose the guaranteed sum assured and are given a pro rata value based on what you have paid. This would explain your drop.

A couple of things to be very wary of here. Pensions with conventional with profits funds often offered guaranteed annuity rates well above the current market rates and secondly, Scottish Widows were offering guaranteed annuity rates on new business until 1995. If you havent sought advice on this transfer and are doing it yourself, you need to be very careful you are not kissing goodbye to some extremely good benefits.

and what position would I be in if I leave the policy with Scottish Widows, will the considerable reduction still apply when the policy finishes.

Has a transfer analysis been done? these are the sort of things that a TVAS would compare and show.

EdInvestor

swifty wrote:

My statements over the years have continued to arrive from Scottish Widows, the last showing a transfer value of £8330.

These annual statements would have been showing a policy value, not a transfer value, surely?

When the transfer paperwork arrived from Scottish Widows it shows a transfer value of £6951.

Is this money invested in the With profits fund? If so this is likely to reflect the imposition of a "Market Value Adjuster" exit penalty.

On quering this figure they say that the policy was not made "Paid Up" until October 2005 and a reduction applies, and that previous statements will not have reflected this reduction.

Did you take any action regarding the policy last October?

What position would I be in if I leave the policy with Scottish Widows, will the considerable reduction still apply when the policy finishes.

If this is an MVA, then it would not be applied at maturity. I agree with Dunstonh's view that you should look into the possibility of the policy having a valuable guaranteed annuity rate.It may not be sensible to move it.

oceanblue_3

Ed and dunstonh are right - you need to look into this very carefully:

1) there may be very valuable guaranteed rates available at your selected retirement age; I've seen two recently where the rate at age 60 was nearly 10%; however.....

2) these rates are often payable ONLY on the specified date: not before, and not after!!

In addition, the rates quoted are for a level annuity paid annually in arrear, which won't suit most people. Nevetheless, if they make the annuity more user-friendly (paid monthly with reversion, for example), their rates are still very attractive.

In summary....your wish to consolidate your pension funds is natural but, in this case, may not be beneficial: you would suffer a transfer penalty and forgo potentially valuable guaranteed annuity rates. It's probably best to contact Scottish Widows to ask if your policy has guaranteed rates; if it has, ask what they are at your selected retirement age. When you have that information, let us know so that we can look at your specific circumstances.