Buy annuity from Scottish Widows?

Channelman

I have an unclaimed 'SERPS equivalent' pension which was accrued
whilst I was working for a company which was not 'wholly
contracted out' of the government pension scheme.
I have already retired (aged 63) but not yet claimed this pension.
Under the present rules I have to buy an annuity with it but I suspect
that from April 2006 I may be able to take 25% as a tax free lump sum.
My question is (whether or I take the lump sum or not) should I 'shop
around' for the best annuity or will Scottish Widows 'clobber' me with a
transfer value reduction such that no one else would be able to compete?
The value (not the transfer value) quoted last July was nearly £29,000.
I realise that this will not be a large addition to my pension (about £1200
per year) but I feel that I want to get some value out of it.
Thanks, Channelman

EdInvestor

Hi Channelman

Channelman wrote:

I have already retired (aged 63) but not yet claimed this pension.Under the present rules I have to buy an annuity with it but I suspect
that from April 2006 I may be able to take 25% as a tax free lump sum.

Correct.

My question is (whether or I take the lump sum or not) should I 'shop
around' for the best annuity or will Scottish Widows 'clobber' me with a
transfer value reduction such that no one else would be able to compete?

Is this pension money invested in the With profits fund? If so, and you are not planning to take the benefits at a "contractual date " ( that is the retirement date on the policy) then there might be an MVA exit penalty applied.

But more importnat may be to check whether the pension has a valuable Guaranteed Annuity Rate (GAR) attached. If it does ( and many Widows policy do) then this GAR should give you a much better annuity than shopping around. However, you can probably only get it at the official retirement date on the policy,whatever that is.

If the money is not in the WP fund there should be no penalty and you should shop around.

Channelman

Thanks for that Ed, I'll have to dig out the original info from SW.
I should have it somewhere although it's over 20 years old.
They send me a statement yearly which tells me what the 'pot'
is worth usually in July. It does increase every year but they also
quote what it 'could be worth' if I purchase the annuity when I'm
65 but this doesn't always increase....infact one year it decreased.

Channelman

@EdInvestor,
I've checked all the SW documents I have and the pension is described
as an "Appropriate Personal Pension" and as I said was the 'SERPS equivalent'
part of a company pension which was not wholly contracted out after
transfering from a wholly contracted out scheme.
The sum quoted, I now realise, is actually the Transfer Value and it does
state that no MVRs have been applied.
It seems to be a 'with profits' fund but I can find no mention of a GAR. In
fact they quote a possible "what it could be worth" figure when I reach 65,
which seems to vary every year (sometimes downwards).
There is also a terminal bonus to be added on termination which again seems
to vary each year (not always up) of around 3%.
Perhaps I would be best to let it "run it's course" until I am 65 in Dec 2007
and then make a decision.....or at least until April 2006.
I was just concerned that the "what it could be worth" figure at present
is less that it was in 2003 and that by claiming it now I stop any repetition
of this.
Regards, Channelman

EdInvestor

HI CM

In the first instance suggest you ring and ask if this policy contains a Guaranteed Annuity Rate and if so what percentage this rate is. Be firm.If you get no satisfactory answer then write and ask again, insist on an answer.

I would not do anything to disturb this policy until this GAR issue has been clarified. The reason the amounts are going up and down is because of fluctuations in ordinary non GAR annuity rates (which behave like interest rates), but if you have a GAR this would not affect you and your terminal bonus at 3% is so small that it can be ignored.

Roughly how much is this policy worth BTW?

Here's a [url=http://forums.moneysavingexpert.com/showthread.html?t=137076]GAR example[/url] showing their value.

Channelman

Hi again Ed,
>In the first instance suggest you ring and ask if this policy contains a
>Guaranteed Annuity Rate and if so what percentage this rate is. Be firm.
>If you get no satisfactory answer then write and ask again, insist on an
>answer.
I'll give them a ring tomorrow

>Roughly how much is this policy worth BTW?
Like I said in the first post the Tranfer Value was about £29,000 last July.

>Here's a GAR example showing their value.
There's something wrong with the link here Ed.
Regards, Channelman

Channelman

Hi Ed,
Just rung SW....policy definately does NOT have a GAR
Channelman

EdInvestor

OK, did you ask for a transfer value? If you compare this with the current value you will see if the policy has an MVA penalty.

Normally an MVA is not payable if you leave on a "contractual event", that is, on the "Normal Retirment Date " shown on your original policy.

What was the NRD and has it been changed, if so, what is it now?

Channelman

The transfer value is the only figure I have since it is the only
figure quoted every year on the statements. This was £19,400
on the statement I received in July 2005.
Before I had this policy I worked for a company whose pension
scheme was 'wholly contracted out'. When I changed companies the
new one was not wholly contracted out so a lump sum was transfered
into a 'SERPS equivalent scheme' and part into the company pension.
After this passing thru the L&G COMPS (Contracted Out Money Purchase
Scheme) it finished up with ScotWid as an 'Appropriate Personal Pension'
where it remains now.
NRD is 24th Dec 2007 (when I will be 65) it has never been changed.
Channelman

dunstonh

Scottish Widows for some time now have shown the transfer value on statements as the value of the plan. Usually because there is no charges on transfers with them now. However, the transfer value would not include any potential MVR as that is a fund penalty rather than a product penalty.

EdInvestor

Channelman

You said in your first post

The value (not the transfer value) quoted last July was nearly £29,000.

And then later ( after confirming there is no GAR attached):

Channelman wrote:

The transfer value is the only figure I have since it is the only figure quoted every year on the statements. This was £19,400
on the statement I received in July 2005. NRD is 24th Dec 2007 (when I will be 65) it has never been changed.

It seems that the full value of the pension is 29k. The transfer value is 19k.This is a large penalty.

ON this basis it would appear to me you should wait until 24 Dec 2007 to claim it, at which point there will be no penalty and you can take 25% tax free cash.

If you claim it earlier, it seems from what you say you will lose as much as one third of its value.