MVA penalty

waltzer

I've just noticed in a recent post that someone pointed out that Standard Life impose hefty MVA under certain circumstances. I currently put 350 pm into a SL SHP (my cont + tax relief+ employers cont) and I'm planning to up this by another 150-200pm personal cont (from salary) from June this year. I also have a Pru PP which holds my SP2 opt out and stands at c20K. I've got modest aspirations for retirement as I was a carer for many years and didn't work (OH has good final salary pension). I'm just trying to max out the little I have over the next few years with a view to retiring at 60. Am I correct in presuming that SL will penalise me for a) retiring early and b) looking for annuity on the open market? I believe that Pru don't apply MVA if pot is <25K, above that figure I don't know... I'm now concerned that I'm pumping cash into SL only to be heavily penalised later? Is this the case? Should I consider putting this extra into Pru or other vehicle instead? I was planning to eventually combine the two pots and buy the best small annuity I can. Now I not sure if I'm doing the right thing (or rather doing the right thing by planning but not doing it in the best way). Has anyone got any views/info that might help me see this more clearly?
As usual, many thanks.

dunstonh

Am I correct in presuming that SL will penalise me for a) retiring early and b) looking for annuity on the open market?

Only if you are in the with profits fund and they are levying a market value reduction at the time. The unit linked funds dont get an MVR.

I believe that Pru don't apply MVA if pot is <25K

Again, only on their with profits fund but they can amend that figure.

I'm now concerned that I'm pumping cash into SL only to be heavily penalised later?

Logic would suggest that you dont invest in a with profits fund unless the selected retirement age is when you intend to retire (or there is a guaranteed annuity rate that is worth keeping).

EdInvestor

SL doesn't apply the penalty if you retire on the NRD and buy an annuity - either with them or on the open marlet. But they do discriminate against people who choose income drawdown rather than an annuity.

The do this on the laughable grounds that people might "select against the WP fund" by reinvesting some of the money they had taken out penalty free back into the WP fund. The very idea that anyone in their right mind going into drawdown would reinvest in SL's pathetically poorly performing and unreliable version of with profits is just a joke.

In fact they are just using this "rule" as a method of creaming off unfair penalties.The fact that they are attacking people who have suffered from their own shocking mismanagement in the past makes it even worse. :mad:

waltzer

I'm 50% in the WP fund and 50% in the Stock Exchange fund with this SL pension. Can I do anything to move out of WP given that I am forced to stay with SL due to it being the choice of my employer who also contributes? Alternatively, might I change things so that I just pay in the minimum in order to get the employer cont and divert all this extra cash into another plan entirely with another provider?
Thanks for your input

dunstonh

You can stop paying into the WP fund although it will probably make sense to keep the existing funds in the WP fund until it reduces to a point that is sensible to move it over.

You are not forced to pay into it. It may be the default fund but you are allowed to change the funds.

waltzer

Thanks Dunston. I presume I should now talk to them to find out what the options are re changing fund allocations? What about paying minimum and starting another pot with another provider?
Although my sums are small it's vital that I get this right over the next 6 years.

dunstonh

I presume I should now talk to them to find out what the options are re changing fund allocations?

Ask them for a copy of the funds list that is available to you.

What about paying minimum and starting another pot with another provider?

The minimum is the amount that gets you the maximum contribution from the employer. Whether you do more with SL or someone else depends on the fund range available. If the range is good enough then you may as well stay put. For just 6 years, creating a third pension isnt really going to save you much. Savings are possible and a better fund range are possible but the amounts involved over 6 years are not going to be a lot.

EdInvestor

waltzer wrote: »

I'm 50% in the WP fund and 50% in the Stock Exchange fund with this SL pension.

Why not stop new contributions into the WP fund and find a new fund - or several for them.Ask what other funds are available.

Can I do anything to move out of WP

Unlikely to be wise to move out existing funds as this will incur immediate MVA of perhaps 25%.

waltzer

They have sent me a list of funds:
Cautious managed
Corporate bond
Ethical
European
Euro Equity tracker
FTSE tracker
International
Global equity 50/50
etc etc
How might I go about investigating what I should do to find out more about these funds, how they work and what might be best?
With a smallish pot and 6 years to go I'm not averse to a bit more risk, in fact more risk and less WP I would now presume?
Thanks