Prov Mutual Pension Assured Fund

cogito

Back in 1994, my wife was advised to invest in the Provident Mutual (now Norwich Union) Pension Assured fund which was closed a few years ago. Rather foolishly (hindsight is great), the contributions were left in the fund – possibly because of penalties for transferring out.

Back in July 2000, the fund value was £9181 and the transfer value £8476. The current figures are £10333 and £8128. Having suggested to my IFA that this was a waste of time and that the money should be transferred elsewhere, he replied:

I would say that care is required because of the fairly big penalty that applies on transfer. Any transfer on this basis would have to work very hard just to get back to the starting position.

She may take a view on this as being an acceptable risk but is not one I could recommend in any case.

It seems to me that the only time this fund will not have a transfer penalty is on retirement in 2020 when on present form, it will be worth around £12000.

I can’t see that there’s much difference between transferring a poorly performing WP fund and a unit linked investment that’s also taken a hit of 20%.

I have wondered from time to time about the quality of advice I’m getting (six months ago he told me that bank shares looked cheap).

Does anyone have a view on his advice?

dunstonh

Rather foolishly (hindsight is great), the contributions were left in the fund – possibly because of penalties for transferring out.

a few years back NU waived them to allow you to move out of the PM fund into alternatives. i dont know if that is still going as I moved all my legacy ones out at the time.

I have wondered from time to time about the quality of advice I’m getting (six months ago he told me that bank shares looked cheap).

Does anyone have a view on his advice?

If the other funds are still available at no cost then switching to those may offer better potential. If not, then a transfer penalty of 7% is hardly large and could be recovered in a short period. So there could well be justification for transferring the pension.

It is possible that the IFA is unable to do pension transfers. I get three IFAs giving me transfer business because they are not allowed to do it. So, you may be getting a fob off for that reason.

If he has given you a transfer analysis which shows how much the exisitng pension is at age x at 7% p.a. against modern alternatives using the transfer value to same age and at same rate then the research has been done. If there are guarnateed annuity rates on it then they could be valuable (if they are 50% higher than open market then any alternative needs to grow by 50% just to catch up).

If the option to transfer into unit linked funds fully is there then that is quite possibly the cheapest option. The fact they have gone down doesnt matter as that would have happened on modern contracts invested in the same areas. Indeed a hit of 20% is actually quite low.

EdInvestor

dunstonh wrote: »

If there are guarnateed annuity rates on it then they could be valuable (if they are 50% higher than open market then any alternative needs to grow by 50% just to catch up).

A GAR seems quite likely especially if this is a Retirement Annuity Contract.