Prudential - contract back in ?

HLK

I have had a letter from the Pru recommending that I contract back in for 2005/2006. Do I just take this as probably the best thing to do? I notice they have not given a phone number but before I look one up and call them I wanted to ask 'what questions should I be asking to base my decision on?

Thanks - also, I have a company stakeholder where both my employer and myself contribute, would it be better for me to transfer what is in the Pru so far to this one - assuming of course I fill in the form and contract back in ?

Thanks

whiteflag_3

HLK wrote:

I have had a letter from the Pru recommending that I contract back in for 2005/2006. Do I just take this as probably the best thing to do? I notice they have not given a phone number but before I look one up and call them I wanted to ask 'what questions should I be asking to base my decision on?

Thanks - also, I have a company stakeholder where both my employer and myself contribute, would it be better for me to transfer what is in the Pru so far to this one - assuming of course I fill in the form and contract back in ?

Thanks

You are being recommended to contract back, in as actuaries have calculated that you may be worse off if you continue to contract out.

However when the new "a" day rules come in Arpril you will be able to access your contracted out money from 55 onwards and take 25% of the fund value as tax free cash. Some people may prefer this than an implied promise from a government that cannot predict the future any better than anyone else.

You could transfer, but this may reduce flexibilty in the future.

Great picture by the way certainly brightened up my morning!

HLK

Thanks whiteflag - the Pru 's letter refers to the level of rebates for 2005/2006 onwards although they say there is a consultation underway about rebates that may resut in an increase for April 2007 onwards - and you could contract back out later. What I think they are saying is that the rebate for the next 2 years 2005 - 2007 is 'rubbish' but any decision can be reviewed if they improve.

"It's impossible to be certain, but we strongly believe that most people should contract back in for the 2005/6 tax year onwards. That's because we think the rebates paid by HM GOV will provide you with less than you should receive from the S2P at retirement. .....'

Really don't know what to do, i guess there's just to much guesswork in investment - that's just me sounding off!

Ps glad you like the picture - I spent the whole of last year in a headscarf and rollers ( well my avatar did) :rotfl:

dunstonh

You have to obtain at least 7% p.a. average to make it really viable to contract out. There is little chance of that happening within the Pru with profits fund. So, they want you to contract back in. Of course, they dont tell you that you could transfer to another pension offering a wider range of funds that have that potential for growth.

Remember Pru cannot advise you on your particular situation. This is a bulk decision that is probably right for about 75% of the policyholders.

HLK

Thanyou for your reply Dunstonh - I had considered a transfer as I have a stakeholder with my current employer as it's a bank I pay reduced fees - I think 0.4% annually and I don't think the funds are doung to bad (abbey managed and tracker). No advice is provided so would it be best If I get this checked by an IFA with a view to transferring across?

dunstonh

I don't think the funds are doung to bad (abbey managed and tracker)

Not exactly a portfolio to set the world on fire. Especially for a long term contract like a pension. Not your fault but you do tend to find group schemes can be a bit naff at times on the fund selection. They may be 0.5% pa. cheaper but they are not funds I would be using.

No advice is provided so would it be best If I get this checked by an IFA with a view to transferring across?

If you want cheap, you have got it with your group scheme. Check to see if there are alternative funds available. If there is a decent range, then you could investigate transferring it to the group scheme. If there is not a decent range of funds, you could transfer the pension to an alternative provider as a stand-alone pension.