Guaranteed Annuities

whiteflag_3

There are a number of posts on this forum stating personal pensions with guaranteed annuities should never be transfered.

Is this true for every personal pension with GARs?

ReportInvestor

You are an IFA wf. You must know the answer to your own question .

Or if not, who the hell does ?

I look forward to your reply to yourself .

P.S. Most posts I read suggest that these guarantees are valuable and should be taken into account when considering cashing in. Which is the right advice and seems fair enough.

dunstonh

I would say no. A fund with zero bonus (and unlikely to change) with a GAR would need to be compared with a fund with growth potential using current market rates. Depending on the differences, I would make the decision then.

EdInvestor

Never say never.

A GAR may be accompanied by restrictions which don't suit the policyholder's circumstances.

But cases are now surfacing ( not just at Equitable Life) of GARs being ignored by advisers in the past and pensions being transferred without the policyholder being aware of the existence of the GAR. Recently, this may well have resulted in a loss because of market performance and plunging annuity rates: these GARs are very hard to beat.

Possibly this is another area where we will see misselling claims arising in future if advisers/companies have not kept records that the policyholder was made aware of, and decided against, using the GAR. IMHO advisers should be very careful on this issue.

Note to readers: pre 1988 Retirement Annuity Plans (RACS or RAPs) almost certainly will have a GAR, and some early personal pensions also have them. Don't disturb these plans until you have investigated the matter.

whiteflag_3

ReportInvestor wrote:

You are an IFA wf. You must know the answer to your own question .

Or if not, who the hell does ?

I look forward to your reply to yourself .

P.S. Most posts I read suggest that these guarantees are valuable and should be taken into account when considering cashing in. Which is the right advice and seems fair enough.

Well spotted

I prefer to pose a question.

I posted this thread to start the debate with the aim of trying to avoid going off topic on another .

Plus the person who posted yesterday saying a pension with GARS should not be moved, has already posted on this thread saying "never say never".

Now people reading this thread should now know to take advice on pensions with GARS, not assume they should not be moved as posted previously- mission accomplished

ReportInvestor

Yes, always use an IFA.

I forgot to say welcome back.

Again.

Since this is a thread for questions. How many clients have you and dh moved out of GAR policies in the last year?

dunstonh

I have transferred about 3 or 4 with GARs. With full disclosure and because there were low potential with profits funds, GARs were level and single life basis only and marginally above current rates. The critical yield required on the alternatives was around 3%p.a.

whiteflag_3

Not many 2-3 max

Reasons were all of the following:

Lack of potential for with profit fund
NO switch options
Inflexibility on both retirement date and GARS
Clients health (ie will qualify for impaired life annuity)
Clients attitude to investment risk
Possibilty client will go phased/drawdown at retirement
Small size of pension funds

ReportInvestor

Thank you. Why couldn't you have said that earlier?

We all know that there are some desperate with profit lifeco funds out there, not least Ed who has made a point of investigating them.

EdInvestor

Interested to know how many you've both advised to stick with their GARs.

The reason why you can easily see problems arising is that it's usually in the interest of both the lifeco and the advisor to move the punter out of a GAR. The lifeco because GARs are now long term loss-making and tie up scarce capital in reserves, and the advisors because they make more commission by selling a pension transfer. Whereas, many normal pension transfers are only in the advisor's interest, not the lifeco's, these days.

When the interests of the advisors and the lifecos are aligned, and if advisors are also being squeezed for income, the punter often loses out.

No offence meant to present company at all, but if I was an advisor I'd make absolutely sure I had any GAR transfers and non-transfers fully and properly documented so I could show a spotless record, because I suspect this one is going to come back and bite some people on the bum at some point possibly not too far away.