Another Equitable Q - sorry!

MiM

As I say in the title, apologies if I'm going over old ground but I really would appreciate a little guidance.

I'm 38 and have an old Equitable Life with-profits personal pension. Haven't paid in for some time but in 2002, the last figure I can put my hands on, it was worth £9,969 notional, £7,700 transferable. However, it says the "protected rights investment" is just £5,493, £4,256 transferable. I've no idea what any of that means.

I now have another pension (a stakeholder with Standard Life - I can really pick them!). I've just read on another fourm advice for someone to get out of EL asap as they could go belly up at any time. The advice was to transfer into the cheapest stakeholder pension you can, they said Legal and General.

My questions are:

1) Are they right?

2) If so, can you have more than one stakeholder pension as I don't fancy putting all my eggs in SL's basket?

3) Which figure is the one I would get out?

4) If I am opening a new pension, should I go through Cavendish?

Many thanks. If these issues have already been dealt with a redirection would be appreciated.

paul666

1) There are still *chances* EL might go bust. You're not going to lose *that* much by getting out. The 'nominal' value is the 'value' of the fund as EL regard it although with with-profits products, this is a bit of a finger in the air and is really what ever they want to say it is. The transfer is on only 'real' figure in that it's the figure that your fund would be if it was tranfered elsewhere.
The protected rights part is the part of the fund that EL have been investing for you from contributions from the government from your National Insurance contributions. This means at some point you 'contracted out' because you or your advisor thought that you might be able to accru better benefits outside the governments scheme. More recently, people are being asked if they'd like to contract back by the providers and if you trust the social state more than the markets then you should do so. There are certain restrictions on where protected rights can go but transfers to a PP or SH are fine.

2) It's fine having another L&G stakeholder just to hold the transfered value of another pension.

3) The 'transfer' value is what you can transfer. you cannot normally 'get out' any of the funds until you retire.

4) You can go through cavendish for a new pension and if you're confident that you know *exactly* what you are doing then I'd say go ahead. But really Cavendish are for those who known exactly what they are doing and are prepared to take the consequences if they don't. With pension transfers, possible consequences mean loosing too much on the transfer or giving up certain rights in the old pension.
If you spent several days going through the messages around here, read several paper's financial pages for a few weeks and bought three books from smiths on personal finance by the likes of Martin Lewis/Alvin Shaw/Bernice Cohen *and* you found at least some of it interesting then yes, I'd say go through Cavendish or challenge an IFA to beat cavendish's quote.

I'm not sure why you think there is any kind of problem with SL...

I should point out that I'm not any kind of professional and this gives me the luxury of saying just about what I like but I hope this helps anyway.

BULLNOTBEAR

Just to add to Paul666's reply.

The Equitable Life With Profits Pension Plan offers very little in terms of growth going forward. EL's With Profits Fund has very low proportion invested in Commercial Property and Equities (shares) and it is these asset classes that provide the capital growth for the With Profits Fund and ultimately your pension fund.

I would say that as you are only 38 it should be worthwhile in you transferring out from Equitable Life into a Stakheholder Pension as you have enough time to retirement in which you can recoup the surrender penalty. Legal & General offer some excellent internal funds and external funds managed by Newton and other fund managers.. Even utilising some of these external funds you will only be charged a maximum 1% per annum annual management charge. This is likely to be lower than the existing charge applied by Equitable Life.

You will incur a Market Value Adjuster penalty which from your figures is £2,269 (or 22%). You have sufficient time to retirement to recoup this penalty and have funds that offer real opportunity fior capital growth, notcurrently offered by Equitable Life With Profits fund.

IT IS IMPORTANT YOU TAKE IFA ADVICE here as he/she can ascertain your attitude to risk and advise a suitable provider/fund and whether a transfer is viable with regard to any loss of guaranteed annuity rates from Equitable (very unlikely!!) etc. They will inevitably take commission or charge a fee as a pension transfer involves quite considerable time for compliance, research etc. You should only go down the Cavendish route if you know exactly what you want i.e you need no advice.

Hope this helps.

paul666

Thanks BULLNOTBEAR for pointing out that the 'transfer value' doesn't always include the infamous MVA. This was also the case with a Scottish Mutual with-profits pension which I transfered. That also was mostly in fixed-income and cash and so had stuff all chance of riding any kind of recovery (doh!).

Pensions transfers are definately seat of your pants stuff for mere mortals.

dunstonh

at age 38, Scottish Life could beat Legal & General on charges. Scot EQ and Skandia could do too potentially.

Standard Life are not a bad pension provider. They may not be the cheapest but they have first rate service and a decent range of funds available. Their SIPP isnt too bad either. You wouldnt use them for with profits but that can be said for all but 3 providers really.

MiM

Thanks to all, this really is much appreciated - only wish I'd asked earlier!

I thought SL was also shaking a little but obviously misunderstood that situation. I'm not ever going to be too clever with these things so will not use Cavendish.

One thing I'm not clear on BNB - are you saying here that a transfer is or isn't likely to be a good idea when loss of GAR is taken into account?

BULLNOTBEAR wrote:

IT IS IMPORTANT YOU TAKE IFA ADVICE here as he/she can ascertain your attitude to risk and advise a suitable provider/fund and whether a transfer is viable with regard to any loss of guaranteed annuity rates from Equitable (very unlikely!!) etc.
Hope this helps.

And one final question - would I be better off simply switching these funds to my SL pension rather than my notion of putting it in a new one?

Many thanks all,

MiM

BULLNOTBEAR

Hi MiM

In the current low interest and low annuity rate environment any guaranteed annuity rates attached to a pension policy is likely to be valuable, and is usually a reason for not transferring the policy. Whether the actual guaranteed annuity rate attached your policy with EL are valuable after their troubles is another matter.

It is another example of why you need to take advice as an adviser can take into account the GAR on your EL policy compared to current annuity rates available on the open market and weigh this up against the potential of better growth from transferring to a new pension than staying put in EL.

You could transfer your policy to your existing Standard Life policy as it will probably accept the transfer. It doesnn't matter if you transfer to another provider really but an adviser can advise. All stakeholder providers are generally similar in terms of charges but the important factors are the financial strength of the provider, their customer service and very importantly in my view the funds they offer- it is being in a good performing fund that provides growth for your pension.

May I reiterate again that this is all purely for information and constitues no advice. Please seek professional advice before transferring as an adviser can advise on the best way forward.

Best of luck

Martyn

MiM

Many thanks, warnings also noted, will visit IFA.

M