Scottish Widows

greengills

Can anyone advise on weather the personal pension I am currently paying into is worth continuing with or is it lame duck. It is a with profits policy with a gauranteed Annuity,With Scot Widows.
Its not paid any bonus for 3yrs now.As a self employed person I need this money to work for me.

dunstonh

The current issue Scot Widows personal pension is good. Indeed, its better than their stakeholder. However, the refers to the IFA version and not the cut down version offered at LTSB or any past LTSB versions which have been rebranded.

Your issue appears to be with a particular investment fund within the pension though and that is a different issue and seeing as it has a GAR it may not even be a personal pension but a retirement annuity contract. Although Scot Widows did offer GARs right upto 1995.

What is your Guaranteed annuity rate?

EdInvestor

The level of the GAR is the key.

Have a look at this thread for a person in a similar position (lucky fellow):

http://forums.moneysavingexpert.com/showthread.html?t=285581

greengills

EdInvestor wrote:

The level of the GAR is the key.

Have a look at this thread for a person in a similar position (lucky fellow):

http://forums.moneysavingexpert.com/showthread.html?t=285581

Thanks for that Iv looked right through schedule and policy provisions and cannot find G A R only says on schedule " guaranteed annuity rate under provision 3.4 PER £1000 Cash sum £98.04 per annum payable as detailed in provisions 5.4 .Provision 3.4 says if entry on pension is at original pension date the annuity rate used will not be less than than the guaranteed annuity rate specified in the schedule.Its seems to go round in bloomin circles

greengills

dunstonh wrote:

The current issue Scot Widows personal pension is good. Indeed, its better than their stakeholder. However, the refers to the IFA version and not the cut down version offered at LTSB or any past LTSB versions which have been rebranded.

Your issue appears to be with a particular investment fund within the pension though and that is a different issue and seeing as it has a GAR it may not even be a personal pension but a retirement annuity contract. Although Scot Widows did offer GARs right upto 1995.

What is your Guaranteed annuity rate?

Wish I new ! The policy is personal pension plus taken out in 1986 , looked through the schedule and policy provisions booklet but cant find the G A R.
Its a with profits cash benefit,not a unit linked . Says on the sched that guaranteed annuity rate under provision 3.4 per £ 1000 Cash sum £98.04 per annum payable as detailed in provision 5.4

dunstonh

guaranteed annuity rate under provision 3.4 PER £1000 Cash sum £98.04 per annum payable as detailed in provisions 5.4 .Provision 3.4 says if entry on pension is at original pension date the annuity rate used will not be less than than the guaranteed annuity rate specified in the schedule

Right. You have a retirement annuity contract (personal pensions arrived in 1988). Although many of the differences are now gone.

Your annuity rate is 9.804%. If that is at age 65, then the open market would be around 6.3%. So, it is higher and that is why the bonus rate is poor.

In monetary terms, if you had £20,000 in the Scot Wid RAC, it would pay out £1960.80 p.a. If you were to transfer that to a modern pension contract to get better returns over the remaining term, you would need it to grow to around £31,000 just to get the same income.

So, the GAR makes the pension quite attractive. However, there are some issues you need to be aware of.

1 - GARs kick in at certain ages. If that age is not consistent with your retirement age, the GAR may not apply
2 - Some providers insist on paying pensions under GAR on an annual basis in arrears and have no guarantee minimum period. The payment method may not be suitable for you as you have to wait 12 months.
3 - GARs can expire if not utilised by a certain date (not that common but it can happen).
4 - GARs can often increase in steps (age 60,65,70 & 75). If you retire at age 63, for example, you may as well take the pension at age 60 as the GAR doesnt next increase until 65 and with no investment growth, you may as well take 3 years of income and put that into your savings (cash/equity ISA maybe).

Retirement annuity contracts, once the direct debit/standing order/cheque stops, cannot normally be re-instated and a lot of people do not realise that some of these plans are worth a fortune despite apparant low/no performance. Some do allow reinstatement and that option should be investigated where the GAR is valuable and the method suits your requirements.

EdInvestor

Retirement annuity contracts, once the direct debit/standing order/cheque stops, cannot normally be re-instated and a lot of people do not realise that some of these plans are worth a fortune despite apparant low/no performance. Some do allow reinstatement and that option should be investigated where the GAR is valuable and the method suits your requirements.

That is, look into seeing if you can contribute more into the plan, so you have a bigger pot to get the 9.5% return on.On the other hand I would caution on an "eggs and baskets" basis.

It has been known for people to contribute entire other pensions into GAR plans to get the higher rate at retirement. This was one of the problems that caused the collapse of Equitable Life - people were transferring in large pensions from other lifecos so as to get the GAR on the money.

It may be a good idea if allowed, but it could also have unforeseen consequences.

greengills

EdInvestor wrote:

That is, look into seeing if you can contribute more into the plan, so you have a bigger pot to get the 9.5% return on.On the other hand I would caution on an "eggs and baskets" basis.

It has been known for people to contribute entire other pensions into GAR plans to get the higher rate at retirement. This was one of the problems that caused the collapse of Equitable Life - people were transferring in large pensions from other lifecos so as to get the GAR on the money.

It may be a good idea if allowed, but it could also have unforeseen consequences.

Thanks very much for your info it is much appreciated, I for some reason doubled my contributions in 1998 cant even remember why now, but one year later the widows stopped any lump sums or additional cotributions attracting the same guarantees,Phew doesnt often workout that way for me:rotfl:

greengills

dunstonh wrote:

Right. You have a retirement annuity contract (personal pensions arrived in 1988). Although many of the differences are now gone.

Your annuity rate is 9.804%. If that is at age 65, then the open market would be around 6.3%. So, it is higher and that is why the bonus rate is poor.

In monetary terms, if you had £20,000 in the Scot Wid RAC, it would pay out £1960.80 p.a. If you were to transfer that to a modern pension contract to get better returns over the remaining term, you would need it to grow to around £31,000 just to get the same income.

So, the GAR makes the pension quite attractive. However, there are some issues you need to be aware of.

1 - GARs kick in at certain ages. If that age is not consistent with your retirement age, the GAR may not apply
2 - Some providers insist on paying pensions under GAR on an annual basis in arrears and have no guarantee minimum period. The payment method may not be suitable for you as you have to wait 12 months.
3 - GARs can expire if not utilised by a certain date (not that common but it can happen).
4 - GARs can often increase in steps (age 60,65,70 & 75). If you retire at age 63, for example, you may as well take the pension at age 60 as the GAR doesnt next increase until 65 and with no investment growth, you may as well take 3 years of income and put that into your savings (cash/equity ISA maybe).

Retirement annuity contracts, once the direct debit/standing order/cheque stops, cannot normally be re-instated and a lot of people do not realise that some of these plans are worth a fortune despite apparant low/no performance. Some do allow reinstatement and that option should be investigated where the GAR is valuable and the method suits your requirements.

Thanks very much for your knowledge it was much appreciated:T