do i change pension

savinglikemad

Hi I transferred in early 1990's a small pension from my old emploer to Pearl. Which provides guarentted pension of £37 a month which kicks in " when I reach retirement age" which as I am 52 now means I guess when I should have been able to obtain at 60. (the old retirement age) I have been told by an insurance rep that I should transfer this to another company as its currently with Pearl and has no bonus added for 10 years now. I would have liked to drawn down 25% on it now but when I spoke to Pearl they said it hadn't reached its miminum value so I could not. They also advised I could only transfer to another provider the transfer in value which was about £2500. The rep recons I can transfer the current value which is about £12500. He has produced spreadsheets on high gains and low gains all very impressive. I have other forms of income I will be living on at pension age so its not my only income I just dont want to be hood winked. Any advice please

mania112

If i understand you right, you have £12500 but Pearl are saying your transfer value is £2500 if you want to move it to another provider - that sounds like quite an extreme penalty?

You're also not allowed to release the Tax Free Cash in your pension (max 25%) until age 55 - maybe that's what Pearl were referring to when they said it hadn't reached it's maximum value?

If this is your only pension, you may be able to unlock all the pension (at age 55) under Triviality Rules.

Here's some info:

http://www.pruadviser.co.uk/content/nav/about/26674/pghome/49880/49934/226426/

savinglikemad

yes that is how I understood it from the pearl, will phone and check
Thats a useful link, I will also ask them about that.

Velcro_Hotdog

The minimum value not being reached usually has something to do with the GMP. If the pot of money isn't big enough to cover the GMP liability you still get your income but they have to cover the loss and you don't receive a tax free lump sum.

If the pot is over and above the GMP element you get 25% or the excess up to a maximum of 25% of the total value of the pot. I have come across plans like this that offer no transfer value as the policy didnt meet GMP.

Be wary of folk with fancy spreadsheets, its not hard to make numbers look good even when they are in reality quite poor.

dunstonh

I have been told by an insurance rep that I should transfer this to another company as its currently with Pearl and has no bonus added for 10 years now.

Firstly, you shouldnt use an insurance company rep to do a pension transfer. Technically, they are not allowed to provide advice on other company products. So, this usually results in it being documented that you wanted to transfer it. Whereas with an IFA, the IFA has to recommend it. So, you basically get better consumer protection. Also, the FSA did a review of pension transfers a few years back and found that tied agents/FAs advice on pension transfers was pretty awful. Indeed, many firms had to stop doing them. Use an IFA. Not an FA/sales rep.

I would have liked to drawn down 25% on it now but when I spoke to Pearl they said it hadn't reached its miminum value so I could not.

That would indicate you have a Pearl Freedom Bond (section 32 buy out bond) with a GMP (guaranteed minimum pension).

They also advised I could only transfer to another provider the transfer in value which was about £2500.

You can transfer it or wait until the scheme retirement age.

The rep recons I can transfer the current value which is about £12500.

And his evidence for this is? I would be looking at the transfer value supplied by Pearl.

He has produced spreadsheets on high gains and low gains all very impressive.

Is that with hindsight picking their own best funds or what you would likely have been in at the time?

Has the sales rep considered the loss of the GMP in relation to the transfer value? Is the sales rep even authorised to transfer section 32 buy out bonds? (he may be thinking its just a personal pension).

If i understand you right, you have £12500 but Pearl are saying your transfer value is £2500 if you want to move it to another provider - that sounds like quite an extreme penalty?

it sounds like a S32 buyout bond. Not a personal pension. So you end up with three effect values. The effect of the GMP and the pseudo valuation that effectively gives it, the current value and the transfer value. With these plans, the GMP is the decider most of the time on how suitable it is. Plus, S32s gained transitional relief automatically after A day (april 2006) and many have protected tax free cash in excess of 25%. For example, the GMP may be £5000 a year but the value may only be £25000. So, whilst the £25k has been getting little or no bonuses, the real value is the GMP which in this example would would require a fund value of around £100k-120k if you wanted match it. So, would the transfer value and realistic growth rate be enough to beat that GMP? The answer in most cases would be no.

My gut feeling is at this early stage of information that the sales rep from the insurer is a donut. If he is focusing on flashy graphs and not GMP and existing terms then I would be on guard as its heading straight for mis-sale territory at the moment.