serps pension with scottish widows with profits

andre1717

hi there. Im 48 and conracted out of serps with the advice of my employers IFA subsidiary. I have a pension with the employer and put my serps with scottish widows back in 1987 and contacted back in in about 2003. The pot is worth about 37k which looks pretty rubbishy considering an employee friend who has just retired at 65 gets the 82 £ state pension per week plus an attitional 7-8k per annum from the governmnet as an extra which is a serps pension so about 11-12k per year total. As I may get the 82£ per week but no serps my pot of 37k will buy an annuity of 2K >? Have I been missold ? Also Widows with profits is terrible. the last few years its paid as a bonus about 1.5% a year! And they say there is not another choice of fund to invest in with them --with profits or with profits ! And I cant transfer it ---I actually want to place it with Hargreaves L in a Sipp but this is not allowed !! Will you be able to place these contracted out/protected rights funs in a sipp in the future because at the moment I feel Im rogered ! thank you

dunstonh

The pot is worth about 37k which looks pretty rubbishy considering an employee friend who has just retired at 65 gets the 82 £ state pension per week plus an attitional 7-8k per annum from the governmnet as an extra which is a serps pension so about 11-12k per year total.

£37k at 7% p.a. to 65 = £118,875.
£118,675@6% = £7120pa

Assuming you are contracted in now, you will be building up some contracted in benefits as well so you will be paid those on top.

So, not a lot of difference between you and your friend.

Have I been missold ?

Unlikely. The FSA have identified a relatively small number of people who may have been mis-sold and it is expected that they will tell the companies involved to investigate those cases to check. In 1996, everyone who contracted out was better off. In 2002, everyone who contracted out was worse off. Now its back to around 1/3rd better off.

Also Widows with profits is terrible. the last few years its paid as a bonus about 1.5% a year! And they say there is not another choice of fund to invest in with them --with profits or with profits !

Yes it is.

And I cant transfer it -

Yes you can.

Will you be able to place these contracted out/protected rights funs in a sipp in the future because at the moment I feel Im rogered ! thank you

We thought that was going to be the case from April but the Govt has not done so. It is not known if it will appear in future or not.

Getting it across to a personal pension, fund supermarket pension or hybrid SIPP would seem the logical answer to you concerns.

EdInvestor

Have you checked whether the pension has a Guaranteed Annuity Rate attached to it ( or any other guarantee)?These are quite common at Widows with older plans.

This might be one reason the performance is poor, and it would certainly explain why they refuse to let you move it.These GARs can be quite valuable and if you have one performance of the actual fund is not the key issue.

Ask them if you have one and if so, how much it is (percentage).

dunstonh

Scot Widows did issue GARs on some of their pensions right up until 1995. They were amongst the last to remove them for new business.

andre1717

EdInvestor wrote:

Have you checked whether the pension has a Guaranteed Annuity Rate attached to it ( or any other guarantee)?These are quite common at Widows with older plans.

This might be one reason the performance is poor, and it would certainly explain why they refuse to let you move it.These GARs can be quite valuable and if you have one performance of the actual fund is not the key issue.

Ask them if you have one and if so, how much it is (percentage).

Im not aware of any guarantees on an annuity rate or minimum growth percentage on the fund.Im almost certain. Ive got a Standard fsavc partly in rubbish with profits but it does grow a minimum 4% pa. Suprisingly thats the bonus rate received for the last 5-6 years ! thanks

dunstonh

Standard Life offer free switching on their FSAVC. If you dont like the fund, switch it into some of their others.

andre1717

dunstonh wrote:

Standard Life offer free switching on their FSAVC. If you dont like the fund, switch it into some of their others.

I did that , a few years before they announced they would go public but after the first time carpet baggers had a go at them I just mentioned them as they have a guaranteed growth rate but not annuity. thanks

defender_of_the_weak

Andre

Looking specifically at the question of possible mis-selling, the key question is whether you understood you might get more or less by contracting out than staying in the state scheme and how this was all explained at the time of sale. There are also other issues regarding salary and age to take into account. We are seeing a regular increase in people coming to us with this issue wanting to complain about mis-selling and in fairness, the companies are reviewing the sales once we raise a formal complaint.

It is easy to blame the government for changing the goalposts on how this worked (whole pitch actually) but the company still has a responsibility to react to changing market forces. If they have not done so then they may be held accountable for your possible losses.

dunstonh

The biggest issue with regards to this being mis-selling or not is that neither option is risk free. One has legislative risk and the other has investment risk.

At this point you could be better off, then in a couple of years worse off and then a few years later better off again. It is just one of those areas where no-one can really tell what is best until you get to retirement. This makes it very hard to review and why the FSA has looked into it and will be making an announcement this spring.

When you look at contracting out you have the following to compare:

Contracted in benefits will only pay out at state retirement age (whatever that ends up being). Contracted out can be taken at 55 or delayed upto 75 if you wish.

Contracted in benefits are income only. Contracted out allows 25% of the value of the fund to be taken tax free as a lump sum.

Death benefits can be different with both options.

Contracted in benefits are based on what the Govt wish to pay. The Govt has effectively reduced benefits 3 times since SERPs was introduced and the increase in state retirement age could be seen as a fourth. Contracted out benefits are based on investment returns and no-one can predict the future.

There are a few other things but they are the main ones.

The problem you can see is that some bits of contract in or out are good but neither is guaranteed. How can you decide which is best when you havent got a crystal ball? This is the dilema the FSA had had when reviewing contracting out sales. The feeling at this stage (based on what has been reported in the financial press) is that the FSA will ask for a review on those that contracted out outside of the pivotal ages (the ages where contracting out was though to be the best option).

EdInvestor

andre1717 wrote:

Im not aware of any guarantees on an annuity rate or minimum growth percentage on the fund.Im almost certain.

Suggest you ask for a forecast of the pension at retirment.

jamesd

Not only can you move the money, Scottish Widows even have a reasonably decent personal pension that you can move the money to, with a wide range of external funds. An NMA IFA like dunstonh might sell it to you execution only (no advice) for 100 up front and a 0.4% discount on the annual charges, so one thing you could usefully do is go looking for one in your area and ask them to do that. The discount will save you more than the initial cost in about 9 months, so don't balk just because it means paying some money initially.

Ultimtely it does look as though you'll be able to put the money in a normal SIPP. For now it is possible in a hybrid SIPP and an IFA can tell you about them as well. If you want H-l as your SIPP for other pension money then the SW personal pension is a decent choice for this protected rights portion.