Reviewing an 'old' pension fund

Peartree

In 1989, I worked for small company. The managing director’s husband worked for a very prominent (I think still) firm of actuaries. Via this firm, a scheme to was set up whereby employees of the firm I worked for could ‘opt out of SERPS’ (as it was called at the time) and that the money would be invested in this fund.

The scheme was with Provident Mutual and called ‘Provident Mutual PPS – (my former firm’s name)’ and described as a ‘Protected Rights Investment Account’. Subsequently, Provident Mutual were taken over by CGU and then Norwich Union.

In 1998, I became part of an occupational pension scheme, which was wound up on the demise of that (public sector) organisation in 2000 when I joined my current organisation and transferred the money into my current LGPS final salary scheme pension.

I have never done anything about the original fund apart from file the annual statements and find it very difficult to grasp concepts relating to pensions. The transfer value of the fund at April last year was c£25,000. At that time I had 1885.974 units at a bid price of £13.38.

My questions are as follows:

- I have always assumed that contributions to this scheme ceased when I joined an occupational pension scheme but is this the case? Should I have done something/do something about it and could this impact negatively on what I will ultimately receive from the state?
- The number of units in the fund seem to be going down – presumably because nothing is going into account and administration costs (2.16 units last statement) are coming out? Is this correct and how will it impact longer term.
- How do I know how this fund is performing against others. I had a quick look at the Norwich Union site but could not see anything on this particular fund and how it is structured.
- If it is not performing well, can I transfer it elsewhere and what options would I have?

I would welcome some insight (I know not advice) from the pensions experts out there on what they’d do in a similar situation.

Peartree

dunstonh

- I have always assumed that contributions to this scheme ceased when I joined an occupational pension scheme but is this the case?

On paper, the scheme would still be contracted out unless you or the provider stopped it. However, they wouldnt have received any rebates since you joined the contracted out occupational scheme.

Should I have done something/do something about it and could this impact negatively on what I will ultimately receive from the state?

No.

The number of units in the fund seem to be going down – presumably because nothing is going into account and administration costs (2.16 units last statement) are coming out? Is this correct and how will it impact longer term.

The investments are in accumulation units and the charges are paid out of the units. Whilst the unit count falls backwards, the unit value increases and should over time increase by much more.

- How do I know how this fund is performing against others. I had a quick look at the Norwich Union site but could not see anything on this particular fund and how it is structured.

Anything in the old Prov Mutual pensions is obsolete. That said, there may be guaranteed annuity rates attached to the pension that could be quite valuable. Prov Mut offered with profits and unit linked funds over the years. You can ask NU to supply information on your funds and others available to you.

- If it is not performing well, can I transfer it elsewhere and what options would I have?

You can transfer it but you shouldnt assume its bad. I have been very active on the pension transfer front and about 1 in 5 legacy pensions (pre 2001 regime) is worth keeping. Your options are:
1 - keep it as it is
2 - keep NU as provider but switch funds
3 - switch to an alternative arrangement

As the pension is protected rights, transferring it into the occ scheme is not possible (at least not with the LGPS I believe). That leaves you the option of transferring it to a stakeholder pension (budget option, limited investment options), personal pension (has stakeholder range and a number of the major external funds available) or SIPP (has tens of thousands of investment options - designed for experienced investor or those wanting a professional product under advice).

Peartree

Thank you, this is most useful. I know I can't transfer to LGPS. When I looked into stakeholder pensions I did not seem to be eligible because of my salary level (maybe I was mistaken or this has changed). Although I am working to become an experienced investor over the next few years I think I'll stick to starting small and not chance my arm with a SIPP at this point!

I will write to Norwich Union but would welcome a little expansion on what information I should ask them to supply.

Peartree

dunstonh

I did not seem to be eligible because of my salary level (maybe I was mistaken or this has changed).

Changed April 2006. The limit is now contribution based and the old 30k income rule has been dropped.

EdInvestor

SIPP (has tens of thousands of investment options - designed for experienced investor or those wanting a professional product under advice).

At the moment you can't transfer protected rights pensions into Sipps.

I would suggest you write to NU asking for details of any guarantees attaching to the pension (particularly guaranteed annuity rates (GARS) Guaranteed Minimum Pension (GMP) or Guaranteed investment return (GIR).)

These could be valuable, meaning it is best to leave the pension alone. if there aren't any guarantees or the pension is unit linked, it may be worth considering a transfer - either inhouse to other funds offered by NU or to another provider.

dunstonh

At the moment you can't transfer protected rights pensions into Sipps.

Correct. With hybrid SIPPs taking them, its easy to ignore that.

EdInvestor

With hybrid SIPPs taking them, its easy to ignore that.

Hmm, it seems that *one* "hybrid Sipp" takes them and it happens to be the one you habitually use. But it only offers investment in the same funds now available at the insurance companies, does it not?So there would be little point in using it.

dunstonh

But it only offers investment in the same funds now available at the insurance companies, does it not?

No. It does not use insured/pension funds. It uses unit trust/oeic funds. There are also some offshore funds available (I stuck Aberdeen Global High Yield Bond D1 £ in a portfolio recently) and SICAVs can go in there as well. The very same funds that you see most people using in the HL SIPP and most other SIPPs.

Cofunds hybrid SIPP and Fidelity's hybrid SIPP are pre A day products and use a combination of insured/pension and unit trust funds and the PR would have to go in their insured funds if you dont use them. However, the Selestia one is the first of the post A day generation of pension plans that uses unit trusts rather than pension/insured funds. More will follow.

EdInvestor

However, the Selestia one is the first of the post A day generation of pension plans that uses unit trusts rather than pension/insured funds. More will follow.

This is really a very small difference from an insurance co pension compared with a proper SIPP, in which you can additionally invest in shares, investment trusts and ETFs and commercial property among other things.Most insurance company pensions now offer their own versions of the top unit trusts and at lower cost than the 'hybrid Sipp".About the only thing the hybrids seem to offer is protected rights drawdown, but at high cost.

dunstonh

Ed, you are so anti financial services it is unbelievable. If I had never mentioned Selestia and you had found it first you would be singing it's praises now. You hate the fact that an IFA can beat your beloved contracts.

Most people who use SIPPs invest into unit trust funds. The Selestia contract is not a SIPP but it caters for those that only want to invest in unit trust funds. It doesn't matter one bit what the name of it is called as long as that person gets what they want. If unit trust investing is what they want then its perfect for that need.

Plus Selestia can be cheaper than Hargreaves Lansdown. You give them as an example of low cost contract but say Selestia is a high cost. Your bias clouds your judgement and makes you an unreliable source of information for people on these forums.

Peartree

Thank you. I'll start with a letter to Norwich Union.