Protected options for potential transfer?

dm999

Hi, my Wife has a deferred annuity with the Pru which was bought some years ago by a final salary scheme that was wound up. The annuity offers a guaranteed income of around £12,400 at retirement.

After working for several companies throughout her (ongoing) career she has consolidated all of her company pensions into one PPP but has always kept the Pru annuity where it is due to it having a minimum income guarantee.

Recently we were advised that there are new products that offer minimum/protected income guarantees and that it would be beneficial to transfer at this point in time. The recommendation is a MetLife Retirement Portfolio offering growth that is 'locked in' on an annual basis and higher levels of income at retirement.

The Pru policy represents the vast majority of my Wife's retirement savings and she is keen to ensure that a minimum income guarantee is maintained and while being attracted to the higher income offered by MetLife is curious to know if there are any other companies that offer similar products?

Any thoughts or suggestions would be appreciated. Thanks, DM.

dm999

Thanks FH, that gives us some food for thought, much appreciated.

dunstonh

I am sceptical as to whether this type of option represents an improvement over and above an income drawdown arrangement.

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me too
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My "opinion" is that by the time you have paid for all the guarantees and costs on that style arrangement you may as well have gone with a conventional investment spread appropriate to your risk profile with an appropriate withdrawal facility to match.

dm999

dunstonh wrote: »

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me too
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My "opinion" is that by the time you have paid for all the guarantees and costs on that style arrangement you may as well have gone with a conventional investment spread appropriate to your risk profile with an appropriate withdrawal facility to match.

Appreciate your opinion Dunston, thanks very much.

dm999

Picking up on this topic again as we still haven't made a decision and need to either do something; or opt to do nothing and stick with Pru..

The MetLife product seems to offer better returns, even after charges and has better tax free cash options. My Wifes' main criteria is that she retains protection of the capital invested and improves on the tax free cash options that Pru offers -

Early Retirement Penalties before 60 20%
Early Retirement Penalties before age 65 40%

Still undecided about MetLife being (relative) new kids on the block in the UK and whether they'll withdraw from the UK market if times get tough.

Which other companies out there offer the capital protection required? Any thoughts appreciated.

martinwh

I know this bunch well. I'd avoid like the plague. Reasons below.

There are a few terms and conditions that MetLife keep tucked away. In fact your IFA is probably not even aware of them.

Firstly, you pay a high price for the guarantee, and are told it is for a fund with either 50%, 60% or 70% equity. In fact all these funds currently hold about half the advertised equity content, although you still pay for the full price. If equity volatility goes through the roof, and the cost of providing the guarantee goes through the roof (such as if Greece exit the euro), MetLife can reduce the equity content, and you could end up in a 100% cash fund, whilst still paying for the very expensive guarantee.

Secondly, there is a clause in the terms and conditions that allows Metlie to increase the charge of the guarantee at any time on existing policies.

Thirdly, there is a clause in the terms and conditions that states MetLife can block you from transferring out for up to 6 months.

If you combine these 3 hidden t's and c's, in the event of another financial storm, MetLife can transfer the cost of providing this guarantee onto you. You could find yourself paying very high charges (that can increase) for a cash fund that you are blocked from leaving.

MetLife would not hesitate to evoke these terms if they were faced with losing money.

They have been here 5 years, and as far as I know have not come close to being profitable in the UK.

They were here of course a numeral of years ago in a joint venture (albany life) from which they exited the uk market.

The terms and conditions above, have all been added recently (feb 2012) to the contract.

martinwh

Please also remember it does not provide capital protection, just a fairly low income. The capital will be eroded by the eye watering charges.

soperman

To transfer away from an absolute guaranteed annuity in such volatile financial times would require your wife to accept a high degree of risk. It appears from your comments that this is not the case so she should probably stick.

dm999

martinwh & soperman - thanks for your comments, very much appreciated :beer:

Both my Wife and I went through (at our own instigation) a pension consolidation exercise a few years ago to tidy up various PPP's and old occupational schemes and at that time my Wife explicitly told the IFA that the Pru policy would not be included in that exercise as she liked the security that it provided.

Step forward 5 years and the IFA has contacted her (unsolicited) to recommend MetLife as a suitable alternative providing greater income.

Call me cynical if you will but I can't help but think that IFA commission will be replaced by the new RDR rules next year and the Pru plan has a transfer value of approx 300k...

Also, after reading the Key Features I emailed MetLife with a couple of basic questions and they haven't got back to me yet. Not impressed.

martinwh

Yes, some IFAs are looking for ways of generating commission pre RDR in January.

Make sure you get a copy of the terms and conditions (as well as key features) dated February 2012.

Good luck with whatever decision you end up making.

dm999

Cheers Martin, we've decided not to go with MetLife and to review the Pru policy in a few years time to see if it meets our ongoing needs in terms of tax free cash etc.