aviva pension advise

bbr81

Hi

I left the private sector several years ago and set up a business myself.

Over the last 3 years I have contributed £60000 into my private pension that I started many years ago and was small at the time. I'm 65 in 2018 and am looking at large contributions to try to up my yearly payout once I do retire.

A year ago I received a breakdown from Aviva indicating that I had £14000 in protected and £67000 in non-protected. It had another sheet indicating in 2018 the protected part would give me £800 per year and the rest would give me £3700 per year. Still low hence the idea to top up my pension.

My recent statement is now showing protected £729 per year and the
non-protected part (now£100,000) ONLY WILL PAY ME £1900 per year in 2018. - A massive drop.

I know the economy is bad, but this feels like robbery. Can any one give me some advise what I should do? Can I get back the money I put in? I would have been better paying tax on it and paying my self from a bank account, this would have been better than a pension!! Or has Aviva made a mistake, or should I be moving my pension?

Thanks

dunstonh

My recent statement is now showing protected £729 per year and the
non-protected part (now£100,000) ONLY WILL PAY ME £1900 per year in 2018. - A massive drop.

Have you compared the illustrative assumptions? i.e. growth rates used, type of annuity used etc. In the last year, the assumptions used have been altered by many providers.

I know the economy is bad, but this feels like robbery.

How is it robbery?

If I have £10,000 and tell you that if it grows at 10% over the next year you get £1000 but then tell you if it grows at 9% you will get £900, do you think you have been robbed of £100?

Equally, lets say your illustration assumption a year ago year 6% and its growth by 7%, can I now have the difference because the example showed less?

Can I get back the money I put in?

No.

I would have been better paying tax on it and paying my self from a bank account

Highly unlikely.

The best thing you can do is understand that example illustrations are just example illustrations. The rates used will vary over the years as well as some of the assumptions. Examples and reality are two different things. Next years one will probably be higher when protected rights are reclassified as non protected rights and wont include a spouses pension as default (unless Aviva are illustrating a 50% spouse as default on non protected rights)

atush

Basically everything you put in got tax relief. So you could not have done better in a csh savings acct.

sandsy

The reason it's dropped is largely because the interest rate used in the annuity assumption has dropped continuously every year for the last 5 years.

Any illustration you receive is based on these illustrative annuity rates. What you get in practice will depend on the annuity rates which are applicable at the time you retire (assuming you decide to annuitise).

dunstonh

The reason it's dropped is largely because the interest rate used in the annuity assumption has dropped continuously every year for the last 5 years.

Aviva also moved to fund based projections as well rather than FSA standard projections. I think they also moved to joint life 50% with increasing annuity as well but that may now be over a year ago since they did that.

DAVAL

If you had another £60000 would you now put this into your pension having seen these figures?
I assume you would not.

If you had £1million would you put this into this pension plan having seen these figures?
Probably not.

IF you could have invested your £60000 yourself and have not touched it then I believe there is a case for doing it, regardless of tax reliefs etc. etc.

That is YOU are in control of your capital NOT someone else who gives you a poor return on it and keeps it if you happen to pass away. YOU are in control of it.

I am not a financial adviser. Just thought I would give another opinion.

fairleads

DAVAL wrote: »

If you had another £60000 would you now put this into your pension having seen these figures?
I assume you would not.

If you had £1million would you put this into this pension plan having seen these figures?
Probably not.

IF you could have invested your £60000 yourself and have not touched it then I believe there is a case for doing it, regardless of tax reliefs etc. etc.

That is YOU are in control of your capital NOT someone else who gives you a poor return on it and keeps it if you happen to pass away. YOU are in control of it.

I am not a financial adviser. Just thought I would give another opinion.

My sentiments entirely. Which is why i never did contribute to one

dunstonh

If you had £1million would you put this into this pension plan having seen these figures?
Probably not.

What figures? The OP is referring to a piece of paper that says if you have £x and get y% p.a. you will get this amount. All hypothetical. How can you make a judgement on his investments without knowing what he has? For all you know he has the Aviva wrap platform which is whole of market and a near infinite combination of investments available.

bbr81

Well thank you for your replies.

After doing more research on annuities and understanding (sort of) that they are linked with Uk Guilt returns, that are poor at the moment and probably will stay that way in my opinion over the next few years. I don't see this growing to anything decent before 2018, my retirement age.

I wonder if there are companies that would buy the pension off me, or if I retire now then buy it off me, instead of putting it into an annuity?

You see I know I will probably only live into my 70's and prob not into my 80's. If they could work it out on those years, I would get a better return?

I'm now probably not going to put anything in my pension form my company and actually put it all into property asap. but I feel like the £60000 has been taken form me as this would have lost less and earnt more money in property over the last 3 years than what it will give me back in the future?!

missile

What is good for most may not be right for you.

You need to decide what YOUR objectives are, i.e. why are you investing and what do you hope to achieve. You have decided when you expect to die, your next step could be to estimate how much you need and work out how you will fund those golden years.

Bricks and mortar may be right for you, but personaly I have reduced my property portfolio.

dunstonh

I wonder if there are companies that would buy the pension off me, or if I retire now then buy it off me, instead of putting it into an annuity?

You cannot sell your pension. Also, you dont need to buy an annuity.

You see I know I will probably only live into my 70's and prob not into my 80's. If they could work it out on those years, I would get a better return?

If you have medical conditions which affect life expectancy then there are annuity providers that consider that and can offer enhanced terms.

I feel like the £60000 has been taken form me as this would have lost less and earnt more money in property over the last 3 years than what it will give me back in the future?!

You would not have earned more on property over the last 3 years compared to the investments. Virtually every asset class is up, and some by a lot, in that period.

Just looking at the FTSE100, here is the returns without dividends:
2011 -5.6%
2010 +9.0%
2009 +22.1%

Has property gone up by over 25% in the last 3 years?

It is up to you do to what you want but I don't believe you understand what you have and are making incorrect guesses. Retirement planning is a very important thing to do. Jumping the gun on incorrect assumptions is a big mistake.