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Full Transfer/Open Market Option Quotation Query

Hi,
My OH has just received paperwork from the Pru' for a Full Transfer Quotation and also an Open Market Option Quotation. I have some queries that I hope someone can help with please:

1. Am I correct in thinking that the former is a transfer of the entire pension fund to a new provider (who will then be responsible for paying the 25% lump sum), wheras the latter is a transfer of 75% of the fund to a new provider, with the Pru' paying the remaining 25% as a cash lump sum to my OH? Are there any advantages or disadvantages with either arrangement please?

2. Previous paperwork from the Pru' (for their offer of an annuity) gave a total fund value of £62K. We've actually had two full transfer quotation letters (dated one day apart) - one offering approx. £61550 and the other approx. £61650. Why the drop from the original figure of £62K - are they penalising us for transferring the fund? By changing from the Pru' to Partnership Assurance (via Hargreaves Lansdown) the annuity will improve by £408 per year so it still makes sense to change, though we'd rather not lose anything in charges etc. if we don't have to!! [p.s. We'll be returning the paperwork with £61650 on it....].

p.s. Included with the paperwork was a leaflet about the possible "reattribution" of Funds with the Pru'. We will have qualified under the 14 March 2007 deadline, but from what I can make out from the leaflet we may no longer qualify (or get reduced benefits) if we transfer to another provider. Are there any indications what the payout levels may or may not be? (Realising of course that it may never happen anyway)

Thanks.

polybear

Comments

  • EdInvestor
    EdInvestor Posts: 15,749 Forumite
    There should be ni difference between the fund maturity value for the Pru annuity quotation and the Open Market option quotation.

    If the pension is invested in a With profits fond, it's possible with a transfer (where you are not taking benefits) that there could be an MVA penalty imposed on exit.Thus it's essential the insurer is made aware and accepts that you are taking benefits.

    The question of who pays out the 25% TFC - the old pension provider or the new annuity or drawdown provider should not have any effect on the fund value when taking benefits.
    Trying to keep it simple...;)
  • dunstonh
    dunstonh Posts: 118,602 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Combo Breaker
    The question of who pays out the 25% TFC - the old pension provider or the new annuity or drawdown provider should not have any effect on the fund value when taking benefits.

    It can have an impact on the annuity rate given though. Transfer and OMO give slightly different annuity rates with most providers.
    I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
  • polybear
    polybear Posts: 398 Forumite
    Part of the Furniture 100 Posts Combo Breaker
    Thanks for the replies.
    It can have an impact on the annuity rate given though. Transfer and OMO give slightly different annuity rates with most providers.

    We had originally planned to transfer the entire sum - will this give the best annuity rates?
    If the pension is invested in a With profits fund, it's possible with a transfer (where you are not taking benefits) that there could be an MVA penalty imposed on exit.

    I'm not sure if it's a With Profits Fund (I'll check) - it's an RAC with no GMP or Protected Rights. Presumably an MVA results from vaiation of the Fund value due to stock market fluctuations?
    Thus it's essential the insurer is made aware and accepts that you are taking benefits.

    I'm not sure what this means. Presumably the "insurer" is the Pru'? But won't they automatically be aware?

    Thanks.

    polybear
  • EdInvestor
    EdInvestor Posts: 15,749 Forumite
    Actually looking at the difference in the figures it's not much, could be simpoly market fluctuations if these various quotes have arrived over a period of several weeks or months. An MVA penalty would normally be a larger amount eg 5% of your fund or more.
    Trying to keep it simple...;)
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