Pension advice required

Gary_L

I am 52 Years old,employed with a planned retirement date of 2027
I have a £149,000 pension pot with Aegon that is is dormant (no more funds going into it) with a guaranteed enhanced cash free lump sum of £49,000 (A-day). I want to know if it is wise to keep this Aegon pension with the guarantee attached and a 0.8% annual management fee or to move it to my Aviva pension that has a 0.2% annual management charge but with no guaranteed enhanced tax free lump sum (they wont accept the guaratee if i transfer it). ANY ADVICE WELCOME
Thanks

mgdavid

Gary_L wrote: »

I am 52 Years old,employed with a planned retirement date of 2027
I have a £149,000 pension pot with Aegon that is is dormant (no more funds going into it) with a guaranteed enhanced cash free lump sum of £49,000 (A-day). I want to know if it is wise to keep this Aegon pension with the guarantee attached and a 0.8% annual management fee or to move it to my Aviva pension that has a 0.2% annual management charge but with no guaranteed enhanced tax free lump sum (they wont accept the guaratee if i transfer it). ANY ADVICE WELCOME
Thanks

depends on the rest of your retirement planning. Will you still have a mortgage or other debts to pay off with the lump sum? Personally I don't really understand why people are so keen on the TFLS unless they are seduced by the thought of a spending spree (hardly MSE!) or the pension after TFLS is more than adequate to live a good life on..

dunstonh

I have a £149,000 pension pot with Aegon that is is dormant (no more funds going into it) with a guaranteed enhanced cash free lump sum of £49,000 (A-day).

Did you apply for transitional relief or is it a section 32 buy out bond?

I want to know if it is wise to keep this Aegon pension with the guarantee attached and a 0.8% annual management fee or to move it to my Aviva pension that has a 0.2% annual management charge but with no guaranteed enhanced tax free lump sum (they wont accept the guaratee if i transfer it). ANY ADVICE WELCOME

is there GMP on the plan?

kidmugsy

Some rough arithmetic: assume all the money is effectively index-linked, tax rates stay the same, etc.

TFLS would be £49k vs £37.5k: at 20% income tax, advantage = £2300.

Annual cost is (0.6/100)x £149000 = £894 p.a.
Multiply by 13 years = £11622.

On the face of it, worth swapping to reduce costs. But then will the assumptions pan out?

If you want to refine the calculation you could assume that underlying growth = inflation rate + 0.6% p.a. then show the greater growth of the option with the lower costs. Hardly seems worth it to me.

It might be wiser to repeat the simple calculation but with annual growth rates 1%, 2%, 3% above inflation.

Gary_L

I am sorry but dont understand the questions regarding transitional relief or section 32 buy out bond.
It is a personal pension plan that I had through the company i work for.The money was transferred to Aegon from SL and retained the original guarantee. The advice i had originally from the brokers used was that i should try and retain the guarantee, however, since my company have changed hands, the new company have a good deal with Aviva re the annual management charge.
I will not have a mortgage when i retire. In all with my current pension plan that i already have with Aviva i have another £80k that is performing very well. I have approx £1200 per month going into the Aviva pension.
My gut feel is that i should just move it into Aviva with the annual management charge being so low but it was suggested that i may want to get advice.
Your opinions are very well received and thanks for pointing out if i am being naive.

dunstonh

I am sorry but dont understand the questions regarding transitional relief or section 32 buy out bond.

Then you need to find out as its important.

It is a personal pension plan that I had through the company i work for.The money was transferred to Aegon from SL and retained the original guarantee.

Personal pensions rarely have any guarantees. They never benefitted from automatic transitional relief. A section 32 buy out bond did. S32s also frequently have guaranteed annuity rates (GARs) and Guaranteed minimum pensions (GMP). These would be lost on transfer along with the transitional relief benefits.

My gut feel is that i should just move it into Aviva with the annual management charge being so low but it was suggested that i may want to get advice.

You may find you have to get advice anyway. If it is a S32, then when Aviva realise it is not a personal pension they may refuse to accept it and require an adviser to sign off on it.

mania112

Gary_L wrote: »

I am 52 Years old,employed with a planned retirement date of 2027
I have a £149,000 pension pot with Aegon that is is dormant (no more funds going into it) with a guaranteed enhanced cash free lump sum of £49,000 (A-day). I want to know if it is wise to keep this Aegon pension with the guarantee attached and a 0.8% annual management fee or to move it to my Aviva pension that has a 0.2% annual management charge but with no guaranteed enhanced tax free lump sum (they wont accept the guaratee if i transfer it). ANY ADVICE WELCOME
Thanks

Plainly, this is really a question that only you know the answer to.

Do you want/need circa 33% tax free cash, or do you want a lower cost pension? (the max TFC without a guarantee currently is 25%)

I don't think Aviva PP is ever as low as 0.2% though?

mania112

Actually, it's more than 33% isn't it? Are you saying £49k is A-Day TFC and £149k is todays fund value?

tony4147

Are you sure that the pension is a Personal Pension and not a Executive Pension??

I have a paid up Executive Pension from when I was a Director of a Company, this meant I could withdraw more than the 25% TFLS. Following "A" this has now been frozen as 51% TFLS of the pension value on "A" day.

Hence my question above

I will be taking the full 51%, I don't intend to leave the money in a pension scheme that dies when me or my wife dies!!

Gary_L

I can advise that it is definitely a personal pension plan and it is clearly stated within the latest plan valuation "the member's benefits include a protected lump sum of £48,049.88 as at A day, which may be lost if the policy is transferred".

The current plan value is 149053.57

the Aviva pension is @ 0.2 % annual management charge and refelects the size of company i work for, i believe they have managed to negotiate this some years ago.

The pension plan also tells me that there are no guaranteed annuity rates or guaranteed minimum pensions.

Does this help in any way?

dunstonh

was the pension with aegon part of a block transfer from an occupational scheme? AFAIA, that is the only way for a personal pension to get automatic transitional relief.

What investment options does the Aegon plan have? (i.e. if it has a fairly decent fund range then the 0.6% p.a. difference in charge is probably insignificant compared to the enhanced lump sum benefit given how close you are to retirement age.