CIS Withprofits

mawallace

I have a pension fund with CIS invested in their "with profits" funds.
Given bonus rates are falling on with profits funds, I wonder if someone can give me an opinion or point me in the right direction.

The fund value, if I transfer it today is £11,700. The guaranteed minimum fund on retirement is £9,700. So as I read it, the fund is higher than the guarantee!
If so, what is the likely final bonus rate? What is being paid out on such polices at the moment?

Your_Hero

mawallace wrote: »

I have a pension fund with CIS invested in their "with profits" funds.
Given bonus rates are falling on with profits funds, I wonder if someone can give me an opinion or point me in the right direction.

The fund value, if I transfer it today is £11,700. The guaranteed minimum fund on retirement is £9,700. So as I read it, the fund is higher than the guarantee!
If so, what is the likely final bonus rate? What is being paid out on such polices at the moment?

Since fund value is quite a bit higher (20%) than the guaranteed value, this makes the guarantee almost useless. However, this also depends on how far you are to the normal retirement age of the plan (usually 65).

You also need to check if there is a guaranteed annuity rate (GAR). Assuming your CIS plan is a personal pension, if it started before 1 March 1999 then there will be a GAR on it and this will need to be assessed as to whether or not it is worth keeping. This will of course be lost on transfer.

As the CIS is a closed book business (sold to Royal London group), the prospect of growth is extremely limited owing to the large amount of guarantees it needs to meet and hence final bonuses (if any) may be low. You can read the CIS PPFM (http://www.royallondongroup.co.uk/Documents/Coop/pdf/PPFM_LTBF.pdf) if you want to know more about how they calculate the final bonuses.

dunstonh

Given bonus rates are falling on with profits funds

It is best to look at your plan and not hypothical assumptions that may not apply.

Many CIS plans actually have no annual bonus and haven't for over a decade. They put the return on using only the final bonus and factor in the cost of guaranteed annuity rates. So they cant actually fall.

Nickolai

mawallace wrote: »

I have a pension fund with CIS invested in their "with profits" funds.
Given bonus rates are falling on with profits funds, I wonder if someone can give me an opinion or point me in the right direction.

The fund value, if I transfer it today is £11,700. The guaranteed minimum fund on retirement is £9,700. So as I read it, the fund is higher than the guarantee!
If so, what is the likely final bonus rate? What is being paid out on such polices at the moment?

I had a similar old opted out serps contributions CIS policy with a transfer value of around £5400 and a guaranteed minimum fund of around £5700.

The estimated final value of around £7100 in 20 years time.

I asked for some advice a couple of months ago after my current DC scheme wouldn't accept the transfer as it is a with profits scheme, even though no annual bonus had been attached for a decade.

Someone suggested a SIPP and Hargreaves Lansdowne so I went for that and sent the transfer paperwork off last week. I just thought that hopefully it would just do better elsewhere it just seemed to have stagnated at the CIS and the GAR rate was only around £50 per £1000, the final bonus was anybodies guess.

For me it just made more sense to transfer.

mawallace

Let me know how the transfer goes. Presumably you transferred cash. I too was thinking of transferring to Hargreaves Lansdown

Nickolai

mawallace wrote: »

Let me know how the transfer goes. Presumably you transferred cash. I too was thinking of transferring to Hargreaves Lansdown

It's gone quite well so far.

I opened a SIPP online and requested to transfer in, HL sent me the necessary form for me to give them the CIS details and request a transfer, sent it back to them and they contacted CIS or Royal London. Got a letter from CIS saying they had sent the transfer forms to my Independent Financial Adviser? (HL), HL filled in their bits and sent it onto me, I signed and got it witnessed and sent it back. I guess they will send it back to CIS and the transfer will go through. HL did tell me it could take 6-7 weeks from start to finish, and from experience CIS never move that fast.

It's been really smooth as far as HL are concerned, they seem very efficient and professional. They sent me a logon and password in seperate letters. I made one call to them and they couldn't be more helpful. The website is very easy to use and I've downloaded the android app which seems quite decent.

I'm waiting for the transfer to go through before choosing a fund or funds, as it is a relatively small amount I may go for more medium risk funds but as there are hundreds to choose from I've no idea what.

My DC contributions at work go into a similar worksave scheme with L&G but I've just decided to remain in the default fund, in fact after chatting to one of our pension trustees a few weeks ago not a single person has moved away from the default fund.

amandajc

I am also considering transferring my CIS FAVC pension into my Fidelity SIPP (although I am not sure whether this would be straightforward or not as Fidelity's website has this to say regarding the transfer of "with profits" pensions: "If you wish to transfer one of these schemes, full analysis and advice will be required to show that it is in your best interests. Without this, the transfer cannot proceed.")

However, my immediate concern is regarding the timing of a transfer. My pension statement is still showing an annual bonus of £489.51 -paid for 2012 on my 2014 statement - and the transfer value went up from £15,076.48 (March 2013) to £17,104.23 (March 2014) which is significantly more than the £684 I paid in during the period (£57 per month after tax relief has been applied).

I would like to take this pension in chunks to help fund my retiring at 60 (I am currently 55) and deferring my LGPS till 63, rather than use it to buy an annuity, so I would have to transfer it out at some point as currently CIS do not offer a drawdown service.

However, given that the pension seems to be growing quite well at the moment it seems it would it be better to leave it with CIS until I am 60 and actually need it?

Your_Hero

amandajc wrote: »

However, my immediate concern is regarding the timing of a transfer. My pension statement is still showing an annual bonus of £489.51 -paid for 2012 on my 2014 statement - and the transfer value went up from £15,076.48 (March 2013) to £17,104.23 (March 2014) which is significantly more than the £684 I paid in during the period (£57 per month after tax relief has been applied).

The annual bonus contributed to £489.51 of this, plus your own contribution of £684. In other words, of the £2,027 increase in transfer value, we know where roughly £1173 came from already. The other thing that may have led to an increase in transfer value is the removal/reduction of an MVR (exit penalty) and/or a final bonus on your plan (not guaranteed).

I would like to take this pension in chunks to help fund my retiring at 60 (I am currently 55) and deferring my LGPS till 63, rather than use it to buy an annuity, so I would have to transfer it out at some point as currently CIS do not offer a drawdown service.

However, given that the pension seems to be growing quite well at the moment it seems it would it be better to leave it with CIS until I am 60 and actually need it?

This is what the analysis will determine, whether or not it is good idea to keep it or transfer to another plan. It's difficult to comment without the full details on this type of policy as there's many parts to it and not just a simple case of looking at how well it's done last year.

The analysis would look at what features you require for the new plan (e.g. drawdown), what features you are giving up, and the extent to which you are better or worse off (final pot value, benefits of the plan lost/gained) and whether or not the adviser feels a transfer is recommendable now or just wait.

amandajc

Thanks Your Hero. I have just phoned CIS and asked about some of the things you mention.

Apparently the "annual bonus" that is applied is not new but one that was applied for 2003 - they haven't applied any since then. (Nor sure I completely understood this but she categorically stated they currently don't and will not be applying any more annual bonuses.)

There is no MVR or final bonus applicable to this type of pension.

She could not break down/explain the £1343 increase in the transfer value (over and above the £684 I paid in) other than to say it has come from the fact that it is a "with profits" fund.

As this is over an 8% rise I am not going to complain - is it perhaps because profits were held back in previous years to allow the smoothing?

I did ask if I could increase payments into the fund but apparently this isn't allowed. Is this usual with this type of fund?

Your_Hero

amandajc wrote: »

As this is over an 8% rise I am not going to complain - is it perhaps because profits were held back in previous years to allow the smoothing?

Smoothing is done achieved through the setting of annual bonuses, MVRs, and/or final bonus.

I did ask if I could increase payments into the fund but apparently this isn't allowed. Is this usual with this type of fund?

CIS is a closed business so they won't accept new payments.

mawallace

I've looked at my statement and there is an increase of about 8 percent too so perhaps that the growth for the year