Non Reserve Pot advice

xylophone

A Guaranteed Annuity Rate is a usually highly valuable feature of older pension products that provides a fixed annuity rate.

And it would seem that certain Scottish Equitable S32 policies contained a GAR in the Non Reserved Fund see

https://forums.moneysavingexpert.com/discussion/4486991

I appreciate the reasons for transferring, but be very sure. Mine isn't payable for 5 years, but it includes a GMP of IIRC £466 p.a. (in 1987) that is revalued annually by 8.5% (that is an actual 8.5%, not a cap on RPI), making it £5856 by 2018. This will be far more than the fund would currently buy. I think it is a level annuity, but it does include a spouse's pension at 50%. As far as I can work out so far, the GMP comes out of the "reserved" funds (a Scottish Equitable term I think) and a further annuity can be purchased from the "non-reserved" funds for which there appears to be a guaranteed annuity rate of 11.1% (at 65).

oshb5

Hi

With regard to the Non Reserve at Aegon the payment of 991 (Would that be the GAR.?.) was on the full amount of £28k from what I understand

But If I was to take any from it then it would have to be moved and this is where the FA came in and I was told and have a email to confirm that even if I was to take 25% the remaining 20k would then give me a yearly rate of £1253
But this yearly amount could also be further played with depending on weather I wanted my partner to have a income for life and not just the five years after my passing which is apparently usual on that type of pension? Also weather to have a higher rate now and it staying at that level Or a lower rate increasing with time and ?? I was not sure what it increased by But whatever it would be equal after 5 years then after that I would be on the better side?
Does that all make sense and sound right. And this is only to do with the Non Reserve fund Not the Reserve GMP part.

Regrds Osh

xylophone

Nobody on the forum can give you advice, only suggestions of where to look for information.

You need to put your questions to an Independent Financial Adviser qualified to advise on pensions.

oshb5

xylophone wrote: »

Nobody on the forum can give you advice, only suggestions of where to look for information.

You need to put your questions to an Independent Financial Adviser qualified to advise on pensions.

Ok Thank you. The information I quoted was from the Company Prime retirement solutions. When I asked the cost of their service I was told it was free and there costs where from whichever scheme/company I decided to go with from their recommendations But said I was also not obliged to take any of their proposals should I decide not to go ahead with any of the recommendations?

So from what Iv said and been told would you suggest I get in touch with a IFA just as a precaution?

regards Osh

xylophone

You could approach local IFAs and ask about charges?

https://www.unbiased.co.uk/

jamesd

oshb5 wrote: »

The information I quoted was from the Company Prime retirement solutions. When I asked the cost of their service I was told it was free and there costs where from whichever scheme/company I decided to go with from their recommendations

Find someone else. There would typically be a commission payment from an annuity purchase if you bought an annuity. That commission can be refunded to you if it wasn't paid to the firm doing the selling. They also appear to be misleading you about your income options so do not do business with the firm.

oshb5 wrote: »

With regard to the Non Reserve at Aegon the payment of 991 (Would that be the GAR.?.) was on the full amount of £28k from what I understand

What is the GAR? It is normally a percentage of the amount, for some type or types of annuity. You cannot make a sensible decision without knowing what the GAR is because it is usually so valuable that it is wrong not to use the GAR.

oshb5 wrote: »

But If I was to take any from it then it would have to be moved and this is where the FA came in and I was told and have a email to confirm that even if I was to take 25% the remaining 20k would then give me a yearly rate of £1253

What did the FA say the GAR was? They cannot provide proper guidance to you without telling you what the GAR is. If they are not doing that then you must not use their service because it is most likely that the GAR is the best choice.

It appears that the £1253 is a level annuity at normal open market rates, not the higher rates that a GAR would normally provide.

oshb5 wrote: »

But this yearly amount could also be further played with depending on weather I wanted my partner to have a income for life and not just the five years after my passing which is apparently usual on that type of pension?

A five year guarantee means that the annuity will be paid for five years from the date of purchase, not five years from your death. If they told you it was from death, they either don't know what they are doing or they lied to you.

oshb5 wrote: »

Also weather to have a higher rate now and it staying at that level Or a lower rate increasing with time and ?? I was not sure what it increased by But whatever it would be equal after 5 years then after that I would be on the better side?

The most purchased type of annuity is a level annuity, something like 90% of all annuity purchases. This pays a higher initial amount that never changes. So over time inflation gradually reduces its real value. 3% inflation would take it to around half value in purchasing power over 25 years.

The main alternative to this is an inflation-linked annuity, CPI inflation. This starts out paying substantially less but the income is increased with inflation so the purchasing power stays roughly the same.

For either type you can pick a five or ten year guarantee. This doesn't cut the income much and means that if you were to die within five or ten years of purchase the annuity would continue to pay out until the full initial five or ten years passed.

For either type you can pick a spousal/dual life annuity. This significantly cuts the initial payout level but provides an ongoing income for their life to a spouse. You can choose the amount the spouse gets, from perhaps 50% to 75%. The more they get and the younger they are compared to you, the greater the reduction in the payment level while you are alive.

If you did transfer it is not necessary to buy an annuity to get an income. You can just leave the money invested somewhere and take an income from it. This option would not pay an IFA commission, instead they would charge a fee. It is likely that many IFAs would not consider this option for you and i do not think that you are a good candidate for using it because it requires some knowledge of investments or an amount big enough to make IFA costs worthwhile and your pot is not large enough for that. This option is called "income drawdown".

From 6 April 2015 you also have the option of taking any amount out of a transferred pension pot. The first 25% tax free, the rest added to your taxable income for the year. You could do this and reinvest the money in a stocks and shares ISA to generate an income. To reduce income tax you wouldn't want to take all of the 75% at the start, you'd keep it to a level so that you would only pay basic rate income tax. This option can also be used if you just need a bigger lump sum and no ongoing income. This is another form of drawdown, just not leaving the money in the pension pot. The costs for taking an income from an ISA are probably lower than from a pension and that's one reason why it can be the better choice.

oshb5 wrote: »

Does that all make sense and sound right.

No. I think that you should not do business with this firm even though they appear to be IFAs.

What I suggest you do is find out from Aegon when the GAR applies and what that percentage rate is. Then I'll almost certainly say that your best choice is to take that GAR as soon as it is available.

You simply can't make a correct choice without knowing the GAR terms. So don't go with what anyone says until you know what those are.

oshb5

Hello

And a thank you to jamesd as your answers have helped me a lot. But I think I have put some information that was wrong those being
1/ The company "Prime" did mention that they got there money in way of a commission from the company that I was to put my money with(If I so choose to)
2/As for GAR it has never been mentioned by either the "Prime" company I have been talking to who apparently inherited the IFAs job for my pension when the original Bremar stopped. Or Aegon Iv been through the pages where one is on about the Reserve fund and another on about the Non reserve and another the options what I could do now but I cannot find anything that point to or says the GAR?
3/As to the 5 year thing yes I was told it was 5 years from start of new setup. And I was the 10 years with income for spouse for life that I pumped for. Simply because I am not a well person and the spouse is 9 years younger than me and is in great health other than her temper with how my illness has put our lives on old and with her at such a young age it hurts im afraid. So thinking along those lines iv tried to do the right thing and leave her a little extra .
4/And finally the 5 years to get even I was wrong and mis heard it was 25 years to be the same so in my thinking that I might have had some benefit of starting low and getting better after 5 years (as I thought) went out of the window as its the 25 years as you mentions. Which I had confirmed today. So as much as I would love to be around in great health too reap the benefit of the "Better after 25 year" well I dont think so but one came always hope.

Right Im very greatful for all your answers above and they have helped me no end. Its just now down to me whether I leave where it is or risk it and move it .

Iv also talked to a FA of a good friend and who is local but again he said his fees where made in the way of commisions from the company your money was invested with. But iv seen many on here where the FA is on a percentage of the deal and paid by you. Can ypu explain the difference please. If there is one that is? Sorry to be a pain and ask all these questions..

The final thing I thought Id ask Is regarding the 21k what suggestions could be a good way to invest it to make it pay out each month as a income. baring in mide I have more than 3 of the illnesses listed on the sites which would give me a enhanced annuity?
Also Is there any schemes or plans that let you put the money in but only to take out the yearly interest So that the original investment stay intact for you to either take at pension age or for your spouse Then to use as yearly interest as a income so in effect you would not get any income for the first year?

Is this better to be asked here or a new thread?

Regards Osh

bilbo51

oshb5 wrote: »

Its just now down to me whether I leave where it is or risk it and move it .

From my reading of the above, moving it would be erm <....searches for the right word....> stupid without knowing what the guaranteed annuity rate is.


Example: I have a S32 with Aviva. If I leave it where it is, it will pay 10% of the fund every year for life at 65. If I move it somewhere else, I would likely get between 5 and 6% at 65 instead.


What do you think I should do?

xylophone

Have you read post 12?

Your policy has two parts, the reserve fund ( set aside to pay your GMP at age 65- presumably the original GMP figure is revaluing at 7% per annum - you can check this with Aegon) and a non- reserved fund- does this fund have a GAR? Again, you can check this with Aegon.

Do you really wish to depend on the opinion of a friend's FA when making a decision about your pension?

You might be better engaging an Independent Financial Adviser qualified in pensions who could also look at your position with regard to state benefits?

Have you rung round to check a few regarding fees and service?

Your_Hero

oshb5 wrote: »

Iv also talked to a FA of a good friend and who is local but again he said his fees where made in the way of commisions from the company your money was invested with. But iv seen many on here where the FA is on a percentage of the deal and paid by you. Can ypu explain the difference please. If there is one that is? Sorry to be a pain and ask all these questions..

No commission is paid for regulated advice sales related to pensions/investments. You agree a fee with the IFA/FA, which could be a % of the amount advised or a fixed fee in £.