Aviva/Norwich Union

worn_out

quick question...

When aviva say my guaranteed benefits are greater than the with profits fund growth , because I have a GMP guaranteed at 8.5%...what happens at the benefit date ? They say I have an open market option to to take my capital sum and price an annuity from elsewhere...but as they haven't added any bonues for 20 years, the fund hasnt' grown at the same rate as the overall with profits fund over the same period...this means I cannot buy an annuity...

In my simple mind..if the with profits fund has increased by fourfold over 27 years,shouldn't my capital sum match that, or is this just another method of propping up my GMP ?

The 'trasnsfer value' is less than the capital sum...so 27 years of zilch, considering i had a healthy 'excess' in my transfer value..which has also disappeared.

Linton

There may well be a terminal bonus added when the pension matures.

At benefit date you should be offered an annuity of around twice the amount you would have got without the guarantee. You can take the Open Market Option but then you lose the guarantee so probably not a good idea.

dunstonh

They say I have an open market option to to take my capital sum and price an annuity from elsewhere...but as they haven't added any bonues for 20 years, the fund hasnt' grown at the same rate as the overall with profits fund over the same period...this means I cannot buy an annuity...

You can buy an annuity elsewhere. It possibly wont be worth it though. You would have to find a provider willing to accept the GMP or you would have to give up the GMP.

In my simple mind..if the with profits fund has increased by fourfold over 27 years,shouldn't my capital sum match that, or is this just another method of propping up my GMP ?

When it gets to the point that the plan never has any realistic chance of making the guarantees then the investment strategy is not really important. The value is in the guarantee.

worn_out

dunstonh wrote: »

You can buy an annuity elsewhere. It possibly wont be worth it though. You would have to find a provider willing to accept the GMP or you would have to give up the GMP.



When it gets to the point that the plan never has any realistic chance of making the guarantees then the investment strategy is not really important. The value is in the guarantee.

when I foolishly transferred my DB pension to this section 32 thing, I had already accrued £2000pa pension (at 1987 prices)..£1500 of that was my 'excess' over the GMP. 27 years later..excess gone,and the £2000 is worth £3000, albeit they have to pay me £5000 GMP.

I should have ignored the FA who told me ' buyouts will always out perform company schemes'....I've just been told the company scheme would have paid £11,600 !(they could have mentioned that to me in 1987...)..

something wrong somewhere....I still don't 'get' why the capital sum doesn't equate to the value of GMP at the annuity rate on benefit date...thereby giving me the open market option ?

xylophone

You have a S32 policy?

http://www.financialadvice.net/s32_buy_out_plan/zone/1288

http://www.barnett-waddingham.co.uk/comment-insight/blog/2014/08/18/what-is-a-gmp/

worn_out

xylophone wrote: »

You have a S32 policy?

http://www.financialadvice.net/s32_buy_out_plan/zone/1288

http://www.barnett-waddingham.co.uk/comment-insight/blog/2014/08/18/what-is-a-gmp/

thanks for that...I now have a sinking feeling...

mgdavid

concentrate on the value you have in the guarantees, not what might have been.
Aviva probably do all within their power (without falling foul of some rule or other) to get you to move away from them (i.e. OMO) as they'd be delighted to not have to pay the guarantees.

worn_out

mgdavid wrote: »

concentrate on the value you have in the guarantees, not what might have been.
Aviva probably do all within their power (without falling foul of some rule or other) to get you to move away from them (i.e. OMO) as they'd be delighted to not have to pay the guarantees.

Until I got the figures from my old pension scheme, i was just another disgruntled investor, but now I know i've lost out on £6500 pa I'm totally furious. Aviva have 'done' me..their with profits fund has quadrupled over the time period, my 'fund' has risen by approx 60%...Even if they increased the fund to equate to GMP it wouldn't cost them a penny more, but at least might give me the chance to shop around for a better deal..and relieve Aviva of the 'burden' they obviously feel they have.

worn_out

dunstonh wrote: »

You can buy an annuity elsewhere. It possibly wont be worth it though. You would have to find a provider willing to accept the GMP or you would have to give up the GMP.



When it gets to the point that the plan never has any realistic chance of making the guarantees then the investment strategy is not really important. The value is in the guarantee.

yes but I already had the guarantee at my former employers,plus another £1500 excess which has grown to a £6500 pension...Aviva have just given up with my policy and snaffled the £1500 to boot !

mgdavid

You have zero chance of undoing a decision made back in 1987, so as I said - concentrate on the value you have in the guarantees, not what might have been.

dunstonh

worn_out wrote: »

yes but I already had the guarantee at my former employers,plus another £1500 excess which has grown to a £6500 pension...Aviva have just given up with my policy and snaffled the £1500 to boot !

Aviva are likely to lose a fortune on this contract. So, they haven't snaffled anything. They have not done you.

After Equitable life and then the dot.com period, there was greater pressure put on insurers to protect their liabilities as the priority and not investment return. So, up until that point, you probably got returns comparable to the performance of the underlying fund. However, after the dot.com crash and the decline in annuity rates, once they realised the fund would never meet the GMP, covering liability would have been priority.