Standard Life S226 retirement annuity

BigSlick

Hi all

Been reading this forum for a long time - first time posting :j

I have a question about my father’s pension. He has a S226 retirement annuity with Standard Life, with a guaranteed growth rate of 4% p.a (no guaranteed annuity rate though). The pension is currently worth around £200k and he is set to reach the retirement date in 1 year. In actual fact he has two S226 plans with Standard Life (one is worth £120k and the otherworth £80k), both maturing at the same date.

My question is regarding income drawdown. Would it be possible to drawdown from this plan (once he reaches retirement date),whilst it continues to grow at 4% p.a.

As an example, say the pension is £200k. He draws down £20k, and then the £180k remaining increases by 4% that year? Or when he goes into income drawdown, would the amount need to be moved to another fund or kept as cash?

I am just trying to work out what is the best for him for when he does retire, but do not feel he should take an annuity as the rates are terrible (I am assuming the rates will still be this low in 1year).

Any advice would be welcome.

Thanks

Linton

The guarantee will cease when the pension reaches maturity. At that time your father will have to accept one of SLs standard offerings or transfer elsewhere. I would have thought this is unlikely to include drawdown.

Is he 65 before April 2016? If so funding a State Pension deferral with some of the £200K pot could be very worthwhile as each year deferred adds 10% to the pension.

What are his views on the matter?

kidmugsy

The contract must long pre-date the idea of income drawdown, so I can't see how the T&Cs can refer to it. They should, however, tell you whether he can defer "crystallising" (the old word is "vesting") the policy and still retain the guaranteed growth rate.

If that latter is possible, one idea would be to keep one policy untouched, while transferring the other to a drawdown policy (perhaps even at SL itself) and withdrawing whatever amount of income he likes until it's empty.

Is he hoping to bridge a gap to the start of his State Retirement Pension, or does it become due at the same time?

BigSlick

Linton - Thanks for the information. He turns 60 next year which is when the policy matures so still a while before he gets the state pension. He doesn't really have much knowledge of pensions and would have just taken whatever annuity Standard Life offered next year, which is why I want to try and get the best possible scenario for him.

Kidmugsy - Thanks. That's a great idea, I will find out if he can defer one of the policies.

xylophone

Re new state pension https://www.gov.uk/new-state-pension/overview

https://www.gov.uk/state-pension-statement

http://www.standardlife.co.uk/c1/news-and-blog/moneyplus/retirement-2/pension-reform-picture-becomes-little-clearer/
"While Section 226s are covered by the legislation changes coming in April 2015, as it’s an older contract, your provider may not offer the new flexibility via that pension. To access the new flexibility, you may have to transfer to a newer style pension (and I’d always say to speak to an expert to get information before making any transfer decisions).

If your question about the tax-free lump sum relates to a Section 226, then only 25% tax free cash is payable. If you’re asking about a different type of pension, then potentially a lump sum more than 25% could be paid – it depends on the individual pension."

But SL's own position is not clarified....:)