Aegon pension >>> with profits investments >>> guarantees

Sterlingtimes

An article appeared in the Financial Times 17 November 2014 stating:

Speaking to FTAdviser, the provider was quick to point out that all associated guarantees remain in place, including guaranteed investment returns of up to 5.5 per cent a year and guaranteed annuity rates.

Today a letter to Mrs Sterling from Aegon regarding investment guarantees: Guaranteed minimum return of around 5.5% p.a. for units held to your pension date.

I am not sure that I understand the qualification "up to" and "around". The two words have different ordinary meaning. "Up to 5.5% could mean "no more than 5.5%" but "around" could mean more than 5.5% or less than 5.5%.

But to my legal mind a "guarantee" is a promise.

Can anyone please clarify why Aegon qualifies the guarantee?

Linton

Guarantees mean just that - they are fixed.

I would guess "around" in the personal letter means approximately. As to "upto" in the FT article I think one would need to see the whole article. One of my old pensions had an 8.5% p.a. return guaranteed.

I see that late last year Aegon were announcing a new drawdown product for introduction in April that guaranteed an annual return. Perhaps your FT article was in relation to that. If you move to a different pension arrangement you could well lose the guarantees provided by the old one which is why you need to check before moving.

jamesd

My assumption is that Aegon did not think it useful to tell Mrs Sterling that the guaranteed minimum return is say 5.49767895678% and decided instead to say about 5.5%.

Sterlingtimes

Thank you both

Although the letter indicates: "Your Funds - You are invested in WP2, WPE", this is clearly not the case on checking on documents dating back to 1999."

In fact, Mrs Sterling is invested in WP2 only. This is the High Equity With Profits pension fund. The only attendant guarantee is that the price upon sale shall not be less than the selling price when the units were bought.

This fund makes my Equitable Life fund look like a solid performer. Units were bought in July 1999 for £2,016 and in 2014 are valued at £2,783. I calculate that as a compound growth of 2.2% per annum.

The other funds in the portfolio INTERNATIONAL and MIXED appear to be ex-Scottish Equitable unit linked funds.

15 years ago INTERNATIONAL was worth £2,047 and in April 2014 it is worth £2,214.

15 years ago MIXED was worth £4,627 and in April 2014 it is worth £6,785.

Perhaps this was just a particularly unfortunate investment period.

Imnoexpert_2

I don't want to hijack your thread but as you seem to be in a very similar position to me you too may have had a letter today about Aegon's changes to With Profits Investments.

I have the WP2 (High Equity with Profits fund) and the forerunner of this the WPE (With Profits Endowment fund) as well as The International and Mixed Funds so very close to your funds.

The WP2 and WPE are now to be closed to new investments.

The letter again quotes the WPE fund as guaranteed 'around' 5.5% if held until pension date. The funds will now be invested in fixed interest (The HIGH EQUITY was 10% equity. I should say that in money terms, so I guess after charges, my increases are probably about 4.4%

After 30 April the terminal bonus rates and the current unit price of the WPE will change as well as the 'investment strategy'

I hung on to this sad, sad, pension because the % was guaranteed and OK ish, and I was waiting for the new pension changes so I could review all my pensions - oh and indecisive.

What should I do? Should I transfer out before 30 April? Should I stay? Can anyone interpret the 4 page letter and put it into English?
I presume the changes will be bad for me particularly if I intend to cash in early or transfer? As I'm over 55 would it be best to just take the pension?

I need help!

sandsy

It sounds like they are changing the investment strategy (as the number of policies declines) to match the guarantee more closely. This is likely to reduce the likelihood of outperformance relative to the guarantee but may be necessary to avoid the firm having to hold excessive amounts of capital in respect of the guarantees.