What is it and what can I do with it ???

thebullsback

Can anyone please tell me what this is and what can I do with it? as in cash it in ,invest it or anything .Also is it any good ??
This is a copy of a letter I received from Aviva.
Policy type :UK Defined Benefit Sch Replacement

This is a replacement policy from a terminated Defined Benefit Occupational Pension Scheme.The benefits were bought out of the scheme fund when the scheme wound up .Therefore there is no fund value and no annuity rates apply. The defined benefits are fully secured with Aviva on a non-profit basis and are not held within any unitized funds.
Therefore you cannot choose or switch funds and there are no charges that apply.
The current transfer figure is £17,237.37 of which £7,586.33 is the value of post-1988GMP.We cannot guarantee these values ,they are for illustration purposes only.

Linton

It represents a guarantee to pay you a fixed amount per year probably inflation linked from when you reach a particular age, perhaps 65, until you die. You need to find out what the amount is and at what age.

So you take that amount or transfer the value as a lump sum into a pension elsewhere at which point you lose any guarantees. You may have to look around for a receiving company that doesnt insist you see an IFA. After transferring if you are over 55 you could take 25% as tax free cash and the rest as taxed income.

I guess if you dont transfer its worth £500-£1000 per year.

dunstonh

A transfer would also forfeit the GMP (as its unlikely a provider would be willing to accept it). The value of the plan would well be the GMP it can provide.

atush

Basically,

your type of pension isn't covered under the new rules, and unless you have no spouse and are due to die early can't think a transfer would be in your best interests?

xylophone

This seems very similar to a S32 policy. http://www.financialadvice.net/s32_buy_out_plan/zone/1288.


How old are you? The company must pay you at least your revalued GMP at GMP age (65 for a male).

As the GMP is post 88, the company must index link the GMP in payment up to 3%.

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

thebullsback

Thank you for your replies .
I am 56,married and working for the NHS as I have done since 1999.
The way I read the letter says to me I have had a lump sum held by Aviva doing nothing as it is not invested in anything.Would that be correct ??

greenglide

The way I read the letter says to me I have had a lump sum held by Aviva doing nothing as it is not invested in anything.Would that be correct ??

Not at all.

What you have is a promise to pay you a certain level of pension when you reach the age determined by the policy in the same way as the original scheme did before it was wound up.

They are committed to provide that, irrespective of investment returns, just like your NHS pension does. The transfer value stated is their idea of how much it would cost to buy the same level of pension from another provider.

Pincher

You worked for another company, and paid into their Final Salary Pension scheme. That company had a pension fund that has legacy obligations, to you, as well as other members who will start receiving a pension until they die, from the age of 65 (I assume). That company has become insolvent, bought in a hostile take over, or any other violent corporate action, resulting in nobody wanting to run a pensions department for your benefit.


Let's say there are 365 members in this pension fund, and they paid Aviva £10milion to take on all the legal responsibilities to the members. They didn't sell you 365 members to Canada Life, because Canada Life wanted £11million. Aviva will want to make some money on this deal, so they will pay you when you come of age (assume 65), but only the minimum they have to.


The original pension contract gave you some rights, like they will pay your spouse at half rate if you die, which Aviva can try to forget as part of the transfer, so you should keep the old contract, and don't sign anything without reading it.


Early withdrawals can mean further erosion of your rights,
like index linking, as well as incurring income tax due to drawdown.

thebullsback

Thank you all for your very helpful replies .
I take it I need to get more info off Aviva and then wait till I get to the declared retirement date ??

atush

Yes, you need the details of what it will pay, and when and any death benefits and indexing. You can get a transfer value, but in your case I would not do that.


Unless your OH has a good pension and your NHS pension will be more than you need to live on

xylophone

Presumably before you started working for the NHS you worked (after 1988) for a company which had a Contracted Out defined benefits pension scheme.

When you left, you were provided with a statement of deferred benefits?

The pension scheme has been wound up (when?) and Aviva are now providing you with a replacement in the form of an insurance policy - as I said, it seems to be similar to a S32 in that it must provide you with at least your revalued GMP at GMP age.

Presumably the GMP is being revalued at Fixed Rate. Check this with Aviva.

Aviva must also index link the GMP pension once in payment by up to 3% per annum.

You can ask Aviva to confirm the above and ask about any spouse benefits.