Phoenix life Qs

lisyloo

I am reviewing my pensions due to a change of circs.
I have one pension with Phoenix life fund value £19.6k (fortunately it's a small part of the total).
If I transfer there is currently an early claim charge of £1.5k plus an MVR of £3.6k, so a total 26% reduction.
I've also noticed that the next MVR free date is when I'm 65 and I hope to retire before that.

As an unsophisticated investor this seems to me to be pretty much daylight robbery. I do understand that pensions are long term investments but I also thought I could take private pensions from age 55.

Can anyone help by explaining this to me as it seems to be a practice that ought to be illegal or at least capped to reasonable levels.

Linton

Pensions with MVRs could well be old "with profits" policies. Some of these are good, some arent. They may also have guarantees that provide an annuity or final pot size much larger than you would expect with standard investments. So you need to find out the details, it may be in your interests to keep that pension until maturity.

Old pensions cant change their rules and investment strategies that form the basis of the pension because the government happens to grant new freedoms. What they can do is offer you the option of leaving that pension and moving your money elsewhere to access the options you want. But they wont give you a good price if they feel it would disadvantage those customer who remain.

lisyloo

Thanks for the explanation, exactly what I wanted.

dunstonh

As an unsophisticated investor this seems to me to be pretty much daylight robbery.

its not.

The theory with With Profit funds smooth the ups and downs out. So, they dont go down as much in bad days and some is held back in good days to offset the down. However, over the years, the running of these funds has had to become more transparent and now they are more volatile than they used to be in the past.

When the underlying fund drops in value (say after a crash/negative period), the fund cannot remove any annual bonuses added to your pension fund and they cannot remove the sum assured (if there is one) or the capital value built up by the contributions. The only thing they can reduce the final bonus. This can mean that a drop of say 20% in the underlying fund may result in your pension only being able to reduce by 5% in value by loss of final bonus. So, the provider now has a 15% loss on its hands. It will be insured to suffer that loss itself if you are at the scheme retirement age/maturity date. However, if you are before that date, they can charge a market value reduction which sees you pay the difference.

If yours is an ex Pearl one then the transfer penalty is to recover some of the money that was added up front in the forum of basic sum assureds or increased allocations. As you are not staying the full term, they claw back some of that up front money.