With Profits Terminal Bonus/Transfer Value

Bosworth85

I am 62 retiring in 2/3 years. I have a Friends Life (now Aviva) With Profits pension that matured when I was 60 and I have continued to leave it in place. The transfer value has grown well in the last 10-15 years. However, this has been due to Terminal bonus which I understand could be removed at any time. If removed my pension which decline by 50% an obviously major concern. A Financial Consultant advised me to transfer to a pay down pension now so as to ensure I will not loose these bonuses. However, I suspect his concern is to charge me fees setting up a new pension.
My question is has anyone lost the Terminal Bonus/seen a major decline in transfer value in there With Profits Plan? I am trying to gauge how likely/common that experience has been. My WP pension transfer value has grown consistently 8-9% per year and only declined once in 2009 3.5% which was pleasant surprise given the recent market crash. I do not want to leave my Pension just because I have been scared off by an advisor with everything to gain if I leave.
Ultimately, I will need to leave the pension as I do not want an annuity (my understanding there is no guaranteed annuity rate with my plan) and will need to transfer to draw down pension which is unavailable with my WP pension.
Any help greatly appreciated.
Seasons Greetings everyone

dunstonh

If removed my pension which decline by 50% an obviously major concern.

Most stockmarket crashes are around 20-25%. A multi-asset fund would drop around 15% in that period. Both the dot.com and the credit crunch dropped around 43% but a multi-asset fund would drop much less than that.

You are overstating the likely loss potential during an extreme crash.

A Financial Consultant advised me to transfer to a pay down pension now so as to ensure I will not loose these bonuses. However, I suspect his concern is to charge me fees setting up a new pension.

You should only get advice from an IFA. Not an FA or other name. The advice needs to be justified. You can just do it on a whim.

westv

dunstonh wrote: »

Most stockmarket crashes are around 20-25%. A multi-asset fund would drop around 15% in that period. Both the dot.com and the credit crunch dropped around 43% but a multi-asset fund would drop much less than that.

.

Just curious to know if anybody on here does actually have their pension pot 100% equities.

Bosworth85

Thank you for your thoughts.


Unfortunately, I did not explain situation well. It is not the WP Fund that is all invested in equities it is that the current WP Funds transfer value is made up of Terminal bonuses that comprises 50% of the value. Apparently these terminal bonuses could removed at any time by Aviva for all manner of internal management reasons unrelated to the financial markets. Has anyone experienced this occurring ? I am trying to find out is this a real concern or just a scare tactic the advisor is using to persuade me to transfer my pension.

OldBeanz

Nothing in life is certain apart from death and taxes.
You can read more here:
https://www.moneyadviceservice.org.uk/en/articles/with-profits-funds
Given your original post, I would be more concerned about what you mean by "Financial Consultant" who could be anyone from a guy in the pub to a fully qualified IFA pensions expert.

Novice_investor101

I have my pension invested in all equities, but I am 36 & in the growth phase so have at least 20 years to ride out any stock market bumps.
I'll be moving it into less risky assets as I approach 50 or 55. For now, though, I'm sticking with all equities.

OldMusicGuy

I transferred an old with profits Equitable Life pension (which was taken over by Standard Life) to my SIPP. The terminal bonus was only about 5% of the fund value, so it wasn't as big as yours. You need to check the terms of the pension to see if there are any things like guaranteed annuity rates or other benefits that you might lose if you transfer it to another scheme.

Standard Life gave me a transfer value of the pension which included the full terminal bonus but were very vague about whether any adjustments would be made if I actually transferred this. The only way I could get a formal transfer value was to get my SIPP provider (Hargreaves Lansdown) to request a transfer as at that point Standard Life had to say what the actual transfer value (including any adjustments to the terminal bonus would be). It turned out I got the full terminal bonus when I transferred to my SIPP.

I would imagine it would be highly unlikely that your terminal bonus would be "removed". It may go up or down but it's unlikely to disappear completely from the level it's at. Mine only ever went up (albeit very slowly!) and I got the full value when I transferred it.

You do not need a "financial consultant" to do any of this if you are prepared to work it out for yourself. You would need to do the following:

a) Read all the plan documentation to see if there are any guarantees or benefits that are worth having and you would lose if you transferred to a different scheme.

b) Ask Aviva for a transfer value, so you will at least see how much of the terminal bonus will be available if you do transfer.

c) If you decide to transfer to something like a SIPP, get the SIPP provider to request a formal transfer value so you will see for sure how much of the terminal bonus will be transferred. You don't have to go ahead with the transfer if you get a nasty surprise.

This worked fine for me. Required a lot of reading of the Standard Life website (and other resources) and quite a few phone calls but apart from that it cost nothing.

Ultimately you need to decide if you want to leave the pension where it is or move it to something like a SIPP where you have more control over it. Or even pay an IFA (not a financial consultant) to set all this up for you. You need to look at what the options are under the Aviva scheme and see if these meet your long term plans better than having more control over the pension yourslef (or using an IFA to manage it for you).

westv

dunstonh wrote: »

Most stockmarket crashes are around 20-25%.

The FTSE100 feel roughly 20% between April 15 to Feb 16 but I saw that as more of a correction than a crash.

HappyHarry

My question is has anyone lost the Terminal Bonus/seen a major decline in transfer value in there With Profits Plan? I am trying to gauge how likely/common that experience has been. My WP pension transfer value has grown consistently 8-9% per year and only declined once in 2009 3.5% which was pleasant surprise given the recent market crash. I do not want to leave my Pension just because I have been scared off by an advisor with everything to gain if I leave.

I had a client with an old WP fund with one of the large insurance companies, I won't say which one.

The value of the fund in November 2001 was £22,000 and had an additional terminal bonus of £20,000

When I first met the client in November 2015, the value of the fund was £42,000 and had a terminal bonus of £8,000.

At it's worse point, in November 2008, it had a fund value of £32,000 and a terminal bonus of £1,000.

So yes, the value of the terminal bonus can fall severely. However, most WP funds are now much more heavily invested in fixed interest products, so that could reduce the volitilaty of this.

Bosworth85

Thank you for the great information.


Also take the point about Financial Advisors. The advice I was given recommending getting out of the WP Pension came from a Certified Financial Planner employed by a registered financial management company but I guess that doesn't make him Independent (his fee coming from setting up a new draw down pension) . Instead I should find a Independent Financial Advisor and pay him a flat fee to review the With Profits Pension before doing anything.

Jerben

But he can't foresee the future!!!
Nobody can!!!