With Profits Pensions - Risks?

Gatser

The FSCS cover savings with approved banks up to £85k but what about a WP pension if the pension company runs into difficulties?
Is a With Profits Personal Pension covered (100%) by FSCS?

sandsy

A WP pension is a long term insurance product with 100% FSCS cover.

Tealblue

The major risk is that you won't get any bonuses, so the growth will be zilch.

dunstonh

The FSCS cover savings with approved banks up to £85k but what about a WP pension if the pension company runs into difficulties?

100% FSCS protection with no upper limit. The same with internal unit linked funds on a personal pension or stakeholder pension.

WP funds are an old fashioned and largely obsolete way to invest nowadays. However, there are a few gems out there which either have guarantees built into them (like a guaranteed minimum return) or guaranteed growth rates or guaranteed annuity rates.

Some people incorrectly write off all WP funds as being bad. That is wrong. However, a good number are obsolete and can be improved on. It is always worth checking if yours is a good one or one that should be moved.

P933alilli

So if it doesn't have those guarantees its not worth keeping hold of? Mine has performed well these last few years, 12% growth in the last three, but overall the guaranteed value isn't great. The transfer value looks quite good with the final bonus but presumably if the company doesn't perform well for any particular reason it could cut the final bonus or even scrap it!

campbell19925

Collyflower1 wrote: »

So if it doesn't have those guarantees its not worth keeping hold of? Mine has performed well these last few years, 12% growth in the last three, but overall the guaranteed value isn't great. The transfer value looks quite good with the final bonus but presumably if the company doesn't perform well for any particular reason it could cut the final bonus or even scrap it!

Terminal bonus can be taken off you at any time - EXTREMELY unlikely that that will occur but it is a possibility. If we see another financial crash - who knows?

Why risk it?

3 ways to lock in a terminal bonus;

1. Die - obviously not an option (Death benefits will be return of funds presumably - 99% are)
2. Stay in scheme till retirement date (Find this on your plan)
3. Transfer out (Assuming no exit penalty you will get the full xfer value)

With profits are generally something you'd want to transfer out of - quite archaic schemes usually that don't offer any flexibility (FAD). If you have a guaranteed growth rate of 4% and you are not a risky person then it may be worth leaving it where it is depending on how close you are to retirement.

Malthusian

campbell19925 wrote: »

Terminal bonus can be taken off you at any time - EXTREMELY unlikely that that will occur but it is a possibility.

It is not extremely unlikely that it will occur. There will be another crash at some point, and at that point it is very likely that the terminal bonus will be removed, or at least reduced, and potentially a Market Value Reduction could be applied as well.

And of course the insurer has the right to remove the terminal bonus even if we don't have a crash.

The OP should check whether there are any guarantees, as 12% growth over the last three years raises the question of whether it has a 4%pa guaranteed growth rate.

Collyflower1 wrote:

The transfer value looks quite good with the final bonus but presumably if the company doesn't perform well for any particular reason it could cut the final bonus or even scrap it!

In theory the performance of the company should be irrelevant - the performance of the With Profits fund is what matters.

P933alilli

The OP should check whether there are any guarantees, as 12% growth over the last three years raises the question of whether it has a 4%pa guaranteed growth rate.


The last three years the transfer value has increased by 12, 10, 13.5% respectively. It looks very good on paper but...?

peterbaker

Collyflower1 wrote: »

The OP should check whether there are any guarantees, as 12% growth over the last three years raises the question of whether it has a 4%pa guaranteed growth rate.


The last three years the transfer value has increased by 12, 10, 13.5% respectively. It looks very good on paper but...?

The OP should try to check more than that Collyflower1.

It is absolutely amazing that so many supposed wise heads in this particular forum advocate transferring out while you can.

To me, their comments exhibit a form of blindness to the obvious when you consider the size of the funds (hundreds of £billions still invested in obsolete funds via obsolete products - ehm ... really?). Since when has any money in £billion piles been obsolete?

None of the wise heads has enquired which exact fund the OP or you might be in. So many of the W-P funds (the vast majority) have been terribly manipulated, renamed and combined or decombined from other funds or sub-funds, such that for most investigators it is worse than a drug-baron's money-laundering set up through Luxembourg Caymans Gibraltar and all the other dodgy places to unravel.

Rare 23 year old actuarial technical papers like the one linked to below were unwittingly perhaps a W-P crook's wet dream when they appeared and laid bare all the potential shenanigans that could be used to obscure the real performance of the funds.
'ASSET SHARES AND THEIR USE IN THE MANAGEMENT OF A WITH-PROFITS FUND' (WARNING: LINK immediately downloads a 4MB PDF file of 86 pages)


I believe it is very deliberately now so, and for my small part have urged FCA to restart the investigations the erstwhile FCA director Clive Adamson got sacked for publicising. The biggest W-P pension scams are not so much by strangers that ring you up and try to get you to transfer out, they are by W.P fund managers supposedly safeguarding and husbanding your money in trust, who want you to transfer out prematurely and too cheaply so they can continue to sequester billions for shareholders via ever more complex instruments they create for themselves. Where do you think Aviva's CEO Mark Wilson is expecting to get the large amount of money to release to shareholders promised in 2017 and again earlier this year?

"This year, we expect to deploy £2 billion of excess cash, including £900 million in debt reduction, in excess of £500 million of capital returns to shareholders and about £600 million for bolt-on acquisitions.

We continue to invest in our businesses and in particular on priorities such as digital to make our products and services easier for our customers."

So why can I not see a single one of my pension policies online, and why do all three have to be telephone enquired about through three completely separate teams even though two of the policies started on the same day invested in the same funds in the late 80s and I have made no changes whatsoever?

And then:

The estimated Solvency II position represents the shareholder view. This excludes the contribution to Group Solvency Capital Requirement (SCR) and Group Own Funds of fully ring fenced with-profits funds of £3.3 billion (2016: £2.9 billion) and staff pension schemes in surplus of £1.5 billion (2016: £1.1 billion). These exclusions have no impact on Solvency II surplus.

What the hell are 'Group Own Funds of fully ring fenced with-profits funds of £3.3 billion (2016: £2.9 billion) and staff pension schemes in surplus of £1.5 billion (2016: £1.1 billion).'? What are Group Own Funds in our WP fund??? And why have they mentioned their staff pension scheme in the same sentence? As a customer, I happen to know that funds have been previously systematically taken out of the 'estate' of certain Aviva WP funds and used to bolster the Aviva staff Pension fund, and now it is £1.5billion in surplus??? What the heck? :mad:

W-P fund managers and actuaries manipulations of the funds (and the closing down of proper customer communication) have all been achieved in plain sight without crossing international borders if you know where to look. In another thread I have reported how I am very much having the drains up on those three Aviva policies at the moment. Even the individual teams of contact centre staff are all kept as much like proverbial mushrooms (on unilateral changes made to the W-P funds) as are the customer base.

'ASSET SHARES AND THEIR USE IN THE MANAGEMENT OF A WITH-PROFITS FUND' (WARNING: LINK immediately downloads a 4MB PDF file of 86 pages)

Keep your eye on where the money really is and who gets it if you transfer out before the shifting sands of time start uncovering the treasure in these funds again, not the industry sponsored scaremongering in many or most cases wrong-footing you by suggesting you need to transfer the heck out while you still can.

Ringfenced Group Own Funds inside our WP Funds??? How? For goodness sakes ...

atush

We have a couple of old ones.

I was going to transfer them- they have no GARs. But, they dont go down when markets do (ie during the credit crunch and dot.com bust). they have gone up susbstantially in the last ten years, but not as high as our other pensions.

the thing is, we are using them as a sort of Bond situation now. So can keep being more agressive with other pensions.

Will switch them out once we go into DD.

bostonerimus

Linking investing/pensions with insurance often produces complex and expensive products. They might be worthwhile ie a well considered and understood annuity might be appropriate in some circumstances.. but often they are a way to charge high fees. So you need to understand the exact terms and if the product is benefiting you.

For example I contributed to a deferred annuity from an insurance company 30 years ago. I bought it without fully understanding the terms, but I was lucky that the company is very reputable and the annuity has performed well after fees and is not too restrictive. It is now part of my fixed income foundation. So before you do anything understand what you have and the alternatives.