Royal London With Profits Pension

swindiff

My wife has an old, small Royal London With Profits pension which she opened in 1991 but has not paid into for many years. She has recently opened a SIPP with Hargreaves Lansdown which she is paying £200/month into and we are wondering if she would be better off transferring this RL pension into the SIPP. The entirety of the SIPP gets invested into Vanguard Lifestrategy 80 each month.

There are 3 values given on the worth of the RL pension which I need clarifying by someone with more knowledge than me on this subject.

With Profits fund value on 31 Dec 2017 = £2958.50
With Profits fund value on 31 Dec 2018 = £2973.29
So the value of the fund has only increased by £14.79 in those 12 months. In contrast the SIPP has only had £600 paid into it over the last 3 months and has increased in value by £30.
Both of these values are quoted as BEFORE any final bonus is added or any MVR (Market Value Reduction) is removed.

With profits fund value on 31 Dec 2018 = £4697.80
This value is quoted as AFTER any final bonus is added or any MVR is removed.

What I am not sure about is this Bonus which is £1724.51, not to be sniffed at.
Is this bonus paid when switching the pension to another provider, are there hoops that need to be jumped through to get it?

It seems rather large when the projected pension value in 2030 when the wife is 60 is only £4600

Thanks for any help.

OldMusicGuy

Here's what you could do. Speak with HL and say you want to transfer the pension to the SIPP but you want to see what the actual transfer value will be prior to pulling the trigger. They should be able to request the transfer from RL, which means RL will give them a quote of the actual money that will be transferred, including some or all of the bonus and any MVR. HL should be able to then allow you to say yes or no to making the transfer.

That's what I did with a Standard Life with profits pension. Standard Life would never tell me how much of the bonus would be applied if I transferred or if there would be an MVR. So I went through this process (HL were very helpful). I got the full bonus with no MVR.

swindiff

Great thanks OMG

swindiff

Any idea how they can give a bonus which would make the value exceed what it would be a maturity in 11 years time?

dunstonh

and we are wondering if she would be better off transferring this RL pension into the SIPP. The entirety of the SIPP gets invested into Vanguard Lifestrategy 80 each month.

Clearly a big difference in risk profile. RL WP fund is more consistent with the average consumer risk profile. VLS80 is much higher risk than the average consumer. You dont mention her risk profile but seeing as she chose VLS80, can we assume she is happy with a higher risk approach (35% loss potential in a 12 month period).

With Profits fund value on 31 Dec 2017 = £2958.50
With Profits fund value on 31 Dec 2018 = £2973.29
So the value of the fund has only increased by £14.79 in those 12 months. In contrast the SIPP has only had £600 paid into it over the last 3 months and has increased in value by £30.

2018 was a negative year. So, in that negative year, RL increased value. Whereas VLS80 lost money.

Comparing a fund held for 12 months with one held for 3 months with phased payments is not a good idea. It is not comparing like for like.

VLS80 lost 4.04% during 2018. Add in your HL platform charge (and HL are one of the most expensive platforms) and your loss would have been closer to 4.5% compared to RL's gain.

It seems rather large when the projected pension value in 2030 when the wife is 60 is only £4600

Projections are synthetic. You could do well to read the assumptions. Probably a low growth rate (less than realistic). Plus inflation of 2.5%p.a.

So, there is a good chance if you transferred it, you would be investing above her risk profile in something she doesnt understand with an expensive provider paying higher charges on the basis of a lot of incorrect assumptions and misunderstanding.

Now that is not to say that moving it is incorrect. It could be the right thing to do. However, there are some alarm bells in what you have said.

swindiff

She has an NHS pension so has started a SIPP to act as a way to fund the gap between 60 and 67. Prepared for some higher risk initially maybe drop it down to VLS60 OR 40 in 5 years time.

Fees with RL are 0.9% + 0.25% HL are I believe 0.45% + 0.22%.

Do you have any insight into this bonus and if it would likely be paid transferring. We have contacted HL on OMG recommendation.

Albermarle

Do you have any insight into this bonus and if it would likely be paid transferring.

I have a Scottish Widows with profits fund ( I keep it as a sort of defensive fund ) and recently read the small print about transferring it . Seemed like the final bonus would come with it whenever I transferred it .
Subject of course to any MVR in play at the time but this only usually happens after a very big market drop .

swindiff

OldMusicGuy wrote: »

Here's what you could do. Speak with HL and say you want to transfer the pension to the SIPP but you want to see what the actual transfer value will be prior to pulling the trigger. They should be able to request the transfer from RL, which means RL will give them a quote of the actual money that will be transferred, including some or all of the bonus and any MVR. HL should be able to then allow you to say yes or no to making the transfer.

That's what I did with a Standard Life with profits pension. Standard Life would never tell me how much of the bonus would be applied if I transferred or if there would be an MVR. So I went through this process (HL were very helpful). I got the full bonus with no MVR.

Seems this is not possible according to their reply, strange they could do it for you?

"Thank you for your email.

I'm afraid we would not be able to request a transfer value on your behalf, but if the statement you have received from Royal London gives a telephone number or email address we would recommend contacting them directly because they should be able to confirm this to you."

I guess next thing to do is get the wife to contact them directly.

OldMusicGuy

swindiff wrote: »

Seems this is not possible according to their reply, strange they could do it for you?

You slightly misunderstood my post. I decided I was going to transfer my pension to HL subject to getting the full bonus and no MVR. So I asked HL to start the transfer process, not to request a transfer value. The thing they did with me was to say that they would let me know what the transfer value was going to be and that they would not execute the transfer unless I said I wanted to do it.

So I did not ask for a transfer value, I started the whole pension transfer process. When HL contact Standard Life saying they have a client that wants the pension transferred, that's the point at which SL gave HL the actual value they would transfer over. I just agreed with HL that I would have the opportunity to stop the transfer if I didn't want to go ahead with it once SL had told HL how much would be transferred.

swindiff

Ah ok. Makes sense thanks.