Equitable Life with profits pension / takeover.

barryd999

Ive just started looking at this today. I generally ignore stuff from EQ but this got my attention.

Just a bit of quick advice from you experts please. Ive read through the thread but most of it goes over my head.

I had a long conversation with EQ advisers today and it would appear that voting for this is a good idea but losing the guarantee on the pot seems a bit worrying. I am 53 and already semi retired. I am 55 in February 2021 and would probably just take the pot. According to the booklet in the pack my current valuation (not guaranteed) including the 35% capital distribution amount as of 1 April 2019 is about £38K With the new proposal its £47K with a £19K uplift.

Presumably it would make sense for me to vote for this as what would the risks of it all disappearing be quite low considering ill be withdrawing it all by Feb 2021?

Its done my nut in reading it to be honest. Go easy on me.

greatgimpo

Don't you mean a £9k uplift?

barryd999

greatgimpo wrote: »

Don't you mean a £9k uplift?

No it says After the proposal 68% indicative uplift £19000

JohnWinder

The scheme uplift looks attractive for those planning to cash out their EL ‘with profits’ holdings in the near future. Were there no new scheme, you would benefit from an extra 3.5%/yr for a year or two until you exit, as well as the capital return which just might remain at the present 35%; but under the new scheme you get a 68% capital return. One of those, the latter, seems clearly more beneficial than the other, and more certain as well.
For those planning to cash out of EL many years hence, the new scheme asks you to forgo 3.5%/yr, for which you might get 0.25%/yr in a new, safe savings account, plus a 68% boost to start with. The break-even time for that option is about 15 years (using an on-line compound interest calculator to compare 100 pounds growing at 3.5%/yr, with 168 pounds growing at 0.25%/yr).
Furthermore, in either scenario you have uncertainties of different nature: could you achieve a 0.25%/yr return for 15 years, or would your investing decisions decimate your savings; could EL be relied on to continue for 15 years honouring its guaranteed return in an uncertain future?

Daisydad

Do you know what the eligibility criteria is for cashing in is though?
I only have a small amount in and am in my mid 40's, will I have to wait until I'm 55? Or whatever the qualifying age is at the time?

pafpcg

barryd999 wrote: »

Presumably it would make sense for me to vote for this as what would the risks of it all disappearing be quite low considering I'll be withdrawing it all by Feb 2021?

I'm not qualified to offer advice, but my expectation (ie a guess!) is that the closer one is to drawing benefits from the pension fund, the more attractive will be the increased uplift. For example, if my partner were to take her benefits (by buying an annuity) from her fund on 1st Jan 2020, then she'd get the full 68% uplift without any worrying about the downside of losing the guaranteed growth rate. But if she were not planning to take any benefits from her fund for twenty years, then the higher uplift offered by Utmost would have to be considered against how the value of her fund would increase over the next twenty years: would the market upon which the funds are based increase more than the Equitable's guaranteed growth rate? Or would some other provider offer a better prospect than Utmost?

PS: Is "withdrawing it all" a good idea? Even allowing for 25% being tax-free, you'd be faced with a substantial tax-bill if you cash-in all £47k in a single tax-year.

lynnpin

I’ve been reading this with interest. Thanks to @pensionpawn for starting the thread.

I’m probably wrong but to my mind there should have been another Illustrative Statement box on page 2 of ‘Your Illustration’. This one should be for people like me who were on the verge of transferring or taking benefits as there seems to be a lot of us.

I rang EL to ask when my Guaranteed Value applies as I am now passed my initial retirement age. As mentioned on page 2 of ‘Your Illustration’ it states “you can contact us if you are unsure when your Guaranteed Value applies”. Although the advisor tried to be helpful, it was obvious he was reading from a script and I had to keep interrupting him to get him back to my question. I still have no definitive answer.

I have two pension policies and today I received a Statement of Value from the Equitable saying that the value of one of them was £14,238.22 and goes on to say that “the value shown is payable if you take your with-profits retirement savings or transfer them to invest with another company”.

However, my Illustrative Statement uses the Non-Guaranteed Value as set out below:

£10,461 + 35% Capital Distribution = £14,122
£10,461 + 74% Indicative Uplift = £18,297

Am I just being thick or should these percentages be applied to the Guaranteed Value/Statement Value? That would work out at over £6,000 more if the proposal went ahead.

£14,238.22 + 35% Capital Distribution = £19,221.60
£14,238.22 + 74% Indicative Uplift = £24,774.50

I’d appreciate any clarification on this if anybody is in the know.

barryd999

pafpcg wrote: »

I'm not qualified to offer advice, but my expectation (ie a guess!) is that the closer one is to drawing benefits from the pension fund, the more attractive will be the increased uplift. For example, if my partner were to take her benefits (by buying an annuity) from her fund on 1st Jan 2020, then she'd get the full 68% uplift without any worrying about the downside of losing the guaranteed growth rate. But if she were not planning to take any benefits from her fund for twenty years, then the higher uplift offered by Utmost would have to be considered against how the value of her fund would increase over the next twenty years: would the market upon which the funds are based increase more than the Equitable's guaranteed growth rate? Or would some other provider offer a better prospect than Utmost?

PS: Is "withdrawing it all" a good idea? Even allowing for 25% being tax-free, you'd be faced with a substantial tax-bill if you cash-in all £47k in a single tax-year.

Your clearly more informed than I am so any advice or "best guess" is fully appreciated. It looks initially that take the money and run in 2021 seems a good idea for me but I dont need the money desperately at all really. Im just one of these that shy away from risk. I know nothing about markets etc. Yes I would want to avoid the tax hit but I am sure I read somewhere up the thread that you dont get the option with this new company to withdraw part amounts. I thought it was all or nothing. I could be wrong of course.

To be honest it was a bit of a shocker. Ive not paid into that since I last had a "proper" job before going on my own in 2001! I think I paid into it as did my employer for about 8 years. I knew there was a bit of money coming my way at some point but the figures on my "illustration" were a bit of a pleasant surprise.

pafpcg

barryd999 wrote: »

Your clearly more informed than I am so any advice or "best guess" is fully appreciated. It looks initially that take the money and run in 2021 seems a good idea for me but I dont need the money desperately at all really. I'm just one of these that shy away from risk. I know nothing about markets etc.

By all means use this MSE forum for ideas from anonymous posters but before you commit to a plan for your own pension, either do your own research or get expert help. Fortunately, Equitable is subsidising financial advice (from Hargreaves Lansdown) for policy holders - I suggest you take a look at the four-page brochure from HL which came with the "Investment Choices" pack in September or www.hl.co.uk/equitable-advice

Yes I would want to avoid the tax hit but I am sure I read somewhere up the thread that you dont get the option with this new company to withdraw part amounts. I thought it was all or nothing. I could be wrong of course.

You're not wrong!
What Utmost seem to be offering is a place to invest our funds - when it comes to take the benefits from the fund, then Utmost have little to offer. From my reading of the section of the Utmost web-site specific to Equitable policyholders, all Utmost can offer is either: a single cash withdrawal; a transfer to buy an annuity; or a transfer of funds to another provider. For multiple lump-sum withdrawals or regular payments, Utmost can't help: "You will need to transfer to a different pension provider to do this."
www.utmost.co.uk/equitable-life/equitable-pension/

Edit subsequent to later posts: This is what Utmost is currently able to offer. Post-takeover, policyholders should be able to take benefits such as multiple lump sums because that is currently available from Equitable and the transfer guarantees the same level of services.

Maffo65

pafpcg wrote: »

From my reading of the section of the Utmost web-site specific to Equitable policyholders, all Utmost can offer is either: a single cash withdrawal; a transfer to buy an annuity; or a transfer of funds to another provider.

See page 10 of the Explanatory Booklet, Part A.
The paragraph titled "About the Transfer to Utmost" states:
The Transfer would not change any Policyholders' terms and conditions.

To the best of my knowledge, Equitable pension policyholders are allowed to make multiple cash withdrawals over time (subject to a 5,000 minimum per withdrawal) once they turn 55.
Since Utmost have to stick to the existing T&Cs, in theory they should offer pension policyholders the same abililty if the Proposal goes ahead.

Could you point to the section of the Utmost website which states that only a single cash withdrawal would be available to former Equitable policyholders? I couldn't find it.

Thanks!