Would I Need To TakeTransfer Advice?

Mothman

I am hoping to retire early next year age 59, if markets are stable I am expecting to have DC pensions & S&S ISA's totaling £390k from which I plan to drawdown 2.7%+inflation.

Unfortunately £120K of the pot is in a Prudential With Profits DC pension which doesn't allow drawdown. This pension has a guaranteed bonus rate of 4% however in practice this counts for little as the final bonus is an increasingly large percentage and this is adjusted to reflect any market fluctuations. I am therefore thinking of transferring this out to my iWeb SIPP however does anyone know if the 4% bonus guarantee will mean I fall foul of the rule which means I will have to take expensive transfer advise from an IFA?

The only other alternative I can see would be to leave the Pru policy where it is until the policy retirement age of 65 which is when I assume the bonus rate ends, and to draw a much larger percentage from my SIPP until then.

Dox

Yes, because you have 'safeguarded rights' (the guarantee). See https://www.moneyadviceservice.org.uk/en/articles/transferring-defined-contribution-pensions

dunstonh

guaranteed growth rates are not a safeguarded benefit.

The only other alternative I can see would be to leave the Pru policy where it is until the policy retirement age of 65 which is when I assume the bonus rate ends, and to draw a much larger percentage from my SIPP until then.

It stays for as long as you hold the pension. it doesnt end at a specific age.

You do have to consider its value though. You have a relatively low risk fund that grows at 4% a year with final bonus potential that is accruing and the ability to exist without an MVR if it all goes wrong on the markets later on. This is potetentially much better than holding corp bonds/gilts etc

You dont need to have all your retirement funds in one place. You can draw from the £270k and invest accordingly whilst keeping this £120k in place

xylophone

https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/495377/pension-benefits-with-a-guarantee-factsheet-jan-2016.pdf


Pension benefits with a guarantee which are safeguarded

To qualify as safeguarded benefits under the legislation, the pension benefits must include some form of guarantee about the rate of secure pension income to be provided. A promise or guarantee about the rate of investment growth or future value of the pot is not sufficient for the pension benefits to qualify as safeguarded benefits under the legislation.

Albermarle

The transfer rules for the SIPP provider I use , are clear that they will accept a transfer of this type of pension, without the need for regulated financial advice . However they would require from you written confirmation that you fully understand what you are giving up and/or you may have to speak with them first .
Probably other SIPP providers will have similar rules so best to check with them first before instigating any transfer.

I agree with Dunstonh though, that just leaving it where it is for now , would seem the best option anyway.

Mothman

Thanks all for the valuable comments. I'm pleased to hear I would not need be required to take formal advice but it is clear that I need to give it serious thought before deciding to transfer.



My only concern is by how much the Pru will manipulate the final bonus in the future as it's 33% of the total value. The final bonus was cut by 7% in April but not sure if this was reacting to the drop in equity markets at the end of last year, though they had largely recovered by April or whether the property part of the WP fund has been revalued. But I guess that's the problem with the returns on WP funds, it's all smoke & mirrors.

dunstonh

My only concern is by how much the Pru will manipulate the final bonus in the future as it's 33% of the total value. The final bonus was cut by 7% in April but not sure if this was reacting to the drop in equity markets at the end of last year, though they had largely recovered by April or whether the property part of the WP fund has been revalued. But I guess that's the problem with the returns on WP funds, it's all smoke & mirrors.

There is nearly always a lag on WP funds in respect of falls and rises. Its not manipulation (not in modern times - it was manipulated in the 90s and earlier). They are structured more now. Typically, they adjust at defined points and only if the loss exceeds a tolerance do they change outside of those points.

WP funds are less transparent but the Pru are probably the only WP fund I would consider. Indeed, I still have people with 90s and early 2000s Pru WP funds that we keep in place because they do the job required. I don't like their modern versions but the old ones can be little gems (not all the old ones as they had different versions).