IFA advice on pension transfer

sandsy

How old are you? How soon can you take the Pru income?
If you were, say, 65, it would cost you around 20 times the annual income to buy guaranteed level income for life. That's more than you've been offered to transfer out. If you can take it earlier, it would cost even more.
If you're in good health and want to look after your dependants, you could probably get life insurance for the next 10 years at a cost of not much more than paying for advice (£100k for £54pm):
https://www.payingtoomuch.com/insurance/life-insurance/lifeins-resource.aspx?FolderName=Life%20Insurance&Tag=Cheap%20Life%20Insurance%20Cover%20Quotes%20Age%2063

AnotherJoe

John17Mal said:

Numbers:   Basic annuity:  £4,679.03          Reversionary Bonus to date     £2,469.03           Total £7,148.06
Guarantee? Not sure what that is. They promise to pay me £7,148.06 per year until I die.
Options: I could take 25% tax free, I could ask for a minimum term of 10 years, I could ask them to pay my wife after my death. All these obviously reduce the sum that I would receive.
I did think about all of the above and link the sum paid to the RPI but the Pru don't do that and they offered a a list of companies to whom I could transfer.
The reversionary bonus increased the value of the pension considerably in the early years but the bonuses are much reduced over the last decade or so.
In the end I decided to put the money into my SIPP (which has done very well over the last year, up 12%). I intend to move into drawdown and take 25% tax free and about 4% annually (this would be largely covered by the dividends that I receive).
If moving money into a SIPP is a "high risk transaction" why was I allowed to move my Aviva personal pension last year. What is so fundamentaly different with my Prudential plan?
                  

124 / 7 = 17 years to be better off plus you'd have no promises on indexation and be open to potential large stock market drops.  I'd stay with it and if you want to leave a lump sum buy a life insurance policy, your children have no guarantee they'd  get anything  anyway you might spend it all. 

Unless you'd plan not to use it in which case just take out insurance and save / invest the income to achieve the same aims. 

John17Mal

I am trying to understand the special benefits of my old style Prudential with profits pension. It has a guaranteed annuity rate. Am I correct that the annuity is guaranteed in that it will not be affected by any sudden drop in the stock exchange. The annuity is now quoted at just over £7K per year and this is guaranteed.
The Aviva pension that I had (and transferred into a SIPP) was fund based and therefore was subject to the ups and downs of the stock market.
If I cash my Prudential pension in then my guarantee is gone and my investment is subject to the whims of the market?
I am sorry if this simplistic to the more knowledge people out there but is this why I need to spend 2-3% of my fund on IFA so that he can advise and guide me?

sandsy

John17Mal said:

I am trying to understand the special benefits of my old style Prudential with profits pension. It has a guaranteed annuity rate. Am I correct that the annuity is guaranteed in that it will not be affected by any sudden drop in the stock exchange. The annuity is now quoted at just over £7K per year and this is guaranteed.
The Aviva pension that I had (and transferred into a SIPP) was fund based and therefore was subject to the ups and downs of the stock market.
If I cash my Prudential pension in then my guarantee is gone and my investment is subject to the whims of the market?
I am sorry if this simplistic to the more knowledge people out there but is this why I need to spend 2-3% of my fund on IFA so that he can advise and guide me?

You have an old fashioned deferred annuity rather than a guaranteed annuity rate. [Guaranteed annuity rates are slightly more recent than your type of contract and a fixed income % is applied to the fund at the relevant date, but the underlying fund can increase or decrease with investment returns.]

You don't have a fund in the same way. You only have a promise to pay an income which has increased with bonuses over the years to £7k. Your £7k can never go down. If any further bonuses are made on your with profits contract, it could increase further.  You've asked Pru what the value of it is if you wanted to transfer it to another pension. If you proceeded, yes, that fund would go up and down with the markets. 

You are considering giving up a secure lifetime income for something that is variable - it may give you less, it may give you more - and which also gives you more flexibility over the timing of accessing your money. But the government didn't think it was a good idea for people to give up secure lifetime incomes without taking professional advice on whether it's the best thing for you, given your particular circumstances. So yes, you must take advice and the adviser has a professional duty to give advice that is in your best interests, once they've weighted up your circumstances.