How to help my dad?

Throwaway1

Deleted_User said:

The 65 and 75 as a selected retirement date - is that for the transferred out ones? If these are normal personal pensions - the selected retirement date (normally called target retirement date) is irrelevant. How much are the with profits bonuses?

Yes, that is for the transferred old MPS. I wrongly presumed it meant that you had preselected that date to be when you start receiving your payments. You say it is irrelevant so where does it come from? Is it just to give a projected annual amount? Bonus this year was £14,517. 46.

ratechaser

Throwaway1 said:

Deleted_User said:

The 65 and 75 as a selected retirement date - is that for the transferred out ones? If these are normal personal pensions - the selected retirement date (normally called target retirement date) is irrelevant. How much are the with profits bonuses?

Yes, that is for the transferred old MPS. I wrongly presumed it meant that you had preselected that date to be when you start receiving your payments. You say it is irrelevant so where does it come from? Is it just to give a projected annual amount? Bonus this year was £14,517. 46.

Yes, that's a target date to provide projections. All of my DC pensions (of which I have had a few) have these and they can be changed to whatever you want. So whilst the projected amount (which is presumably for an annuity) would be lower if taken earlier than 75, it should be up to him to make that decision.

Of course that assumes that he wants an annuity rather than going the drawdown route (which may require a transfer to another pension provider that offers this as an option). My own view is that annuities are poor value right now and I wouldn't touch them with a bargepole. But at the same time I understand why some people might prefer them for the simplicity and assured income they offer.

[Deleted User]

The 75 may be the plan that he has purchased with regards to safeguarded benefits within the with profits plan. Somebody cleverer than me will have to explain, but you will need to see his plan booklets for details.

Linton

If you did not specify a retirement date it may well have been put down as the latest which was 75. But as previously stated it probably isnt cast in stone, it is purely for documentation and management purposes - eg telling the pension company when they should start nagging you to decide what to do with your pension.

Throwaway1

Deleted_User said:

The 75 may be the plan that he has purchased with regards to safeguarded benefits within the with profits plan. Somebody cleverer than me will have to explain, but you will need to see his plan booklets for details.

It says:

'If you decide to cash in your policy when market conditions are poor we sometimes have to apply a market rate reduction when customers leave a with-profits fund. This reduction we may apply to protect investors when investment returns are below the level we normally expect or following a large or sustained fall in the stock market. We apply this to make sure that all investors receive their fair share of the returns earned over the period of their investment.

Your plan may have a guarantee date when a market value reduction will not be applied. Normally this is your selected retirement date but plans vary so it's important to check any guarantee dates you may have.'

So, to sum up if I have got this right... the amounts listed are just one example of if he goes with an annuity from the age of 75. He doesn't have to do this and can choose to take it earlier if he wishes (I have a very general sense of the different options available). 

LHW99

our plan may have a guarantee date when a market value reduction will not be applied. Normally this is your selected retirement date but plans vary so it's important to check any guarantee dates you may have.'

That's typical for endowment type policies - there are certain dates on which they guarantee not to apply a market value adjustment (which are there to ensure they don't pay too much to early leavers, leaving a shortfall for those still in).

It may or may not apply at other times.

He could ask for a quote on what his benefits would be if he took it immediately - even with an MVA he might get more than having to pay 20% to some other company.

Throwaway1

LHW99 said:

our plan may have a guarantee date when a market value reduction will not be applied. Normally this is your selected retirement date but plans vary so it's important to check any guarantee dates you may have.'

That's typical for endowment type policies - there are certain dates on which they guarantee not to apply a market value adjustment (which are there to ensure they don't pay too much to early leavers, leaving a shortfall for those still in).

It may or may not apply at other times.

He could ask for a quote on what his benefits would be if he took it immediately - even with an MVA he might get more than having to pay 20% to some other company.

I believe the 20% would be of any compensation he gets on top (paid as either a cheque or put into his pension) rather than affecting the current pension pot. I will ask him to get a quote relevant to the date he wants to retire.

Albermarle

If you decide to cash in your policy when market conditions are poor we sometimes have to apply a market rate reduction when customers leave a with-profits fund.

A With Profits fund will smooth out the ups and downs of the market . They retain money when the market is good and use it to get through bad years . So the idea is to give a steady return . However if the markets really dive then to protect the fund they penalise people who leave the fund in that period, by applying a Market Values Reduction MVR) . Once markets pick up again they remove it . Unless you reach the specified pension age then they will pay the pension without the MVR.

As far as I know with profits funds are not applying MVR's at the moment despite recent events .

Separately it seems that everybody is assuming that transferring out of the Pit fund was a bad idea and has lost him loads of money . It probably was a bad idea but to compare what he has now - £117K? - which could maybe produce an annual inflation linked income of say £3K , with what he would have got , you have to know what he gave up .

xylophone

It probably was a bad idea but to compare what he has now - £117K? - which could maybe produce an annual inflation linked income of say £3K , with what he would have got , you have to know what he gave up .

He had the MPS from 1977-1993. That is sixteen years of a DB pension with a normal pension age of 60.
It would have revalued in deferment.
https://www.mps-pension.org.uk/my-pension-is-not-in-payment/annual-increases

It would have automatically paid a widow's pension. https://www.mps-pension.org.uk/my-pension-is-not-in-payment/what-happens-if-i-die#:~:text=Your%20widow%20will%20receive%20a,the%20discretion%20of%20the%20Trustees.
"If you left the Scheme after 6 April 1978

Widow’s pension
Your widow will receive a pension of two-thirds of your total weekly pension at the date of death. If at the date of death, you had been married for less than six months, widow’s benefits would be payable at the discretion of the Trustees.

Once in payment, a widow’s pension is payable for life and will not cease should she re-marry."

In the OP's father's position I'd have thought twice about giving up so generous a DB pension.

Throwaway1

Albermarle said:

If you decide to cash in your policy when market conditions are poor we sometimes have to apply a market rate reduction when customers leave a with-profits fund.

A With Profits fund will smooth out the ups and downs of the market . They retain money when the market is good and use it to get through bad years . So the idea is to give a steady return . However if the markets really dive then to protect the fund they penalise people who leave the fund in that period, by applying a Market Values Reduction MVR) . Once markets pick up again they remove it . Unless you reach the specified pension age then they will pay the pension without the MVR.

As far as I know with profits funds are not applying MVR's at the moment despite recent events .

Separately it seems that everybody is assuming that transferring out of the Pit fund was a bad idea and has lost him loads of money . It probably was a bad idea but to compare what he has now - £117K? - which could maybe produce an annual inflation linked income of say £3K , with what he would have got , you have to know what he gave up .

Thank you, that's really useful to know.

In terms of the second point, that's the beauty of no win, no fee right? If they decide that he's isn't worse off then he's lost nothing by getting it checked. If they decide he is, then he gets more than the 117k, even after their 20% plus VAT.

Am I right in thinking that he could leave the 117k as it is and take the 3k out each year as lump sums instead (the amount that he'd maybe get from an annuity) until it reduces to zero, rather than committing to the annuity? If the calculation is 117k divided by 3k then that would last for 39 years and he isn't exactly likely to live that long. Whatever he doesn't take, then goes to my mum when he dies.