Can someone give advice on Dads pension

Cammywatson033

Hi guys,

So my Dad has no clue about his pension and I’m trying to sort these out for him. He has 2 private pensions that have very little in them (under £1000) but when I was enquiring we came across a pot with about £47000 in it. Turns out that he opted out of the earnings related portion of the state pension in the 80’s (the fact that you could do this was all new to me, so have tried to read up on it but I have very limited knowledge). So because he opted out of this he was getting some sort of payment into a fund I believe and over the years it amounted to the said £47000. Fast forward to yesterday and my dad received a letter from Phoenix life stating that this figure is not guaranteed and it all depends on the value of the unit prices and number of units in force on the day that all requirements are received??. So the benefits of this plan are currently invested in Phoenix LL pension managed (ex AMP) fund, however, the funds can be transferred to Phoenix LL pension deposit (guarranteed) fund, at any time. Could someone explain in lay man terms what this means. My dad is 61 and he was thinking that transferring to the guaranteed fund would be a good idea as he doesn’t want to lose any of the £47000 but if he transferred now and took his pension at 65 would he make money on this £47000 from now until then or would it stay at £47000? I have already stressed to my dad that he needs to speak to a IFA regarding this but sometimes it falls on deaf ears. I was just looking for pros and cons for staying in the current fund and transferring to the guaranteed one. 

Thanks for your help guys 

GunJack

first thing to do would be talk to Phoenix and see if there are any safeguarded benefits (like guaranteed annuity rates, GMP etc) on the existing plan, as this may limit what you can do with it.

Brynsam

Cammywatson033 said:

Hi guys,

So my Dad has no clue about his pension and I’m trying to sort these out for him. He has 2 private pensions that have very little in them (under £1000) but when I was enquiring we came across a pot with about £47000 in it. Turns out that he opted out of the earnings related portion of the state pension in the 80’s (the fact that you could do this was all new to me, so have tried to read up on it but I have very limited knowledge). So because he opted out of this he was getting some sort of payment into a fund I believe and over the years it amounted to the said £47000. Fast forward to yesterday and my dad received a letter from Phoenix life stating that this figure is not guaranteed and it all depends on the value of the unit prices and number of units in force on the day that all requirements are received??. So the benefits of this plan are currently invested in Phoenix LL pension managed (ex AMP) fund, however, the funds can be transferred to Phoenix LL pension deposit (guarranteed) fund, at any time. Could someone explain in lay man terms what this means. My dad is 61 and he was thinking that transferring to the guaranteed fund would be a good idea as he doesn’t want to lose any of the £47000 but if he transferred now and took his pension at 65 would he make money on this £47000 from now until then or would it stay at £47000? I have already stressed to my dad that he needs to speak to a IFA regarding this but sometimes it falls on deaf ears. I was just looking for pros and cons for staying in the current fund and transferring to the guaranteed one. 

Thanks for your help guys 

He doesn't need an IFA for the amounts involved.

There are two free options available for further information/guidance (not the same thing as financial advice, but often simply understanding what you've got and what your options are enables you, or in this case your dad, to take a sensible decision). Try https://www.pensionsadvisoryservice.org.uk and book a free appointment for him with https://www.pensionwise.gov.uk/en

That should do the trick!

xylophone

My dad is 61

Has he obtained a State Pension Forecast to help with planning?

https://www.gov.uk/check-state-pension#:~:text=If%20you'll%20reach%20your,get%20your%20forecast%20more%20quickly.

Re contracting out into a personal pension (ended in 2012).

From 1988, a person could choose  not to be part of the State Earnings Related Pension Scheme (later State Second Pension)  but to  "contract out". into a Defined Contribution pension. This did not affect NI contributions to the Basic State Pension.

If  a person contracted out through an appropriate personal pension (APP) or appropriate stakeholder pension (ASP) (DC schemes),  he and  his employer paid the same NI contributions as before, but some of this was rebated.   This amount was known as  his NI rebate. Tax relief was added to the rebate, and this total amount was invested, and at a retirement date was used to provide benefits called ‘protected rights’.   In April 2012, those in a defined contribution (DC) scheme were contracted back in and paid National Insurance at the full rate. They accumulated state second pension (S2P) between 2012 and 2016.    In 2012, when contracting out was abolished for DC schemes, members’ ‘protected rights’ were converted into ordinary pension benefits.

https://markets.ft.com/data/funds/tearsheet/summary?s=GB0000655711:GBP

Your father's pension is invested in the above?  If so, he has a number of units in this fund.

The value of these units fluctuates on a daily basis. Thus, if he had 10,000 units  and sold on a day 

when the unit price was (say) 10p, then he would receive  £1000.

If he sold on a day when the unit price was 8p, he would receive £800.

 With regard to Phoenix LL pension deposit (guaranteed) fund, is it something along these lines?

https://www.morningstar.co.uk/uk/snapshot/snapshot.aspx?id=VAUSA05SX2&InvestmentType=SA

Your father could seek an interview with Pension Wise for a discussion of his options

https://www.pensionwise.gov.uk/en

but this would not be a substitute for advice from an IFA. 

He has other options that he might consider, for example transferring the tiny pensions and the Phoenix pension to a modern pension plan.

It may be that he would wish to explore the option of a transfer in to his current pension plan ( if transfers in are accepted).

Albermarle

SERPS was additional state pension for people earning over certain amounts . From the eighties until around 5 years ago , you had the option of giving up your rights to this and in return payments were made into a personal pension.
If your Dad had not done this he would have a higher state pension but he wouldn't have the £47K. For most people it was a 50:50 result or thereabouts.
If he leaves the £47K in the current fund it could grow or shrink , depending on financial markets  . In the guaranteed fund it would presumably stay about the same ( possibly losing out to inflation ) 

ElephantBoy57

Albermarle said:

If your Dad had not done this he would have a higher state pension but he wouldn't have the £47K. For most people it was a 50:50 result or thereabouts.

I did the same as the OPs dad, back in the 80s. I received a similar amount, my fund was with the Prudential.

I used it to get a mortgage a few years ago. I was shocked that I could do that, and that its value had increased so much. I was only in the private pension for a couple of years.

My state pension forecast is £175.20 per week, in 5 April 2029, I cannot increase it with more NI contributions.

I assume that someone of my age would get a similar amount.

Cammywatson033

Thanks for the info guys. I’ll get him to make an appointment with pensionwise. We checked his SP forecast and it was for the full amount, £9000ish I believe 

ElephantBoy57

Cammywatson033 said:

Thanks for the info guys. I’ll get him to make an appointment with pensionwise. We checked his SP forecast and it was for the full amount, £9000ish I believe 

The state pension forecast tells me that my opted out portion should have got me "COPE estimate is £25.86 a week".

xylophone

We checked his SP forecast and it was for the full amount, £9000ish I believe 

What exactly did it say?