Defined contribution pensions, partial transfer with Aviva - the segments affair

rachelism26

Hello,

Hubby has got two pension pots.  The underlying funds/shares within the pensions are the same (you can see it's the same share breakdown), just branded differently from two employers.  They are boring company pensions (current company + old), with no extra benefits (started post 2010).  Both with Aviva.

Point is, old company charges 0.35% fee, new one 0.65%.   We'd therefore like to do a partial transfer of as much as possible to get to the lower fees. 

The thing is Aviva uses segments - why, is beyond me, and they only said it was their process.  To me, it appears to be a scheme to limit partial transfers, but it appears unfair to the customer.

So the pot is made up of an intial segment of 10,000.  You need to leave 1 segment behind to keep it open.  But it's the initial pot amount which matters, not any top-ups.
e.g. pension pot is 18k.   So, this makes it 18,000 divided by 9999 segments = £1.80 per segment

If you then take out 15k, that's 8333 segments (15,000 by 1.8 ).  Meaning I've only for 1777 remaining

Which means in future years, I can only transfer 1777 segments.  This would limit transfers as if you were to do this once a year, you'd run out of segments over say 2 further years and then be stuck.

Any ideas why this policy is in place?   It appears to be discouraging transfers which to me feels wrong. 

dunstonh

The thing is Aviva uses segments - why, is beyond me, and they only said it was their process.  To me, it appears to be a scheme to limit partial transfers, but it appears unfair to the customer.

Segments were commonplace a long time ago but less so nowadays.  You only tend to see it on very old plans.  However, it rarely causes an issue with transfers.  It is not unfair to the customer.  It's a bit like owning an iPhone 1 and saying it's unfair it can't do what an iPhone 10 can do.  

I'm struggling to see what you are trying to achieve by focusing on segments (I have done countless thousands of DC pension transfers and never once had a problem like you a describing).  Why not just transfer it to a cheaper plan?

And can you verify how many segments you have?  I want to make sure what you are calling segments are actually segments and not units.     You also get segments where plans would segment transfers, regular contributions and single premiums (often seen on ex Friends Provident plans now branded under Aviva) where you get a total value but also the values of each segment.

rachelism26

Aviva called it a segment hence my post, as I wasn't familiar with this term.   I understand the term unit - i.e. a Unit within an investment fund, therefore, what I would be buying with my invested funds.

She described it like I did below.  I get 10,000 segments.   I take pension pot/9999, then get a £value.   Then if I want to transfer X amount, this uses up Y segments.  In following years, rinse repeat, except that my 10,000 segments isn't reset by any additional funds into the account.   

rachelism26

dunstonh said:

The thing is Aviva uses segments - why, is beyond me, and they only said it was their process.  To me, it appears to be a scheme to limit partial transfers, but it appears unfair to the customer.

Segments were commonplace a long time ago but less so nowadays.  You only tend to see it on very old plans.  However, it rarely causes an issue with transfers.  It is not unfair to the customer.  It's a bit like owning an iPhone 1 and saying it's unfair it can't do what an iPhone 10 can do.  

I'm struggling to see what you are trying to achieve by focusing on segments (I have done countless thousands of DC pension transfers and never once had a problem like you a describing).  Why not just transfer it to a cheaper plan?

And can you verify how many segments you have?  I want to make sure what you are calling segments are actually segments and not units.     You also get segments where plans would segment transfers, regular contributions and single premiums (often seen on ex Friends Provident plans now branded under Aviva) where you get a total value but also the values of each segment.

Hello,

Please see response below - I don't know if you've had a chance to look - help is much aprpeciated

Kind regards,
Rachel

dunstonh

If you want out of the pension, can't you just transfer it in full to a modern alternative?

rachelism26

dunstonh said:

If you want out of the pension, can't you just transfer it in full to a modern alternative?

No this is unfortunately still an active pension which his employer is paying in, so I will take most of the money out this year (is my intent).   But what I don't get is why I'm limited by the segments at all!

This is a personal pension plan which was initiated in 2018, so not exactly ancient - possibly, the underlying product was old.

Novice_investor101

This is true for a lot of Aviva’s workplace pensions. The underlying administration system is pretty old. The segments thing is exactly as you described. If you get down to one segment then all future contributions make up that one segment & if you transfer it away, I’m assuming, it would close the policy & a new one would have to be started in the scheme. 

This would need checking whether it is wise to do. Employers can have different schemes for different people & sometimes if you close the policy in an old scheme you may end up being re-enrolled in a newer, inferior, one. 

rachelism26

Novice_investor101 said:

This is true for a lot of Aviva’s workplace pensions. The underlying administration system is pretty old. The segments thing is exactly as you described. If you get down to one segment then all future contributions make up that one segment & if you transfer it away, I’m assuming, it would close the policy & a new one would have to be started in the scheme. 

This would need checking whether it is wise to do. Employers can have different schemes for different people & sometimes if you close the policy in an old scheme you may end up being re-enrolled in a newer, inferior, one. 

Thanks for taking the time to reply.   This is insane.   I get it about systems being old etc and that would explain why @dunstonh mentioned this was an old concept.

It would mean at some stage, I'm stuck with a disadvantageous product.   It consolidates my plans to go ahead with the transfer and when we make another transfer in a few years, I will be unable to do so, and will then have to complain to the FCA to say that this process is treating me unfairly as a customer.  

From your experience, you believe it's down to an archaic system, rather than any other explanable reasons?

Novice_investor101

Im just repeating what i was told when I considered doing the same thing with my work pension that is also with Aviva. 

They explained the same thing & said that it’s how their system operates. 

I just left my pension there. The Funds available are enough for me & similar to what I’d choose in a Sipp anyway. Transferring is something I’d potentially consider in the future when my pot is much bigger. 

Im not sure what the FCA would think of it. The Employers scheme might have some more information on what happens if you transfer it all out, it might just carry on with a new policy & new lump of segments. Or maybe Aviva can answer that question. I never pursued it. 

rachelism26

Thank you - appreciated.   We're going to go ahead with it in an attempt to minimise the fees.  In our case, we have two policies with them, one active and one not.  Our active one is the one with the disadvantageous fees.   We can see however that the underlying funds are the same via the share allocation - so we have nothing to lose.   

I will also pursue raising a complaint as I feel that down the line this will not be fair treatment - got nothing to lose here!

anselld

From a pragmatic view why not just transfer half of the remaining units each year.  It would take you 12 or 13 years to get down to one segment.  By that time something may have changed.