Old CIS pension discovered, what to do going forward?

onlyfoolsandparking

I have 'just' discovered 2 old CIS pensions I have which I have found out are now with RL. I'm currently doing due diligence (been reading this part of the forum for about a week now!!) and will speak with my IFA soon about plan moving forward, fortunately he is a good friend so that will help but I am looking for opinions first on whether these pensions are any good (not looking good from what I'm reading on here so far) and should be left or should definitely consider moving them.  A bit of info I guess will help:


policy 1, current value 28600, GAR 8% 
Policy 2 current value 24600 GAR 3.5% pre 97, 5% post 97 (whatever that means?)
Both these policies are unfortunately 'paid up' and no further contributions can or will be made.

I'm currently 53 and will probably not retire till I drop or my health fails (nothing to do with lack of money by the way), retirement age on policies is 65 so potentially a further 12ish years of nominal growth with annual bonuses? (although I'm not hopeful of any future bonuses or even a final bonus after speaking with RL about projected growth etc)


I am reasonably well positioned for retirement with property investments, don't have any current pension/s in force, I guess my question is should I open a new pension and move the 53K into the new scheme and then I could maybe bolster that fund up with new contributions OR leave the funds where they are and look to take whatever the pot has grown to when I'm 65. I spoke to RL and they just said I can take it in a few different ways from age 55 or I could move it (no charges for transferring apparently) BUT I would lose the GAR,s although the GAR,s to me don't look anything special in investment terms I have been reading a lot about how GAR's can be valuable and shouldn't be transferred without a lot of thought/advice.

I consider these 2 pensions a pleasant surprise, would be great if I could get some advice/opinions on best ways to maximise any potential growth if there is any to be gained of course. I have read on here that old CIS pensions are pretty naff so please feel free to tell me if that is indeed the case and maybe I should just cash them in at some stage between 55-65, I just don't know, I've never been involved with pensions so I really don't know what the 'best' route to take will be.     

Marcon

GARs can indeed be very valuable - if you want to buy an annuity. If you want to use drawdown, or simply cash in the lot and head off on that first class world cruise (and have plenty of other retirement income on tap), less so. As usual, that classic answer: it depends...

onlyfoolsandparking

Marcon said:

GARs can indeed be very valuable - if you want to buy an annuity. If you want to use drawdown, or simply cash in the lot and head off on that first class world cruise (and have plenty of other retirement income on tap), less so. As usual, that classic answer: it depends...

Thank you for the reply, from what I can gather a GAR at 8% is okay but not great and of course that only applies to approximately half of the funds. Not sure I will buy an annuity although I can't say that definitively IF the GAR makes it worthwhile. I'm more thinking can I make good use of a new scheme by using the 53K as a decent starting point. I could comfortably contribute 500 a month to a new scheme but would it be worth it as I now realise at 53 I've possibly missed the advantages of a decent pension scheme. I have a decent amount of rental incomes so no big regrets I can think of, just wondering which option to take. 

onlyfoolsandparking

Having asked for and received up to date fund values my current fund stands at £53600 (approx). I think? I understand my options for making the best use of what I have in the pot so to speak. I've been trying to find what the 'average' growth on these pensions is likely to be (crystal ball time I know) and have requested from RL the historic growth statements which they are happy to send. I wanted to check and ask if my figures are somewhere in the ball park and this will help me decide best course of action.

I have 11 years before I hit 65 and have used a simple growth calculator to see what potential figures I 'might' end up with.
1, growth at 3% over 11 years gives a pot of £74194
2, growth at 5% over 11 years gives a pot of £91674
3, growth at 6.5% over 11 years gives a pot of £107154.

These figures are all approximate and don't contain any bonuses OR terminal bonus (if of course bonuses are in fact issued?) 
These pensions are 'with profits' and I don't know if that makes any difference.
Is 5% growth on a 'paid up' pension a realistic figure? am I correct in my rough guesswork?

I'm certain I will be better off leaving this pension until I hit 65 even though I can't contribute to it any further and it wouldn't be a sensible move to draw it at 55 as it's still a fairly decent investment but?  

 

dunstonh

Does the CIS plan have safeguarded benefits?   Those that do tend to have lower rates of return compared to those that do not.

onlyfoolsandparking

dunstonh said:

Does the CIS plan have safeguarded benefits?   Those that do tend to have lower rates of return compared to those that do not.

Thanks for the reply, I can't see anything that specifically states the words 'safeguarded benefits' on the paperwork RL have sent me but it does say it has guaranteed cash sum (GCS) and fund guarantees and a GAR of course IF that is what you mean by your question.
It also states under guaranteed cash sum and fund guarantees:
The policy is written to provide a GCS  at the normal retirement date (65 in my case) and that is a minimum amount the policy will be worth.
Annual bonuses may be added each year and once added cannot be removed
A final bonus may also be added
It is the GCS, the accumulation of annual bonuses and any final bonuses that make up the final fund value
The GCS and annual bonus only show what I am guaranteed to receive at normal retirement date and do not guarantee the current fund value of the policy.
   

xylophone

and a GAR of course I

A GAR is a safeguarded benefit.

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

onlyfoolsandparking

xylophone said:

and a GAR of course I

A GAR is a safeguarded benefit.

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

Thanks for clarifying, now to getting an answer/opinion on what potential growth could be achieved if I leave it a further 11 years. (it would appear to have grown 4.5% historically so not great?) or whether I should consider transferring it which I did of course ask in my opening post.

GunJack

Say each fund ends up at around £37k by you hit 65...
income approx. £3k p.a. from 8% GAR
income approx. £1500 p.a. from the other

That's a guaranteed income of approx.£4500 pa (possibly index-linked, and possibly a bit more if the investments perform better) from something you'd forgotten about!! That plus state pension gives you a good basis going forward. 

Putting some in a new pension going forward would seem a good idea too...

onlyfoolsandparking

GunJack said:

Say each fund ends up at around £37k by you hit 65...
income approx. £3k p.a. from 8% GAR
income approx. £1500 p.a. from the other

That's a guaranteed income of approx.£4500 pa (possibly index-linked, and possibly a bit more if the investments perform better) from something you'd forgotten about!! That plus state pension gives you a good basis going forward. 

Putting some in a new pension going forward would seem a good idea too...

Thanks for that reply, exactly what I've been trying to confirm   

I don't know about the index-linked part it is a 'with profits' scheme? , I did ask RL as much as I could with my limited knowledge of pensions, she couldn't give me advice (I get that) but did say that they do apply bonuses if the fund performs well enough and they did apply one in 2019 so this could tie in with what your suggesting about future performance. I'm having a meet with my IFA when Covid rules allow but didn't want to look completely clueless regarding this pension, I did speak with him the other day and he said he would happily take a look, based on what I told him he said there are definitely a few decent options. 

I'm quite fortunate that I don't 'need' this forgotten pension as my retirement plan is/has been based on properties, won't give me a Richard Branson lifestyle but I won't starve either. If I can benefit my children by making the correct decision with this forgotten pension then that will be my preferred choice. 

GunJack

the index-linked bit will be dependant on the annuity they give you with the GAR...With-Profits is the current investment fund. So, any bonuses that apply will be added to the investment fund, and then when it matures at you hitting 65, whatever the fund is will be used to buy you the annuity with the GAR return, you'll have to ask the provider if it's going to be index-linked