Transferring Prudential AVC to SIPP

VXman

My wife has a Teachers AVC's account with Prudential. It is invested in a Prudential With-Profits Cash Accumulation Fund. 

We are retired now and no longer contributing. She will be 60 in January. The plan is to take the 25% tax free lump sum on her birthday in January and have the rest on drawdown - withdrawing an amount each year but keeping under the 40% tax threshold. The reason for doing it on her birthday is that this is the only day Prudential guarantee that they will not apply a MVR (Market Value Reduction) 

We would like to have it in a Vanguard drawdown account rather than leave it with the Pru.

How does this work?

Do we wait until her birthday, take the 25% and put the remaining funds into a Pru drawdown and then transfer to Vanguard...

or...

Transfer it now/sometime before we cash it out? (Risk MVR)

Can it be transferred on her Birthday without being transferred to a drawdown pension with Prudential first?

Just unsure about the process involved in this and would appreciate any knowledge on these matters.

dunstonh

The reason for doing it on her birthday is that this is the only day Prudential guarantee that they will not apply a MVR (Market Value Reduction) 

Pru don't apply the MVR often on most of their WP fund versions.   Is there one being applied at the moment on hers?
Pru don't normally apply the MVR after scheme age.    If she is 60 in

January, then they won't apply it after that (if 60 was the scheme age) and that would probably be the ideal window to do it.

Transfer it now/sometime before we cash it out? (Risk MVR)

If there is no MVR at the moment, then markets have been moving up again and its unlikely one would be added now.

Can it be transferred on her Birthday without being transferred to a drawdown pension with Prudential first?

You wouldnt transfer it into the Pru's retirement account as that will cost you an advice fee.  Although it would get rid of the MVR issue as you can't have with profits in their only pension that supports drawdown.

You dont have to transfer it on her birthday either. Indeed, that is next to impossible to do.   It has to be after.

Albermarle

Do we wait until her birthday, take the 25% and put the remaining funds into a Pru drawdown and then transfer to Vanguard..

Pru will charge you 3% for 'advice. ( quite a few posters have complained about this and their poor customer service generally)
Much better to transfer the whole lot out and then start the drawdown process. 

VXman

dunstonh said:

The reason for doing it on her birthday is that this is the only day Prudential guarantee that they will not apply a MVR (Market Value Reduction) 

Pru don't apply the MVR often on most of their WP fund versions.   Is there one being applied at the moment on hers?
Pru don't normally apply the MVR after scheme age.    If she is 60 in

January, then they won't apply it after that (if 60 was the scheme age) and that would probably be the ideal window to do it.

Transfer it now/sometime before we cash it out? (Risk MVR)

If there is no MVR at the moment, then markets have been moving up again and its unlikely one would be added now.

Can it be transferred on her Birthday without being transferred to a drawdown pension with Prudential first?

You wouldnt transfer it into the Pru's retirement account as that will cost you an advice fee.  Although it would get rid of the MVR issue as you can't have with profits in their only pension that supports drawdown.

You dont have to transfer it on her birthday either. Indeed, that is next to impossible to do.   It has to be after.

A lot of that is just not true. The letters regarding the maturity of the policy and the processes for taking the money/transferring etc clearly state the only day you are GUARNTEED not to have an MVR applied is on the day of the normal pension age (in this case 60) birthday. It can be applied before and after. You do not know (they cannot tell you) whether it will apply or not until you request to withdraw it. Chances are it wont but there is no guarantee. For example they told us recently that no MVR would apply today (the day we spoke to them about it) but it could change when you go through the admin process.

When I withdrew mine last June I told them I would like to take it early if there was no MVR or leave it until my birthday if there was and they proceeded on that process.

"You wouldnt transfer it into the Pru's retirement account as that will cost you an advice fee.  Although it would get rid of the MVR issue as you can't have with profits in their only pension that supports drawdown."

This is interesting and it part of what I 'm trying to get my head around. Would there be charges transferring to become and after it had become a PRU retirement drawdown fund?  

What do you mean by 'profits' Nearly 50% of the current value of the fund is profits and the final bonus. Are you saying some of this would be lost? 

What we want is the full value of the policy (- 25%) put into an account that we can draw on and for it to grow reasonably in the mean time and to avoid any charges if possible.

dunstonh

A lot of that is just not true. The letters regarding the maturity of the policy and the processes for taking the money/transferring etc clearly state the only day you are GUARNTEED not to have an MVR applied is on the day of the normal pension age (in this case 60) birthday. It can be applied before and after. You do not know (they cannot tell you) whether it will apply or not until you request to withdraw it. Chances are it wont but there is no guarantee. For example they told us recently that no MVR would apply today (the day we spoke to them about it) but it could change when you go through the admin process.

Part of the problem is certain versions have different terms.  The Pru FSAVC and Teachers AVC (SAL or SALAS versions) both have the more flexible terms than the more common one and there was a period when some members could get more favourable MVR rules.  Pru covers that by telling you to refer to the original product key features document issued to the member.

However, trying to get an insurer to do anything on a given day is next to impossible.     The key is to getting the paperwork in before and instructing it to happen at scheme age.      if the insurer then takes a fortnight to do it then they will not apply the MVR.  The receiving scheme controls the process.  Not the ceding scheme.   Hence, why there is a tolerance (even if its not officially published).

"You wouldnt transfer it into the Pru's retirement account as that will cost you an advice fee.  Although it would get rid of the MVR issue as you can't have with profits in their only pension that supports drawdown."

This is interesting and it part of what I 'm trying to get my head around. Would there be charges transferring to become and after it had become a PRU retirement drawdown fund?  

The charge is to set it up.  I don't know if teachers get a discount but its not a great product in my opinion (cost, software and fund choice all feel like early 2000s).  The ongoing charge is higher than most platforms too (unless discounted).

What do you mean by 'profits' Nearly 50% of the current value of the fund is profits and the final bonus. Are you saying some of this would be lost? 

The retirement account doesnt offer the with profits fund.  It has a modern variation with a smoothed mechanism but the majority of consumers dont need to pay the higher costs for that functionality.

What we want is the full value of the policy (- 25%) put into an account that we can draw on and for it to grow reasonably in the mean time and to avoid any charges if possible.

Which probably means you finding a direct to consumer provider that you like and transferring it to them.  

VXman

dunstonh said:

Which probably means you finding a direct to consumer provider that you like and transferring it to them.  

  Yes, which is likely to be Vanguard. What I am trying to work out is the easiest and best way to do that. It looks like asking Vanguard to do the transfer. My worry was about the MVR as, as you say, it will be impossible to get the timing of that spot on. My wife will have to discuss this with the Pru and see what they say.

Albermarle

What we want is the full value of the policy (- 25%) put into an account that we can draw on and for it to grow reasonably in the mean time and to avoid any charges if possible.

That's what we all want !  Hopefully in the long run our pension pots should 'grow reasonably' but no one will ever promise you that. Plus no pension provider offers the services free of charge, although the transfer should be free. In fact some providers offer cashbacks for transfers in from time to time. 

 Yes, which is likely to be Vanguard. What I am trying to work out is the easiest and best way to do that. It looks like asking Vanguard to do the transfer

That is in fact the only way to do it. You do not need to have contact with RL.

VXman

Just to update this thread.

We transferred my wife's AVC's to Vanguard before cashing them in. The transfer process was simple - all done on line via Vanguard website and took less than a week. Went through around my wifes 60th birthday and no MVR was applied.

We could have cashed them in, converted to a drawdown with Prudential (which interestingly would have required independent financial advice (I assume paid) according to the Pru?) Then we could have transferred out. Going direct to Vanguard was a lot simpler. I was just worried that the Pru could have added a MVR if it had not gone through on my wife's 60th birthday. However, in practice they allow a 30 day window and in the current economic climate it was unlikely to happen anyway.

We are now in the process of withdrawing the 25% tax free sum and putting the remainder into a drawdown account. We also need to choose what fund to invest the remaining 75%. A difficult one as we really don't know when or how much we are likely to withdraw anything as we don't really need it at the mo. I know - a nice position to be in.

On the plus side the money is still getting 3.25% interest while sitting in our Vanguard as cash - which is not bad for an instant access account. Pretty much the same as it has been growing at Prudential for the last few months!

Impressed with Vanguard, Even though it is low cost and website based they have excellent customer service on the phone. Knowledgeable and quick to answer the call.

Albermarle

 We also need to choose what fund to invest the remaining 75%. A difficult one as we really don't know when or how much we are likely to withdraw anything as we don't really need it at the mo. I know - a nice position to be in.

In simple terms the choice comes down to.

Time - The longer you think it will not be needed/ or only withdrawn at a low rate, the more likely you will get a better result with a higher equity/higher risk fund

Risk Tolerance- Higher risk funds can be volatile and not everybody likes to see  their funds drop sharply, even if they are likely to recover again.

Note - when I say higher risk, I mean mainstream high % equity funds, not Crypto or investing in Bolivian forests/gold mines etc !

thebigun

VXman said:

Just to update this thread.

We transferred my wife's AVC's to Vanguard before cashing them in. The transfer process was simple - all done on line via Vanguard website and took less than a week. Went through around my wifes 60th birthday and no MVR was applied.

We could have cashed them in, converted to a drawdown with Prudential (which interestingly would have required independent financial advice (I assume paid) according to the Pru?) Then we could have transferred out. Going direct to Vanguard was a lot simpler. I was just worried that the Pru could have added a MVR if it had not gone through on my wife's 60th birthday. However, in practice they allow a 30 day window and in the current economic climate it was unlikely to happen anyway.

We are now in the process of withdrawing the 25% tax free sum and putting the remainder into a drawdown account. We also need to choose what fund to invest the remaining 75%. A difficult one as we really don't know when or how much we are likely to withdraw anything as we don't really need it at the mo. I know - a nice position to be in.

On the plus side the money is still getting 3.25% interest while sitting in our Vanguard as cash - which is not bad for an instant access account. Pretty much the same as it has been growing at Prudential for the last few months!

Impressed with Vanguard, Even though it is low cost and website based they have excellent customer service on the phone. Knowledgeable and quick to answer the call.

Thank you so much for this very useful. I am now in a similar position and wish to do the same with a pot of around £66,500 before any potential MVR. I will be 60 at the end of May this year. Can I clarify.....
1) When did your wife apply for the transfer i.e how many weeks/months before in the end? 
2) Also how long did it take for you to then arrange to withdraw the 25% tax free amount and was that easy enough?
3) Did the prudential or vanguard charge a transfer fee?

VXman

thebigun said:

VXman said:

Just to update this thread.

We transferred my wife's AVC's to Vanguard before cashing them in. The transfer process was simple - all done on line via Vanguard website and took less than a week. Went through around my wifes 60th birthday and no MVR was applied.

We could have cashed them in, converted to a drawdown with Prudential (which interestingly would have required independent financial advice (I assume paid) according to the Pru?) Then we could have transferred out. Going direct to Vanguard was a lot simpler. I was just worried that the Pru could have added a MVR if it had not gone through on my wife's 60th birthday. However, in practice they allow a 30 day window and in the current economic climate it was unlikely to happen anyway.

We are now in the process of withdrawing the 25% tax free sum and putting the remainder into a drawdown account. We also need to choose what fund to invest the remaining 75%. A difficult one as we really don't know when or how much we are likely to withdraw anything as we don't really need it at the mo. I know - a nice position to be in.

On the plus side the money is still getting 3.25% interest while sitting in our Vanguard as cash - which is not bad for an instant access account. Pretty much the same as it has been growing at Prudential for the last few months!

Impressed with Vanguard, Even though it is low cost and website based they have excellent customer service on the phone. Knowledgeable and quick to answer the call.

Thank you so much for this very useful. I am now in a similar position and wish to do the same with a pot of around £66,500 before any potential MVR. I will be 60 at the end of May this year. Can I clarify.....
1) When did your wife apply for the transfer i.e how many weeks/months before in the end? 
2) Also how long did it take for you to then arrange to withdraw the 25% tax free amount and was that easy enough?
3) Did the prudential or vanguard charge a transfer fee?

1. My wife's birthday was on 11th. Looking at her Vanguard documents she instigated the transfer on the 10th Jan and it was completed on the 17th. 

2. Once your money is in the Vanguard pension account you have to go through the steps of having talked to Pension wise (or other financial advisor) or at least say you have. You will then need to go through some questions on the phone with a Vanguard advisor to create your drawdown account. She requested the 25% on 30th and it arrived in my bank account on 6th Feb. (Vanguard withdrawals seem to take 5 working days) So whole process from start of transfer to tax free amount in bank took 4 weeks. 

3. No transfer fees.

Note, your first withdrawal from your drawdown account after your initial 25% lump sum will be taxed at 40% no matter what your normal tax rate is. You will have to go through the process of claiming that back which is reasonably quick it you do it online through your online tax account if you have one set up (Government gateway). After that it seems to be at the standard 20% (providing you keep under the 40% tax threshold)