Transferring an old Prudential pension

Seamonster_2

I have a dormant Prudential pension, invested in their With-Profits Fund. It dates from the early 90s, when I was contracted out of SERPS for a few years. 

I’m now considering what to do with it. I’m inclined to transfer it to another provider, as the online management facilities are poor (no app, limited functionality on the Pru website) and the charges seem high at over 1%. Also I understand that they don’t offer a drawdown option to take the pension, which would be my preferred option.

I’m 55, planning to retire at 60. The pension transfer value is £76,000, of which £44,000 is a “final bonus”.

I received a letter from them recently, informing me that as I have passed the Selected Retirement Date (April 2023), they have extended this date to April 2028 and added a £6,500 final bonus because of this extension. I don’t know where that figure came from.

As regards a transfer destination, I’m considering my current employer’s Royal London scheme – this has very low charges and good customer service. However, I might be leaving the company in the next few months, which could complicate things.

So I’m also looking at Pension Bee – probably their lower-risk Preserve Plan, which has a charge of 0.5%.

Some questions on which I would appreciate guidance:

1.  From my research, I believe the £44K final bonus is pretty much guaranteed – is that a reasonable assumption?

2.  Does anyone know the reason why I would have been given that “extra” £6,500 final bonus? It is not mentioned anywhere in the pension documentation, which just says they award regular bonuses, and one final bonus when you take money out.

3.  My recent statement (22 March 2023) stated that a £1,400 Market Value Reduction would be applied if I switched out from the with-profits fund now. I assume this is due to poor fund performance over the last couple of years, which is fair enough. Would it be better to wait until the markets have recovered before switching out, in the hope of avoiding this MVR?

Albermarle

1. Not guaranteed but unlikely to significantly drop, unless there are bad market conditions for a prolonged period.
2. Not sure but I assume because you will be invested for longer.
3. Markets have not been great, but have been worse, which is reflected in a relatively small MVR. Impossible to say when it will be removed or even increased.

I have a dormant Prudential pension
As it is still invested and charging fees, then it is not dormant.

Probably you are right to think about transferring it . The Pru suffers from poor customer service. They do offer a drawdown product, but you have to transfer to it a cost .

You would have to check with Royal London if they would accept a transfer in . They may insist you take financial advice as that is part of their business model.

Pension Bee market themselves as a special product for pension transfers. In reality nearly all pensions are very happy to accept transfers in, so probably a good idea to shop around. If you intend to drawdown over a long period it is usually best not to invest too low risk. 

Mothman

My Pru With-Profits pension says that no MVR will be applied when the policy hits the selected retirement date, though I'm not sure if there is a narrow window when this applies. Certainly worth double checking to see if they would actually apply an MVR if you were to transfer out now.

dunstonh

I have a dormant Prudential pension, invested in their With-Profits Fund.

For reference, the dormancy rules do not apply to personal pensions.  So, it won't be dormant.

I received a letter from them recently, informing me that as I have passed the Selected Retirement Date (April 2023), they have extended this date to April 2028 and added a £6,500 final bonus because of this extension. I don’t know where that figure came from.

That doesn't side right unless your plan has a guaranteed minimum maturity value (unlikely).   Pru would not pay more money into the final bonus because of that.   Final bonuses can change daily.   So, maybe it was a synthetic projection you were looking at.       Deferring pensions is common place now. Some automatically use age 99 nowadays.

1.  From my research, I believe the £44K final bonus is pretty much guaranteed – is that a reasonable assumption?

No. There are no guarantees on the final bonus. It can removed fully or increased as per market conditions.

2.  Does anyone know the reason why I would have been given that “extra” £6,500 final bonus? It is not mentioned anywhere in the pension documentation, which just says they award regular bonuses, and one final bonus when you take money out.

I suspect this is a misunderstanding on your part.  Pru would not load the fund with extra money just because the scheme age was deferred.

3.  My recent statement (22 March 2023) stated that a £1,400 Market Value Reduction would be applied if I switched out from the with-profits fund now. I assume this is due to poor fund performance over the last couple of years, which is fair enough. Would it be better to wait until the markets have recovered before switching out, in the hope of avoiding this MVR?

Poor fund performance is an unfair statement.  The legacy Pru WP does not perform poorly.   It is one of the few legacy WP funds that is worth keeping.  However, it is subject to market conditions and 2022 was a negative year.   So, an MVR is not a surprise.

re the MVR. If you wait, then you dont pay the charge. However, the alternative you moved to would also have gone up in that time as well.  So, its swings and roundabouts unless you are changing the risk profile.

So I’m also looking at Pension Bee – probably their lower-risk Preserve Plan, which has a charge of 0.5%.

That is at the expensive end of DIY now.  Indeed, its more expensive than can be arranged via an IFA under advice.   So, if you are going with that option, it wouldn't be for low charges but for a reason you haven't mentioned.   

Seamonster_2

Thanks all for the extremely useful info. Just to respond to a few points:

• "Dormant" pension - I used the wrong word there, just meant that I am not making contributions into it.
• Regarding the extra final bonus, I may well have misunderstood. The actual wording in the deferral letter was as follows: 
  "Premium payments have now been stopped and your original Selected Retirement Date has been extended to 1 April 2028. You may still take retirement benefits before this date and a quote will be provided to you on request. A final bonus of £6,583.91 was added as a result of the extension of your selected retirement date. As you've delayed your benefits, the total value of your guaranteed benefits is now treated as a new investment in our With-Profits Fund and Final Bonus may also be payable for this further period of investment."
• Pension Bee - Yes, I think I was attracted by their slick advertising and nice app. I am now looking at Vanguard, who are well-respected and have lower charges than PB.
  

xylophone

As you've delayed your benefits, the total value of your guaranteed benefits 

Is there any chance that there is an advice requirement ?

https://www.gov.uk/government/publications/pension-benefits-with-a-guarantee-and-the-advice-requirement/pension-benefits-with-a-guarantee-and-the-advice-requirement

Seamonster_2

Just to provide an update on this, in case it is useful to anyone else.

I went ahead and transferred the Pru pension to Vanguard.

I received the full Final Bonus, and they only deducted £320 MVR. So the transferred sum was around £75,700.

Very pleased with that.

NlghtOwl

I moved a small Aviva with profits pension to HL, it made sense to lower fees, easy to access in the future and I didn’t like the idea that part was down to their discretion. Good luck

BIGFATBALOO

Seamonster_2 said:

Just to provide an update on this, in case it is useful to anyone else.

I went ahead and transferred the Pru pension to Vanguard.

I received the full Final Bonus, and they only deducted £320 MVR. So the transferred sum was around £75,700.

Very pleased with that.

Did the tell you the the total transfer value before you transferred ? Please thank you as I'm in a pretty similar situation you with the pru but only £16000 with bonuses my retirement date was 1/08/24
But when I spoke to them on the phone they said i needed a ifa or fa but I've been told i don't if it's under £30,000 
I wanted to take 25% and put the rest in drawdown probably with Vanguard.
I had a similar letter to you saying they have not heard from me (which they have) so have changed my retirement date to 1/1/2025 & a final bonus of £5267.73 has been added as a result of your extension of your selected retirement date. Thank you any info would be grateful