Confused about pension segments

chockydavid1983

Hi

I’m looking to do a partial transfer of my workplace pension with Aviva to my Vanguard SIPP and had a question about segments.

I've been informed by Aviva that any transfer I initiate will be for a certain number of segments, of which my workplace pension is made up of 9999.

From searching online forums, it seems as though if I was to transfer 9998, then no further partial transfers would be available as you need to have 1 segment to keep the scheme active. This isn’t ideal as my employer and I will be paying into it for a number of years going forward.

Does the number of segments increase at some point as money is added or is it fixed until you do a transfer out? If it's fixed, I guess I may just go with something like transferring out half of the remaining segments each year, unless there is a more optimal way of doing it?

I can’t find too much information online about segments in general.

Thanks,

Chris.

RogerPensionGuy

I cannot answer you question, but I'm sure if you call Aviva they will explain. 

I'm just wondering why you are moving coins out of a low cost(I think) company Aviva scheme in to a SIPP with Vanguard?

sevenhills

RogerPensionGuy said:

I cannot answer you question, but I'm sure if you call Aviva they will explain. 

I'm just wondering why you are moving coins out of a low cost(I think) company Aviva scheme in to a SIPP with Vanguard?

Will the Aviva pension have more benefits than a SIPP? A % of the pension for dependants or spouse?

Pat38493

chockydavid1983 said:

Hi

I’m looking to do a partial transfer of my workplace pension with Aviva to my Vanguard SIPP and had a question about segments.

I've been informed by Aviva that any transfer I initiate will be for a certain number of segments, of which my workplace pension is made up of 9999.

From searching online forums, it seems as though if I was to transfer 9998, then no further partial transfers would be available as you need to have 1 segment to keep the scheme active. This isn’t ideal as my employer and I will be paying into it for a number of years going forward.

Does the number of segments increase at some point as money is added or is it fixed until you do a transfer out? If it's fixed, I guess I may just go with something like transferring out half of the remaining segments each year, unless there is a more optimal way of doing it?

I can’t find too much information online about segments in general.

Thanks,

Chris.

I would certainly be interested in more information about this also as I am in a similar situation and might want to partially transfer out of Aviva at some point in the next year or two, whilst still contributing through my employer.  I've not heard of this concept of "segments" so this is yet another new thing to find out about!

Edit: - unfortunately I am having a brain issue this morning - it's actually an Aegon pension that I want to do it with but I wouldn't be surprised if the same thing applies (unless it's a feature of the point that I think most Aviva pensions are insured pensions).

RogerPensionGuy said:

I cannot answer you question, but I'm sure if you call Aviva they will explain. 

I'm just wondering why you are moving coins out of a low cost(I think) company Aviva scheme in to a SIPP with Vanguard?

One possible reason might be if you want to take the tax free cash and you don't see Aviva as your long term provider - once you put some of the fund in drawdown, you can no longer do further partial transfers (I think).

squirrelpie

chockydavid1983 said:

I’m looking to do a partial transfer of my workplace pension with Aviva to my Vanguard SIPP and had a question about segments.

I've been informed by Aviva that any transfer I initiate will be for a certain number of segments, of which my workplace pension is made up of 9999.

From searching online forums, it seems as though if I was to transfer 9998, then no further partial transfers would be available as you need to have 1 segment to keep the scheme active. This isn’t ideal as my employer and I will be paying into it for a number of years going forward.

Does the number of segments increase at some point as money is added or is it fixed until you do a transfer out? If it's fixed, I guess I may just go with something like transferring out half of the remaining segments each year, unless there is a more optimal way of doing it?

I can’t find too much information online about segments in general.

I can't find much either, so I suspect it's something specific to your pension. What I did find talks about compulsory annuities, so I'd want to be very sure I understood the situation before I did anything. I would suggest asking Aviva for a copy of the scheme rules, if you haven't already got one, and read it very carefully, including any small print. Then come back here with any specific questions you have about the rules.

dunstonh

Does the number of segments increase at some point as money is added or is it fixed until you do a transfer out? 

Normally, the segments are set at the outset and if you transfer 9998 in one go to leave 1 segment, then you will only ever have 1 segment after that.

If it's fixed, I guess I may just go with something like transferring out half of the remaining segments each year, unless there is a more optimal way of doing it?

How about leaving it with Aviva?
After all, Vanguard isn't really a SIPP and you are limited in fund selection. The Aviva pension will be limited as well but chances are it has similar mainstream options to Vanguard.  Most Aviva pensions have a range of trackers for example.

One possible reason might be if you want to take the tax free cash and you don't see Aviva as your long term provider - once you put some of the fund in drawdown, you can no longer do further partial transfers (I think).

You deal with that closer to retirement.  There is no need to do it earlier.

With crystallised funds, you can transfer segments of a crystallised fund.  However, a plan that has not been segmented and then crystallised can not do partial transfers.

For those asking about segments, it is not that commonplace.  You did tend to see it on older Friends Provident and some AXA plans (both of which fall under Aviva now).    I don't recall seeing it on CNU based Aviva plans.    

Marcon

squirrelpie said:

chockydavid1983 said:

I’m looking to do a partial transfer of my workplace pension with Aviva to my Vanguard SIPP and had a question about segments.

I've been informed by Aviva that any transfer I initiate will be for a certain number of segments, of which my workplace pension is made up of 9999.

From searching online forums, it seems as though if I was to transfer 9998, then no further partial transfers would be available as you need to have 1 segment to keep the scheme active. This isn’t ideal as my employer and I will be paying into it for a number of years going forward.

Does the number of segments increase at some point as money is added or is it fixed until you do a transfer out? If it's fixed, I guess I may just go with something like transferring out half of the remaining segments each year, unless there is a more optimal way of doing it?

I can’t find too much information online about segments in general.

I can't find much either, so I suspect it's something specific to your pension. What I did find talks about compulsory annuities, so I'd want to be very sure I understood the situation before I did anything. I would suggest asking Aviva for a copy of the scheme rules, if you haven't already got one, and read it very carefully, including any small print. Then come back here with any specific questions you have about the rules.

My recollection is that shortly after personal pensions first became available (1988 - the pensions world was a very difference place!), many were set up in segments (aka 'clusters') to enable people to take the 25% tax free cash and then 'bank' the remaining part of each segment to draw on at a later date. The 'banking' meant that the remaining cash stayed with the pension provider and gave the individual a larger pot with which to buy an annuity - which of course was what you had to do in those days - whilst still being able to access the tax free elements at a time of their choosing.

chockydavid1983

Thanks for the replies everyone.
The main reason I was looking at a partial transfer out was due to costs.
I'm fine with just having the VG funds to choose from.
I have no dependants or spouse.
I will check my scheme rules and contact Aviva for more information.

Thanks,
Chris.

Novice_investor101

It’s a quirk of one of the administration systems Aviva use for their workplace pensions. I’ve encountered it a few times whilst working for IFA’s & had to get Aviva to explain it to me. 

What Dunstonh said is correct. The pension has 9999 (or 10,000) segments at the start. If your pension had a value of £9999 then each segment would be worth £1. To transfer £5000 as a partial Aviva would have to transfer 50% of the segments (you’d have to decide between 499 or 501 segments if it doesn’t divide by two etc). 

You’d be left with 500 segments & a policy value of £5000. Your new contributions apply to the remaining 500 segments & if your value increased to £10,000 & you wished to transfer 50% again, you’d be left with 250 segments etc. 

Eventually you’ll be down to 1 segments that holds the entire value. Transferring it out will close the pension & your employer would have to re-enrol you, which may not be into the same pension scheme or same terms you currently get. 

It was all unnecessarily convoluted & why Aviva still work in this antiquated way is a mystery. 

chockydavid1983

Thanks for the explanation and detailed example. That's how it looked like it worked to me but good to get it confirmed. It does seem a bizarre way of doing things but I guess it made sense at some point in the past. I was surprised I couldn't just transfer out the whole lot once a year and leave it open with nothing in there but you live and learn, or sometimes you just live

Investing101

Hi Chocky, 

I'm in the exact same position where I have a work based pension and want to move to a vanguard SIPP. I've spoken to them regarding the segments too. Did you end up doing this in the end? Thanks in advance