Explanation of options listed by Pru Pension Letter

Carefulspender1

Hello, I've received an Open Market Option letter from the Pru on a small £14k pension fund I have. I'm not planning on retiring until I'm 66 in July next year, however, they have my retirement date for July this year.  One of my options is to delay my benefits until next year which is what I was going to do, however, the letter then goes on to say:

" If you're interested in delaying your benefits, we want to remind you that any Final Bonus, payable for the period you've already been invested in our With-Profits Fund, will be calculated and added to your guaranteed benefits at your Selected Retirement Date. The total value of your guaranteed benefits is then treated as a new investement in our With-Profits Fund and Final Bonus may also be payable for this further period of investment. The total amount for guarantee charges over each period of investment in our With-Profits Fund will be no more than 2% of your benefits. For more information about the guarantee charges, please see your plan documents. We strongly recommend you talk to a financial adviser about the option of delaying your benefits."

My issue is that I only have this small Pru pension, a small defined benefit work pension from years ago and another small amount in a Hargreaves Lansdown Cash account that I occasionally use to draw down small sums as Uncrystallised Funds Pension Lump sums.  I will be relying on my state pension as my main income. I don't really have the money to pay a financial adviser for advice regarding what to do and so I'm hoping that one of the very knowledgeable forumites here could tell me what this paragraph means...am I going to be penalised for delaying my benefits another year? 

My second question is - Pru already told me that this pension scheme does not allow for taking my pot as a number of lump sums as per Uncrystalised Funds lump sums nor for an Income Drawdown where the remaining funds are left invested, so there would be fees and the cost of a financial adviser to do either of these things with Pru.  My thought was to take the transfer value and transfer it to the Hargreaves Lansdown cash account so that I can do drawdowns as and when I need to.  Would that be the most sensible option as I know I wont get much of an income on an annuity basis with a £14k pot?  

Apologies for the length of this one, I hope I don't sound too muddled! Any help would be much appreciated, many thanks!

xylophone

In your position I would be inclined to explore the possibility of transferring this small pension to a SIPP.

It would give  the required flexibility.

It would be wise to start making your enquiries now as other posters indicate the possibility of  weeks of delay.

Have you obtained a state pension forecast?

https://www.gov.uk/check-state-pension

What is shown as "estimate to 5/4/23 (4)"?

Carefulspender1

xylophone said:

In your position I would be inclined to explore the possibility of transferring this small pension to a SIPP.

It would give  the required flexibility.

It would be wise to start making your enquiries now as other posters indicate the possibility of  weeks of delay.

Have you obtained a state pension forecast?

https://www.gov.uk/check-state-pension

What is shown as "estimate to 5/4/23 (4)"?

Thanks for replying xylophone. I understand that when I transfer a small pension to say Hargreaves Lansdown  it goes into a cash fund that I can then either invest in a SIPP or draw down an Uncrystallised lump sum when I choose. The only reason I say this is that I transferred my old Equitable life fund in there without investing it and have drawn on that when needed. But am I right in this assumption?

My state pension forecast for July 2025 is 227.71 a week and the quote says it's the most I can get (I've paid 47 years of NI). Not a lot I know but fortunately I don't have a mortgage or any debt to pay off so I think I can get by.

xylophone

You already have a SIPP in drawdown with HL?

You hold no investments within the SIPP?

You draw lump sums every so often on a 25% tax free/75% taxed basis?

Is your starting point that you want to be able to access the Pru pension on the same basis?

This option is not available in the current arrangement so would require transfer to a modern plan with the Pru.

This would involve taking paid for advice and if transferred to such a modern plan, the modern plan could involve drawdown charges?

If you did not opt for a transfer to a modern plan but opted for 

a new investement in our With-Profits Fund 

 would  you simply be pushing your decision down the road in so far as you would still have to change to a modern plan eventually in order to access as you wish in July 2025?

Have you read your Plan documents?

For more information about the guarantee charges, please see your plan documents. 

You might try a PM to https://forums.moneysavingexpert.com/profile/29254/dunstonh

This poster is a IFA who must have seen hundreds of legacy products (including from the Pru) and may be willing to comment.


Have you yet had a Pension Wise appointment?

https://www.moneyhelper.org.uk/en/pensions-and-retirement/pension-wise/book-a-free-pension-wise-appointment

Had you considered a telephone call to HL to explore the option of transfer to a SIPP to run alongside your existing drawdown

SIPP?


With regard to the state pension forecast, is £227.71 the "estimate to 5/4/23"?

Remember that the SP increases each year.

You have a "protected payment".

https://www.gov.uk/new-state-pension/what-youll-get#:~:text=If you're getting more,rate of new State Pension.

Carefulspender1

Thank you for getting back to me @xylophone - yes is the answer to your questions,  you have summed up my situation perfectly and looking at it the way you have worded it then you're absolutely right...I'm just prevaricating on a decision that I'll have to make next year anyway so now is the time to take action. 

I have had a pension wise appointment and they explained all I had but are not able to give advice on what to do with it in my situation.  

I think that the best option is for me to transfer the Pru balance into the SIPP cash account that I have and draw on it as and when needed but I just wanted to check if there is anything I need to be aware of with doing this on this Pru personal pension.  Thanks for the heads up re dunstonh - I've tagged him in to see if he can add any useful observations.

@dunstonh are you able to make any observations on my questions (I appreciate it cant be advice), many thanks.

[Deleted User]

May I ask how much your small defined pension will pay you per annum? Is the Hargreaves Lansdown account also a pension? 

Albermarle

Carefulspender1 said:

Thank you for getting back to me @xylophone - yes is the answer to your questions,  you have summed up my situation perfectly and looking at it the way you have worded it then you're absolutely right...I'm just prevaricating on a decision that I'll have to make next year anyway so now is the time to take action. 

I have had a pension wise appointment and they explained all I had but are not able to give advice on what to do with it in my situation.  

I think that the best option is for me to transfer the Pru balance into the SIPP cash account that I have and draw on it as and when needed but I just wanted to check if there is anything I need to be aware of with doing this on this Pru personal pension.  Thanks for the heads up re dunstonh - I've tagged him in to see if he can add any useful observations.

@dunstonh are you able to make any observations on my questions (I appreciate it cant be advice), many thanks.

The Pru crops up regularly on here for charging fees for starting withdrawals and for poor customer service.
It seems clear that transferring it to HL is a good idea.

However as a separate point you quoted this from the Pru.

We strongly recommend you talk to a financial adviser about the option of delaying your benefits."

You will find that many pension and financial providers will say this as a matter of course about many options. It covers their rear end in case of any later issues.

Carefulspender1

Thank you so much @Albermarle - you've told me all I need to know...I'll be doing a transfer to my HL account.