MVR Question and Factors? (Prudential)

JMoz1

Hi

Hoping someone can offer some general advice here as I know very little about finance etc, so I may be being naive or ignorant of the basics.

I know individual cases vary, but to provide some basic info:

I have a private pension (with Prudential) which I began in 1989 and which I was written to by Prudential and informed it was possible to fully access as of this month if I wanted to.  At first I had some tax queries (I'm a British ex-pat living in the US) but as I still maintain a UK bank-account I'm informed that's not a problem and the tax situation is fine as I haven't earned anything in the UK for a long time and I'll be well below the threshold (the pension pay-out being less than 10K and my tax limit being fine under 12K). Not my biggest concern at this point as monies will likely stay in the UK for the forseeable

But since trying to get other straight answers from Prudential, it's become frustrating. After requesting a valuation, they took a few days to message me through their website a 'as-it-stands' amount, noting that the MVR was currently 0 (good news), but in speaking to them again on the phone, to make sure I understood the situation on that, they basically said that because the MVR can change according to the policy's investments on a moment-by-moment basis, it was impossible to say that if I closed the policy now, what the MVR would be. (The letter was basically, a 'If you'd closed it on Tuesday, this would have been the case' and now it was a Friday, so who knows?

I obviously understood that there might obviously be slight variations, but was looking for some assurances that the number from a few days before was in the basic ballpark of what I'd get (barring hugely unusual circumstances like a financial crash etc). The guy on the phone was quite dismissive, saying it would be impossible to calculate all the factors in advance (or,even at the moment I pressed the trigger on it) and that in basic terms, I wouldn't know what my final amount would be until it landed in my account.

Is that basically correct? It seems impossible to make ANY kind of real or  educated decision on ending the policy if it's 'You can close it, but we can decide to deduct an amount that we can't specify in advance from it and whatever that amount is, you're locked in and can't change it, so you just have to cross your fingers and trust us!'...

Again, I understand that (as in stocks and shares) timing is everything and can change things quickly, but I'm not even sure WHAT real factors could change the MVR from its 'current' O status IF it did. (For instance, the guy on the phone told me that ending the policy before my official retirement date (technically as far away as 2033) could be a *big* factor (but again, shrugged when I asked for some qualification on that and how big an element that was and it felt like trying to dissuade me rather than an actual element). IS that a significant factor?

ANY help appreciated. Individual cases vary and I'm not looking for concrete specifics, but anything that could give me some sort of reasonable context to keep me grounded would be better than the hand-waving and shrugs from Prudential this week.

Many thanks.

dunstonh

t first I had some tax queries (I'm a British ex-pat living in the US) but as I still maintain a UK bank-account I'm informed that's not a problem and the tax situation is fine as I haven't earned anything in the UK for a long time and I'll be well below the threshold (the pension pay-out being less than 10K and my tax limit being fine under 12K). Not my biggest concern at this point as monies will likely stay in the UK for the forseeable

As a US citizen, you would be taxed (or assessed) under the US system.

But since trying to get other straight answers from Prudential, it's become frustrating. After requesting a valuation, they took a few days to message me through their website a 'as-it-stands' amount, noting that the MVR was currently 0 (good news), but in speaking to them again on the phone, to make sure I understood the situation on that, they basically said that because the MVR can change according to the policy's investments on a moment-by-moment basis, it was impossible to say that if I closed the policy now, what the MVR would be. (The letter was basically, a 'If you'd closed it on Tuesday, this would have been the case' and now it was a Friday, so who knows?

Investments change value daily.  So, they cannot guarantee a value.

I obviously understood that there might obviously be slight variations, but was looking for some assurances that the number from a few days before was in the basic ballpark of what I'd get (barring hugely unusual circumstances like a financial crash etc). The guy on the phone was quite dismissive, saying it would be impossible to calculate all the factors in advance (or,even at the moment I pressed the trigger on it) and that in basic terms, I wouldn't know what my final amount would be until it landed in my account.

You are asking them to do something they cannot do and do not hold regulatory permissions to do.  And even those that do would be adding a lot of caveats.

Is that basically correct? It seems impossible to make ANY kind of real or  educated decision on ending the policy if it's 'You can close it, but we can decide to deduct an amount that we can't specify in advance from it and whatever that amount is, you're locked in and can't change it, so you just have to cross your fingers and trust us!'...

You have the current value, and it's between you or your financial adviser to make that judgment call, knowing that it may or may not be the right one.   But in reality, does it really matter in the scheme of things?

I understand that (as in stocks and shares) timing is everything and can change things quickly,

Its not about timing.  Trying to time markets usually results in a worse outcome.  Its time-in-the-market that is more important.

but I'm not even sure WHAT real factors could change the MVR from its 'current' O status IF it did. (For instance, the guy on the phone told me that ending the policy before my official retirement date (technically as far away as 2033) could be a *big* factor (but again, shrugged when I asked for some qualification on that and how big an element that was and it felt like trying to dissuade me rather than an actual element). IS that a significant factor?

MVRs cannot be imposed for transferring out or doing a UFPLS.  However, if an MVR is already in place or negative market event occurs before you do the transaction, an MVR could be put in place.     Most Pru plans have an MVR free exit window at the scheme age.

JMoz1

Hi, thanks for the comments.

 - Though I'm in the US, I'm not an American citizen, so I think the tax-side of things is all UK based - especially if the money stays there. I'm all good there as things stand.

-  As noted, even as a layman and member of the public with no real fiscal training, I DO get that there are 'known unknowns' and I wasn't looking for any guarantee of exact pin-point amounts. But as a layman, I'm trying to establish *what* factors can realistically come into play. 

I totally understood the guy on the phone couldn't give me ALL the answers I would have liked in an ideal world, because - as noted - things change - but equally it's hard to make an educated decision with virtually NO information.

I guess my questions remain:  

1) According to the information on the communication I got and MY phone call, I'm explicitly NOT being told what the MVR factor is, but what it was worth four or five days ago and I'm explicitly told that the amount it is/isn't now may now be different but that they can't tell me that new amount for several more days by which it will once again could have changed. That feels counter-intuitive?  Basically, even with some fluidity, should Prudential be able to tell me the amount quicker and more pragmatically?

2) When I decide to close the policy, at what point is the return calculated - to the moment I announce it, the day or when the paperwork is processed?

3) Is it true I'll only know the amount I'm getting when it lands in my account?

4)  What pragmatic factors affect the MVR? In an MVR realistically likely to change overtly-dramatically short of a financial crash? (ie: Is it paranoid to wonder if an MVR that's 0 one day could be reduced massively between the moment I decided to close the pension and when I get the money?) I'm assuming form the comment above that MVR can't be added *solely* because I'd be closing the account before retiring?

Again, I'm just feeling around in the dark here. 

xylophone

If you type Prudential Pension Market Value Reduction into Google, you should come up with a pdf

Market Value Reduction

A clear explanation

It does make it clear that the MVR is not fixed - it also details certain exemptions. It may be worth a look.

JMoz1

Thanks. I'll continue to investigate options.