GUARANTEED WITH PROFITS FUNDS VALUES

epsilon4900

I have a with profits fund pension policy with Phoenix Life. I only recently discovered that there is supposed to be a guarantee of 4% growth on the with profits fund component of the policy.
Eg There is a final bonus too which makes up the full or transfer value. They gave me various figures from the past three years. My issue is that the transfer value between Dec 2021 and Dec 2022 went down despite the fact that the final bonus component actually went up that year? So given that the whole value eg full transfer value went down ( admittedly only by £15 ) that must mean that the WPF component went down. How is that consistent with that fund being guaranteed to rise by 4%? If I took the differences and added 4% it comes to a couple of hundred pounds more in my calculations? Does this make sense? It is the only comparison of the 4 values they sent where the transfer value the next year went down if that makes sense. It brings into question though in my mind ALL their figures. 

So my question to you is what am I not understanding here? OR am I right to be concerned about these figures and especially the first comparison?

How can a fund be guaranteed to grow by 4% and yet its value actually falls? At all?

Sorry if I am being dim here!  Thanks!

HappyHarry

There are three components to the surrender/transfer value;
1. Fund value which cannot fall and which you say has a guaranteed growth rate 
2. Terminal bonus which can be adjusted up or down depending on fund performance
3. Market Value Reduction (MVR) which is a penalty applied to withdrawals at certain times

The valuation you have should detail each of the above three components. You will find that your fund value has not fallen, but the other two components will have an impact on the total you would receive.

epsilon4900

HappyHarry said:

There are three components to the surrender/transfer value;
1. Fund value which cannot fall and which you say has a guaranteed growth rate 
2. Terminal bonus which can be adjusted up or down depending on fund performance
3. Market Value Reduction (MVR) which is a penalty applied to withdrawals at certain times

The valuation you have should detail each of the above three components. You will find that your fund value has not fallen, but the other two components will have an impact on the total you would receive.

Thanks Happy Harry! Most instructive.  So IF the terminal bonus went up but the transfer value went down and given the fund value must always go up that could indicate there was an MVR in operation at that time? The thing is I thought an MVR would not usually show up in a transfer value? When I have been asking for transfer values on and off over the past year there has been no mention of an MVR at all? Also even if there were an MVR operating in previous years or any other year for that matter IF I took money/s on my selected retirement date there would be no MVR anyway? I am asking for clarification from Phoenix as to why the value went down in one period in light of what I already explained earlier. It will be interesting to see if they lay it at the door of an MVR kind of thing. I still feel something odd is going on.

epsilon4900

Phoenix Life are being evasive on this alas. Saying they haven't got the information yet bla bla bla. It feels like
some kind of a stonewall really as they should be able to explain what lead them to get the figures they sent me in that letter at the end of June.

epsilon4900

The other thing I am wondering about is how their admin or management charge gets factored in to all of
this. That could be part of what is going on I guess. So far I am completely in the dark of course which is very frustrating.

HappyHarry

Phoenix Life have taken over many different with profits funds. They all run on different rules with different calculations required. To produce and break down transfer values is not necessarily a quick exercise, so be prepared to wait a little for the information. 

Their management charge will not be declared, above the fact that it will be factored in when declaring bonuses. These policies were in place long before transparent pricing regulations came in, and is one of the reasons they are not retailed anymore.

Typically MVRs do not apply if you take your pension at retirement date.

epsilon4900

HappyHarry said:

Phoenix Life have taken over many different with profits funds. They all run on different rules with different calculations required. To produce and break down transfer values is not necessarily a quick exercise, so be prepared to wait a little for the information. 

Their management charge will not be declared, above the fact that it will be factored in when declaring bonuses. These policies were in place long before transparent pricing regulations came in, and is one of the reasons they are not retailed anymore.

Typically MVRs do not apply if you take your pension at retirement date.

Thanks Happy Harry,  It's frustrating as I want to take moneys this summer but this is now getting in the way. That is what I assumed that the management charge would be factored in to the figures and yes absolutely I am aware that there is no MVR on retirement date. I may have to change that if this drags on for various reasons. Something feels very fishy to me.

dunstonh

Thanks Happy Harry! Most instructive.  So IF the terminal bonus went up but the transfer value went down and given the fund value must always go up that could indicate there was an MVR in operation at that time?

Yes.

For example, if your pension with Phoenix is an ex NPI one, they operated a guaranteed minimum growth rate of 4%  on some of theirs but many of them have an MVR in place.     The MVR ceased to be levied from scheme age but can fluctuate in between.

The thing is I thought an MVR would not usually show up in a transfer value?

It should do.  The transfer value is the amount that will be transferred.  

The other thing I am wondering about is how their admin or management charge gets factored in to all of
this. That could be part of what is going on I guess. So far I am completely in the dark of course which is very frustrating.

The annual charge is too small to be noticeable.    Some plans pay 4% before charges.  Some pay 4% after charges.

SouthCoastBoy

I have one of these ex npi schemes with a guarantee 4% growth, don't really understand the nuances so am just leaving it to the retirement age that is set on the scheme which is aged 65 then going to transfer it into my sipp. Dunstonh is that what you mean by scheme age?

dunstonh

SouthCoastBoy said:

I have one of these ex npi schemes with a guarantee 4% growth, don't really understand the nuances so am just leaving it to the retirement age that is set on the scheme which is aged 65 then going to transfer it into my sipp. Dunstonh is that what you mean by scheme age?

The scheme age refers to the age the plan was originally set up to "mature".  So, if you selected age 65 at the outset, then it will be MVR free from 65.

I have had a bunch of these over the years and I tend to use them as defensive part of the portfolio until scheme age and use the other pensions for the growth assets.  Then consolidate it after scheme age.

epsilon4900

dunstonh said:

Thanks Happy Harry! Most instructive.  So IF the terminal bonus went up but the transfer value went down and given the fund value must always go up that could indicate there was an MVR in operation at that time?

Yes.

For example, if your pension with Phoenix is an ex NPI one, they operated a guaranteed minimum growth rate of 4%  on some of theirs but many of them have an MVR in place.     The MVR ceased to be levied from scheme age but can fluctuate in between.

The thing is I thought an MVR would not usually show up in a transfer value?

It should do.  The transfer value is the amount that will be transferred.  

The other thing I am wondering about is how their admin or management charge gets factored in to all of
this. That could be part of what is going on I guess. So far I am completely in the dark of course which is very frustrating.

The annual charge is too small to be noticeable.    Some plans pay 4% before charges.  Some pay 4% after charges.

Thanks. An MVR is not specified in the values I have been given from 2021 onward? The WPF bit is there and the final bonus is specified but no reference at all to any MVR? So if they were operating that I think they should have made that clear in these figures for a start. Two or three years of the transfer values have gone up and only the first comparison between 2021 and 2022 went down. Also for PL they have told me that IF I don't transfer this summer when it's my birthday and don't change the SRD before the date they will throw it forward for 5 years automatically and that they could operate an MVR at any time between now and then if they so chose. I guess every policy has different terms and conditions. I am still waiting for clarity on the detail of this policy and they are taking a while to find it out which is a bit frustrating.