Advice on moving a Pru With Profits please. What to do?

mehimandus

I’m still having issues replying via quotes.  

I had a whole reply to @dunstonh but lost it so here’s the abbreviated version of my reply. 

What speculation is your OH falling for?



He had been concerned about possible detrimental TFLS changes but having read other posts here, it seems that’s probably unlikely?

The  other thing he wondered about was, could the upcoming budget have a detrimental impact on the ‘markets’ that might, in turn, impact his pot.  His thinking, might his  TFLS be impacted.  Should he take it now, rather than risk a loss?

What drawdown investment strategy will you be using?   

Indecision has been a big factor in our delaying and still not fully decided. Possible options:
1) Take TFLS and move it to ISAs, plus take a regular monthly amount. Possibly £500 pm

2) Take TFLS and move it to easy access ISAs and perhaps not take any more for a couple of years or so.  Following that, then move to a regular monthly withdrawal?
3) Take TFLS and move it to easy access ISAs (for supplementing our income) and then decide in a couple of years what next? 

Most consumers do not use shares.   They use funds and it’s the funds that will invest in shares.   So, you don't need to micromanage the shares.  You just need to manage the fund selection.



That’s reassuring.  Not having viewed any platforms, it’s not easy to envisage. I think we could do with a dummy run or a trial platform etc lol

Insufficient information to answer that.   There is no single best option.   The type of investments you want, the method of drawdown you intend to use (not all pensions support all methods), the quality and functionality of their software and their service are all key considerations.



have I answered this with 1) 2) and 3) above. 

Type of investments? good question, I really don’t know but then on the occasions we have spoken with FA/IFA,  it seems it’s basically been about high/medium/low risk, so our lack of knowledge comes in here. It probably sounds very naive to say, we’re looking for something ‘well regarded, medium risk, reasonable costs’ but that’s the only way I can put it. 

However, if you invested long before that, then there wouldn't be an MVR.

Thanks for the MVR info. Pru, in their latest statement seem to be clearer with MVR statements, maybe they’ve just got better at presentation,  or could they be going to implement a change ?  I note they state ‘we can change our MVR practice at anytime without giving prior notice’.  

OH’s pot has been confusing.  He gets statements for the full overall pot but then also gets a statement for part of the pot (40k ish).  We’ve questioned this in the past, their answers have been, advisor error years ago, when increasing the pot, at a time other than the pot anniversary.  Another time, they said the 40k ish was related to SERPS.  

Their MVR info does state that, they won’t apply an MVR at retirement dates.  OH’s ‘retirement date’ has rolled over a few times,  on the latest £40k pot statement, the retirement date was 1/8/24.  We are hoping now that we are not penalised,  for being later than 1/8/24, if we decide to move the fund soon. 

Or maybe we just have to go along the lines of what @xylophone mentioned, if an MVR is applied we just have to live with it and hope for the best. 

Thanks @dunston and @xylophone for your input.  

OH has had a Pension Wise  appointment in the past and we rang the helpline recently, for general info,  that helped us conclude that the ‘initial assessment fee’ is a Pru thing.   The link you provided @xylophone, is useful, if we did decide  to involve an IFA.  Not seen that link before

mehimandus

@alwayslearning77 thank you.  It’s good to get confirmation that you could transfer without charges.  

Having read later comments , it seems others have had an MVR applied.  Do you know if this was the case for yourself?

@Roger175  many thanks for the detailed info and insight. This is really helpful. Re your 5 separate plans, it seems OH may have 2 but his both have the same reference.  This has definitely caused confusion over the years and, as stated in my previous post, we have had conflicting info from Pru about this.  Thank you for sharing info on your MVR too. 

Thank you also @bucksman. Comments here are making us realise, that things are unlikely to happen quickly and from what @Roger175 states, it seems to be pot luck, as to whether you get a Pru employee who is helpful and knows what they’re doing.  It’s shocking really that Pru are giving investors such a hard time and bad experience. 

Before posting, we’d googled best drawdown providers. Interactive investor, HL, Vanguard, AJBell were names in the mix, along with others Aviva, Pensionbee.  I’m not sure how we make the decision on what’s best for us though.  I know we need to analyse the charges but when @dunstonh talks about type of investments and software functionality I’m not sure how we’d choose the best for ourselves. 

Roger175

mehimandus said:

Before posting, we’d googled best drawdown providers. Interactive investor, HL, Vanguard, AJBell were names in the mix, along with others Aviva, Pensionbee.  I’m not sure how we make the decision on what’s best for us though.  I know we need to analyse the charges but when @dunstonh talks about type of investments and software functionality I’m not sure how we’d choose the best for ourselves. 

For a pension of the size you're talking about, you are not going to find too many IFA particularly interested and a DIY approach would be cheaper. Don't fret too much about the investment side at this stage, just choose a platform which you would feel comfortable with and start the transfer process. You can then do a bit of research in the meantime regarding investments. Ultimately, once you're on a modern DIY platform you can always do another transfer which will take days (not weeks or months). I have used AJB and HL over the last few decades, both are broadly similar, but I settled on AJB based on the charges. For simplicity, funds will almost certainly the best way to proceed, therefore look at platform fees based on holding funds rather than individual shares. Whatever platform you choose will be significantly cheaper than Pru! Modern DIY platforms will give you so much more flexibility in terms of accessing your money - start researching drawdown and follow the threads on here - so much useful info.

dunstonh

He had been concerned about possible detrimental TFLS changes but having read other posts here, it seems that’s probably unlikely?

The media is doing its usual scaremongering and making up a load of areas that they think that Labour will hit.  On the whole, the media is more wrong than right historically.

There is no expectation that PCLS will be hit.   Most people don't realise that there is already a cap on PCLS and its a hard cap that will naturally be eroded in real terms.     Removing PCLS will harm people with less money.  Not people with more.  There have been two statements from Labour.   One has stated that it is a permanent feature of pensions and the other was that they are happy with the current lump sum allowance.

They could change their tune but they have said that they are carrying out a review into pensions and it will be subject to consultation.   That will likely be several years and have plenty of lead in.  

The  other thing he wondered about was, could the upcoming budget have a detrimental impact on the ‘markets’ that might, in turn, impact his pot.  His thinking, might his  TFLS be impacted.  Should he take it now, rather than risk a loss?

None whatsoever.   The UK is about 4% of the global economy.    Investments are a global spread.

Indecision has been a big factor in our delaying and still not fully decided. Possible options:

1) Take TFLS and move it to ISAs, plus take a regular monthly amount. Possibly £500 pm

2) Take TFLS and move it to easy access ISAs and perhaps not take any more for a couple of years or so.  Following that, then move to a regular monthly withdrawal?

3) Take TFLS and move it to easy access ISAs (for supplementing our income) and then decide in a couple of years what next? 

Why not take it on drip?  That is the most frequent method we use for people and you haven't mentioned that.  i.e. each withdrawal is paid 75/25% split.   That method can reduce your tax paid over the long term if the amount of TFC is greater than the ISA allowance.

Type of investments? good question, I really don’t know but then on the occasions we have spoken with FA/IFA,  it seems it’s basically been about high/medium/low risk, so our lack of knowledge comes in here. It probably sounds very naive to say, we’re looking for something ‘well regarded, medium risk, reasonable costs’ but that’s the only way I can put it. 

An FA will have limited options based on the company they represent. An IFA is whole of market and has over 30,000 options.   The IFA would choose for you.  An FA would often limit the options and present the one for you to choose.

Investing is as much about option as structure.  So, you will get different views and that doesn't mean that those with different views are wrong.   There are multiple investment strategies for drawing on an investment.   e.g. a yielding strategy or total return strategy.  The last decade has favoured total return but the decade before favoured yield.      We may be getting to the point (or already be at the point given the last few months) where yield is coming back into play but with 25-30 years of retirement, you will see many periods favouring one method over the other.

There are also variations such as cash floats and bucketing (bucketing is where you have money allocated for different periods and adjust the risk to reflect each period.  i.e. money not needed to be drawn for 15 years can be invested more in the stockmarket than money that will be drawn over the next 5 years).   Some providers can handle bucketing much easier than others.

Thanks for the MVR info. Pru, in their latest statement seem to be clearer with MVR statements, maybe they’ve just got better at presentation,  or could they be going to implement a change ?  I note they state ‘we can change our MVR practice at anytime without giving prior notice’.  

With Profits are old fashioned and in decline.  There is no reason they would change the MVR now.  They have to give vague warnings like that as default.    It is no indication of anything.  Just generic.   Don't over worry about MVRs at this time.

OH’s pot has been confusing.  He gets statements for the full overall pot but then also gets a statement for part of the pot (40k ish).  We’ve questioned this in the past, their answers have been, advisor error years ago, when increasing the pot, at a time other than the pot anniversary.  Another time, they said the 40k ish was related to SERPS.  

Contracting out of SERPS saw the rebates go into a pension that accepted "protected rights".  Personal contributions went into a pension that accepted "non-protected rights" (or ordinary rights if you go back further in time).   So, if you contracted out and made personal contributions you ended up with two segments.    Protected rights were abolished many years ago and reclassifed as non-protected rights.  However, old fashioned plans on old software couldn't bring them together so the old segments remained.  if you transferred them, they would be combined.

The link you provided @xylophone, is useful, if we did decide  to involve an IFA.  Not seen that link before

There are not many IFA directories any more.  Unbiased used to the one but the majority of IFAs have been priced off it and it has turned into a lead generation site rather than a directory.  Now it is dominated by FAs, sales agents and national firms.  Not your local "independent" IFAs.  Adviserbook is a smaller directory but it does check independent status as long as the adviser firm has contacted adviserbook to get their listing confirmed.

alwayslearning77

No I didn't pay MVR but I had to wait a few months until my plan maturity date until the MVR didn't apply from memory it was about 3k on fund of £200k+ so I held fire for a few months.   I messaged pru online to get in writing the date at which no MVR was payable. 

mehimandus

 Thanks again @Roger175 and @dunstonh

Thanks for the encouragement @Roger175 I do kind of think once we got set up and familiar with things, we’d have more confidence about DIY,  and of course  we’d have a vested interest in researching and keeping on top of things.  With little experience though, at this point, it’s not easy to know where to go to to start, for DIY, as we’ve no experience of the ‘platforms’. 

dunstonh said:

There is no expectation that PCLS will be hit.   Most people don't realise that there is already a cap on PCLS and its a hard cap that will naturally be eroded in real terms.     Removing PCLS will harm people with less money.  Not people with more.  There have been two statements from Labour.   One has stated that it is a permanent feature of pensions and the other was that they are happy with the current lump sum allowance.

They could change their tune but they have said that they are carrying out a review into pensions and it will be subject to consultation.   That will likely be several years and have plenty of lead in.  

Thanks for the reassuring info and facts on this and the question below. 

The  other thing he wondered about was, could the upcoming budget have a detrimental impact on the ‘markets’ that might, in turn, impact his pot.  His thinking, might his  TFLS be impacted.  Should he take it now, rather than risk a loss?

None whatsoever.   The UK is about 4% of the global economy.    Investments are a global spread.

Indecision has been a big factor in our delaying and still not fully decided. Possible options:

1) Take TFLS and move it to ISAs, plus take a regular monthly amount. Possibly £500 pm

2) Take TFLS and move it to easy access ISAs and perhaps not take any more for a couple of years or so.  Following that, then move to a regular monthly withdrawal?

3) Take TFLS and move it to easy access ISAs (for supplementing our income) and then decide in a couple of years what next? 

Why not take it on drip?  That is the most frequent method we use for people and you haven't mentioned that.  i.e. each withdrawal is paid 75/25% split.   That method can reduce your tax paid over the long term if the amount of TFC is greater than the ISA allowance.

This is an interesting idea that we hadn’t considered!   Is dripfeed something that needs an IFA or can it be DIY?

I see why it may make sense, to leave some, or all, of the TFLS in the pot, when we’re only storing it elsewhere in an ISA. 

I’ve tried a quick general google but not much info came up.     I did find this  scenario but I can’t work out how it’s done here ? Unless here he is dripping only  his TFLS? 4k from his remaining tax allowance and ? 4k TFC? 

Doesn’t it have to be 75/25 split as you previously mentioned ?

Or is it possible to drip the TFC out of a pot, until it’s expired? 

Mitch, who has recently retired aged 63, receives an annual final salary pension of £8,500. He has £170,000 in a personal pension. To meet his needs, he requires £16,500 per annum and wants to draw from his personal pension for a few years until he takes on a low-skilled part-time job to supplement his income. He wants to make sure his personal allowance is not wasted so he requires some taxable income. An £8,000 withdrawal is made from his pension through drip-feed drawdown made up of £4,000 tax-free cash and £4,000 taxable income. The latter income plus his final salary pension of £8,500 use up all of his £12,500 personal allowance (2019/20), meaning the full £16,500 can be received free of tax

Type of investments? good question, I really don’t know but then on the occasions we have spoken with FA/IFA,  it seems it’s basically been about high/medium/low risk, so our lack of knowledge comes in here. It probably sounds very naive to say, we’re looking for something ‘well regarded, medium risk, reasonable costs’ but that’s the only way I can put it. 

An FA will have limited options based on the company they represent. An IFA is whole of market and has over 30,000 options.   The IFA would choose for you.  An FA would often limit the options and present the one for you to choose.

Investing is as much about option as structure.  So, you will get different views and that doesn't mean that those with different views are wrong.   There are multiple investment strategies for drawing on an investment.   e.g. a yielding strategy or total return strategy.  The last decade has favoured total return but the decade before favoured yield.      We may be getting to the point (or already be at the point given the last few months) where yield is coming back into play but with 25-30 years of retirement, you will see many periods favouring one method over the other.

There are also variations such as cash floats and bucketing (bucketing is where you have money allocated for different periods and adjust the risk to reflect each period.  i.e. money not needed to be drawn for 15 years can be invested more in the stockmarket than money that will be drawn over the next 5 years).   Some providers can handle bucketing much easier than others.

Thank you, some reading ahead, lots of terminology here that I’ve not come across! 

Thanks for the MVR info. Pru, in their latest statement seem to be clearer with MVR statements, maybe they’ve just got better at presentation,  or could they be going to implement a change ?  I note they state ‘we can change our MVR practice at anytime without giving prior notice’.  

With Profits are old fashioned and in decline.  There is no reason they would change the MVR now.  They have to give vague warnings like that as default.    It is no indication of anything.  Just generic.   Don't over worry about MVRs at this time.

OH’s pot has been confusing.  He gets statements for the full overall pot but then also gets a statement for part of the pot (40k ish).  We’ve questioned this in the past, their answers have been, advisor error years ago, when increasing the pot, at a time other than the pot anniversary.  Another time, they said the 40k ish was related to SERPS.  

Contracting out of SERPS saw the rebates go into a pension that accepted "protected rights".  Personal contributions went into a pension that accepted "non-protected rights" (or ordinary rights if you go back further in time).   So, if you contracted out and made personal contributions you ended up with two segments.    Protected rights were abolished many years ago and reclassifed as non-protected rights.  However, old fashioned plans on old software couldn't bring them together so the old segments remained.  if you transferred them, they would be combined.

The link you provided @xylophone, is useful, if we did decide  to involve an IFA.  Not seen that link before

There are not many IFA directories any more.  Unbiased used to the one but the majority of IFAs have been priced off it and it has turned into a lead generation site rather than a directory.  Now it is dominated by FAs, sales agents and national firms.  Not your local "independent" IFAs.  Adviserbook is a smaller directory but it does check independent status as long as the adviser firm has contacted adviserbook to get their listing confirmed.


Thanks for all the other info above too @dunstonh.  Yes, some years ago, we approached IFAs and found unbiased useful but when we looked recently, we noticed the changes. 

mehimandus

Thanks @alwayslearning77

Interesting that Pru sound helpful here, in advising you of MVR so that you could plan to avoid it.   For OH, each time we’ve queried, they’ve said ‘today it’s £0’.  

Perhaps when we requested a Transfer Value though, this might be a different case.  I’m assuming that any MVR would show on a transfer value ? 

bucksman

mehimandus said:

Thanks @alwayslearning77

Interesting that Pru sound helpful here, in advising you of MVR so that you could plan to avoid it.   For OH, each time we’ve queried, they’ve said ‘today it’s £0’.  

Perhaps when we requested a Transfer Value though, this might be a different case.  I’m assuming that any MVR would show on a transfer value ? 

When I spoke to an M&G person, they said there would likely be no MVR as the AVC had been set up so long ago. A year later, when I asked for the transfer value, this changed, and an MVR was added. When I asked about this, the actual process of when and how the MVR was applied was very vague.  

mehimandus

bucksman said:

mehimandus said:

Thanks @alwayslearning77

Interesting that Pru sound helpful here, in advising you of MVR so that you could plan to avoid it.   For OH, each time we’ve queried, they’ve said ‘today it’s £0’.  

Perhaps when we requested a Transfer Value though, this might be a different case.  I’m assuming that any MVR would show on a transfer value ? 

When I spoke to an M&G person, they said there would likely be no MVR as the AVC had been set up so long ago. A year later, when I asked for the transfer value, this changed, and an MVR was added. When I asked about this, the actual process of when and how the MVR was applied was very vague.  

Thanks @bucksman  I think we’re now, not going to be surprised, if the same happens to us too. 

MallyGirl

In simple terms, the drip feed method takes a slice out of the pot. 25% of each slice is tax free and 75% is taxable. You can choose the size of the slice - for example setting the size to £16,760 where the £4,190 is tax free and £12,570 is taxable. If you have no other income, and haven't transferred the marriage allowance, then this £12570 is taxable but fits perfectly into the 0% tax band so no tax will be due. The rest of the pot (after the slice has been taken out) is left in there to grow (hopefully) and is referred to as uncrystallised. If it stays in there and grows then you will be able to get more tax free out over the long term as 25% of that growing pot is tax free when you draw it out.