Royal London (ex CIS) with GAR

FIREDreamer

Preacher64 said:

Yes. Taking the pension in any form before age 65 results in the loss of the GAR.

What is the GAR rate at 65 and on what basis (eg single life, no increases)?

Shadyocuk

I also have a Royal London (Ex CIS) with a GAR at 60 of 7% (level being the only option to keep the GAR (I believe single life only) ), In a phone conversation (with Royal London) late last year they confirmed that as long as the fund value was less than £30K I could trf it without advise , but if it reaches £30K then I would need advise.
Mine was about £25.5K at the time and I was going to trf it before it hit 30K as even if I eventualy buy an annuity I am not likely to go for Level over RPI , the orange menace has ment I have more time to make the decision.

Preacher64

FIREDreamer said:

What is the GAR rate at 65 and on what basis (eg single life, no increases)?

The GAR isn’t explicitly set out in this annual statement but I calculated it based on their example payments as approximately 7%. It’s single life, non-increasing according to the helpdesk.
In the options paperwork, it outlines other ways of taking the pension but these result in loss of the GAR.

It’s a pity as it’s not a particularly attractive option to justify leaving it until age 65 and very restrictive in accessing it any other way but it is what it is.

I’ll contact my IFA office on Tuesday as they’re closed for Easter but expect to be limited to taking the TFLS and small lifetime annuity. Unfortunately, a fixed term annuity of 5 or 10 years isn’t an option either.

FIREDreamer

Preacher64 said:

FIREDreamer said:

What is the GAR rate at 65 and on what basis (eg single life, no increases)?

The GAR isn’t explicitly set out in this annual statement but I calculated it based on their example payments as approximately 7%. It’s single life, non-increasing according to the helpdesk.
In the options paperwork, it outlines other ways of taking the pension but these result in loss of the GAR.

It’s a pity as it’s not a particularly attractive option to justify leaving it until age 65 and very restrictive in accessing it any other way but it is what it is.

I’ll contact my IFA office on Tuesday as they’re closed for Easter but expect to be limited to taking the TFLS and small lifetime annuity. Unfortunately, a fixed term annuity of 5 or 10 years isn’t an option either.

If you have a GAR, many companies will ‘reshape’ it to the form you want, eg index linked by using the GAR basis for the type of annuity you want. I know some of the old Phoenix Life companies (Royal Life, Sun Alliance) do this.

QrizB

7% level single life isn't particularly appealing; the current open-market rate on HL looks to be 7.7%:

https://www.hl.co.uk/retirement/annuities/best-buy-rates

dunstonh

QrizB said:

7% level single life isn't particularly appealing; the current open-market rate on HL looks to be 7.7%:

https://www.hl.co.uk/retirement/annuities/best-buy-rates

CIS GARs are rarely attractive and often beaten via the OMO.

Preacher64

Just a quick update for anyone in a similar situation.
My IFA who has pension transfer permissions is happy to facilitate transfer / encashment as required.
Fee for values under £100K is 3% of the total and lower if above £100K, which I think is quite reasonable.

It’s obviously a less risky and onerous process than a DB transfer but still requires a report to be produced and interaction with the pension company.

The wheels are now in motion and hopefully should progress smoothly.

FIREDreamer

Preacher64 said:

Just a quick update for anyone in a similar situation.
My IFA who has pension transfer permissions is happy to facilitate transfer / encashment as required.
Fee for values under £100K is 3% of the total and lower if above £100K, which I think is quite reasonable.

It’s obviously a less risky and onerous process than a DB transfer but still requires a report to be produced and interaction with the pension company.

The wheels are now in motion and hopefully should progress smoothly.

@Preacher64

Doesn’t help you of course, but about 15 years ago Phoenix Life wrote to certain with profits pension policyholders with a GAR giving them the option of giving up the GAR in return for an uplift in their fund value.

eg they could give up a fund of £100k with GAR in return for enhanced £140k without a GAR. No advice was required but the policyholder was advised to seek advice in respect of the transfer.

The same annuity could be bought before and after the switch, so there was no loss to the policyholder, but if you didn’t want an annuity it was an easier transfer elsewhere afterwards.

Shame RL didn’t offer such an option.

dunstonh

FIREDreamer said:

Preacher64 said:

Just a quick update for anyone in a similar situation.
My IFA who has pension transfer permissions is happy to facilitate transfer / encashment as required.
Fee for values under £100K is 3% of the total and lower if above £100K, which I think is quite reasonable.

It’s obviously a less risky and onerous process than a DB transfer but still requires a report to be produced and interaction with the pension company.

The wheels are now in motion and hopefully should progress smoothly.

@Preacher64

Doesn’t help you of course, but about 15 years ago Phoenix Life wrote to certain with profits pension policyholders with a GAR giving them the option of giving up the GAR in return for an uplift in their fund value.

eg they could give up a fund of £100k with GAR in return for enhanced £140k without a GAR. No advice was required but the policyholder was advised to seek advice in respect of the transfer.

The same annuity could be bought before and after the switch, so there was no loss to the policyholder, but if you didn’t want an annuity it was an easier transfer elsewhere afterwards.

Shame RL didn’t offer such an option.

Royal London did a similar thing in 2018.     And like Phoenix, which didn't apply it to all their policies, RL offered it on the ex Scottish Life plans (which is the bulk of their book).   CIS plans were still operating independently of the main RL systems and still using CIS staff and processes and not yet integrated into RL.   So, it isn't a surprise that CIS plans were not included.

Also, most CIS GARs are beaten with OMOs and the liability with ex CIS plans is very small.    So, I suspect there isn't much of an appetite to uplift ex CIS plans.

What you tend to find with older ex CIS plans (S226 pre April 1988) is a higher basic annuity.  Whilst this is not a GAR, it can lead to a higher income outcome and if you were to use a percentage basis, it can get you close to 10% p.a.     However, on these plans, they haven't paid an annual bonus since 2002.     So, whilst potentially expensive to the insurer, over 20 years of not paying an annual bonus has offset it.

FIREDreamer

dunstonh said:

What you tend to find with older ex CIS plans (S226 pre April 1988) is a higher basic annuity.  Whilst this is not a GAR, it can lead to a higher income outcome and if you were to use a percentage basis, it can get you close to 10% p.a.     However, on these plans, they haven't paid an annual bonus since 2002.     So, whilst potentially expensive to the insurer, over 20 years of not paying an annual bonus has offset it.

I suspect that 23 years of no bonus / fund growth has more than offset a 10% GAR given that current rates are about 7%.