Guaranteed Annuity help needed

Prunetheroses123

Hello I wondered if anyone had any experience with this

Husband has a small pension with Royal London stated in 1985 paying in £252 a year; total payments as of last statement are £10143

Breakdown of policy value is £19687.33

Final bonus £27760.79

Total policy value £47448.12

The pension has a guarantee on it, I have the original schedule and it reads that if he takes where to take it on his 67th birthday and buy annuity it would pay £1969 per annum, at top of this box it says amount of annuity per annum exclusive of profits.

Does this mean that you can separate the policy value amount off and buy annuity with that part and take the rest to drawdown?

Otherwise there does not seem any value in this guarantee

JoeCrystal

What is GAR percentages exactly?

On-the-coast

Royal London has bought up lots of old pensions - including mine - Which is about same value as yours.  The rules of those old pensions still apply though. 

At maturity you can either buy an annuity through royal London - including any enhancements that guarantee gives.  Or you can transfer it elsewhere. And do what you like with it. 

But you won’t be able to have both the annuity and do drawdown with your old policy - and if you try and do that elsewhere your annuity will be reduced proportional to the amount you keep for drawdown. 

DRS1

Prunetheroses123 said:

Hello I wondered if anyone had any experience with this

Husband has a small pension with Royal London stated in 1985 paying in £252 a year; total payments as of last statement are £10143

Breakdown of policy value is £19687.33

Final bonus £27760.79

Total policy value £47448.12

The pension has a guarantee on it, I have the original schedule and it reads that if he takes where to take it on his 67th birthday and buy annuity it would pay £1969 per annum, at top of this box it says amount of annuity per annum exclusive of profits.

Does this mean that you can separate the policy value amount off and buy annuity with that part and take the rest to drawdown?

Otherwise there does not seem any value in this guarantee

I may be being slow but isn't 1969 just 10% of 19687.33?  Does that suggest a GAR of 10%?

When they say exclusive of profits I think that refers to the annuity payment - in other words the annuity is without profits and not with profits.  I believe it was (is?) possible to have a with profits annuity where the payment goes up with investment return on underlying investments.  Most annuities don't do that.  They can increase eg in line with RPI but you have to pay extra for that (or get a smaller starting annuity).

I don't think exclusive of profits means that the final bonus does not qualify for the GAR.  So he may qualify for an annuity of £4750 on the whole policy.

Worth checking what sort of annuity the GAR would buy - my guess is single life level with no guarantee period.

dunstonh

Worth checking what sort of annuity the GAR would buy - my guess is single life level with no guarantee period.

Most RL original or ex-Scottish Life plans use the GAR original terms as the starting point, but then adjust them for any changes in guarantee period, indexation, or inclusion of a dependent.    Therefore, the GAR typically remains valuable even after adjustments.

LiamFalcon

What is GAR percentages exactly?

DRS1

dunstonh said:

Worth checking what sort of annuity the GAR would buy - my guess is single life level with no guarantee period.

Most RL original or ex-Scottish Life plans use the GAR original terms as the starting point, but then adjust them for any changes in guarantee period, indexation, or inclusion of a dependent.    Therefore, the GAR typically remains valuable even after adjustments.

Yes but if you look at a table of best buy annuity rates it is useful to know which version to compare the 10% to - the gap may be less for the version I was suggesting than for a joint life RPI linked 30 year guarantee version.

Oh and not every flavour of annuity is necessarily available - with my SW GAR the permitted tweeking did not include an RPI linked annuity.  If you opted for that the GAR was lost.  Flat increases were OK so 3% or 5% would be fine.  No idea why that was.

dunstonh

Yes but if you look at a table of best buy annuity rates it is useful to know which version to compare the 10% to - the gap may be less for the version I was suggesting than for a joint life RPI linked 30 year guarantee version.

Cannot argue with that.  The OP seems to think it's of no value.   A comparison of whole of market rates vs the GAR is sensible even if it just confirms that the GAR is valuable.

Oh and not every flavour of annuity is necessarily available - with my SW GAR the permitted tweeking did not include an RPI linked annuity.  If you opted for that the GAR was lost.  Flat increases were OK so 3% or 5% would be fine.  No idea why that was.

I have seen that on SW and other providers.    Some providers have the GAR as annually in arrears with no guarantee period and will not adjust the GAR to any other shape.

Albermarle

LiamFalcon said:

What is GAR percentages exactly?

In the past, when you had a DC pension ( often referred to in the old days as a Money Purchase scheme) often when you reached the prescribed age, you had to buy an annuity with the pot that had been built up.
Annuity rates vary over time.
So for example if you had a £100K pot and an annuity paid 4%, you would get £4000 pa guaranteed income, typically until you died.
Some pensions offered a GAR - a guaranteed annuity rate, regardless of the actual annuity rates at the time. . If say in the above example the GAR was 6% , you would get £6,000 pa
So a valuable thing to have.
Above is only a simplified explanation to show the basic idea.

Prunetheroses123

I am definately going to ask Royal London for an up to date quote then I will know, thankyou for your replies