Aviva final bonus query

Aylesbury_Duck

I've got an old deferred Aviva stakeholder pension.  It's worth £189k and given that I will likely be drawing from it from 2030 to 2040, I've recently de-risked from what was almost all equities plus some old with-profits, to a more balanced set of funds, retaining the with-profits fund.  I am contemplating moving to an Aviva SIPP, because I'm happy with the funds that are available and the fees will come down from the 1% I'm paying now to something like 0.65%.

I got my annual statement today, and there's an additional £28k in final bonus if I were to transfer now.  I've done some reading around this and think I understand how this is generated and why, but I'm not certain. I assume that if I did the transfer to the SIPP, the amount that would appear in the SIPP would be £217k (the funds value plus the final bonus)?  I've already checked that there would be no MVR and there are no protected benefits I'd be surrendering, so the transfer seems sensible.

One thing I'm curious about is how the final bonus has reduced from what was £34k this time last year.  The funds have gained about 10% in the last year, and I think I get why the bonus moves around, but I'm unsure about timing a transfer.  Is it sensible to transfer now, with what looks like a healthy bonus, or better to wait and see if it goes up in six months or a year's time?  It could go down, of course.  I don't really understand the mechanism behind its calculation, although I do believe there's a lag.  If markets drop over the next 12 months, what might that mean for the final bonus, or does it also depend upon the actions of fellow investors with their with-profits pensions, and therefore it's pointless trying to second-guess it and just transfer when I want to?

DRS1

One thing your statement should say is something like the final bonus is not guaranteed and if you ask for a transfer they will recalculate it again at that time.  So it might go up or it might go down.

I have no idea how they work out the final bonus (other than it is supposed to smooth out investment performance) but I looked back at a couple of annual statements for my old Aviva with profits pension and I see that the final bonus dropped quite a bit from 2022 to 2023 (12%) and then went up a little from 2023 to 2024.  I can't help with 2024 to 2025 because I bought an annuity in 2024.  Was the drop from 2022 to 2023 something to do with the Co-Vid crash?  I don't know but maybe.

Marcon

Aylesbury_Duck said:

One thing I'm curious about is how the final bonus has reduced from what was £34k this time last year.  The funds have gained about 10% in the last year, and I think I get why the bonus moves around, but I'm unsure about timing a transfer.  Is it sensible to transfer now, with what looks like a healthy bonus, or better to wait and see if it goes up in six months or a year's time?  It could go down, of course.  I don't really understand the mechanism behind its calculation, although I do believe there's a lag.  If markets drop over the next 12 months, what might that mean for the final bonus, or does it also depend upon the actions of fellow investors with their with-profits pensions, and therefore it's pointless trying to second-guess it and just transfer when I want to?

Aviva has a lot of explanatory literature on its website, so if you've not yet done so, that's worth a read, especially this which might be relevant to your stakeholder pension with them: https://static.aviva.io/content/dam/document-library/adviser/ecm/sp56001c.pdf

Also useful reading is this: https://www.financial-ombudsman.org.uk/decision/DRN1229749.pdf and also https://www.pensions-ombudsman.org.uk/sites/default/files/decisions/CAS-39026-L7Y8.pdf which I think might help to answer your question (although I'm afraid not terribly helpfully!).

Aylesbury_Duck

Marcon said:

Aylesbury_Duck said:

One thing I'm curious about is how the final bonus has reduced from what was £34k this time last year.  The funds have gained about 10% in the last year, and I think I get why the bonus moves around, but I'm unsure about timing a transfer.  Is it sensible to transfer now, with what looks like a healthy bonus, or better to wait and see if it goes up in six months or a year's time?  It could go down, of course.  I don't really understand the mechanism behind its calculation, although I do believe there's a lag.  If markets drop over the next 12 months, what might that mean for the final bonus, or does it also depend upon the actions of fellow investors with their with-profits pensions, and therefore it's pointless trying to second-guess it and just transfer when I want to?

Aviva has a lot of explanatory literature on its website, so if you've not yet done so, that's worth a read, especially this which might be relevant to your stakeholder pension with them: https://static.aviva.io/content/dam/document-library/adviser/ecm/sp56001c.pdf

Also useful reading is this: https://www.financial-ombudsman.org.uk/decision/DRN1229749.pdf and also https://www.pensions-ombudsman.org.uk/sites/default/files/decisions/CAS-39026-L7Y8.pdf which I think might help to answer your question (although I'm afraid not terribly helpfully!).

Thank you.  Very interesting.

One conclusion I draw from all of those links is that as the number of people holding the with-profits sub-fund decreases (and it can only decrease since it was closed to new investors since 2023), any increases or decreases in the final bonus for any leavers will be more "dramatic", because for each leaver, the future bonus increase or decrease needs to be spread over fewer investors.  The committee determining the annual bonus twice a year needs to adjust for that.

I suspect I will be transferring to an Aviva SIPP shortly.  What I also conclude is that unless there's a big market shift before then, the final bonus indicated on today's statement is likely to be in place until the next committee decision, which is perhaps up to six months away.

I'll get final figures from Aviva before enacting any transfer.