Moving pension pots for the best annuity

hotncold47

As someone who purchased an annuity last year using funds from an AJ Bell SIPP I had to have cash amount to cover the Tax Free Lump Sum and Annuity purchase amount, not sure If you will have to do the same which would require investments to be sold? Hopefully someone can clarify who would facilitate this.

dunstonh

hotncold47 said:

As someone who purchased an annuity last year using funds from an AJ Bell SIPP I had to have cash amount to cover the Tax Free Lump Sum and Annuity purchase amount, not sure If you will have to do the same which would require investments to be sold? Hopefully someone can clarify who would facilitate this.

SIPPs have to be converted to cash although some providers will auto-sell on a transfer request.
PPPs, stakeholders and auto-enrolment schemes do not as the provider will do that (and in most cases, there is no cash facility)

Roy1234

I have mentioned that I had a pension with SW and bought the related annuity from SW.  So the link has remained for that one.  The reason I stuck with SW was that my pension had a GAR and I would lose that GAR if I transferred the pension elsewhere or bought an annuity from a third party.  That is why it is important to check if she has any such benefit in her existing pensions.

Sorry if I’m being thick here.  I’ve spent my working life in company pension schemes; my wife’s private ones have complexities that are new to me.

Is this correct: If she gives say the SW pension to SW for the annuity, after her research via IFA/brokers, there might be a guarantee of other valuable perk she gets for loyalty to SW.  One that might sway the decision.  Correct?

Well that is another surprise.  Is that a reflection of the growing regulation etc on IFA's shrinking the pool of those still practicing? I don't know about that.  The thread I was thinking of was from someone who could not find an IFA who would just deal with the buying of the annuity.  Many of them wanted to do a full financial survey and give ongoing advice on all things financial.  Others just have trouble finding an IFA at all.  The usual source (unbiased) seems to have become the home for big firms not the smaller independents that you might prefer.  I think there is a box you have to tick to find them. 

Correct me if wrong here, but I thought that these days, IFA’s had no choice but to do full surveys for the products they sell?  If so, perhaps the few thousand they’d get from many modest pension pots just isn’t worth it?

So she wants an RPI linked annuity - not 3%.  @dunstonh or others will have views on whether you need a guaranteed period if you go for joint lives.  If you have gone for 50% spouse annuity then it may make sense to have the 100% continue for x years if she dies early.  What I am not sure about is if the 100% would pay out at the same time as the 50% or if the 50% would only start at the end of the guarantee period.  Something an IFA or broker would know more about.  As to the effect it has on the annuity that is why you use the Moneyhelper or HL calculators.  They will give you a feel for the impact.

The issue of wanting joint lives was pretty much a knee jerk assumption, as my company schemes give that to her.  Perhaps I would cope better without a widower’s pension than she would?  A tricky decision, not least because she likes to leave these decisions to me.

As both pension companies have been given a retirement date of this June, isn't it normal/automatic for them to move investments into high security/lower return as that date approaches?  My work related pensions certainly do this.  As @MallyGirl says that depends on how her pensions are invested.  The older forms of lifestyling were based around buying an annuity at your selected retirement date but more modern ones can be geared towards drawdown and so glide into bonds/cash at a more gentle rate and leave a lot more in equities for longer.  And there was a time before anyone had heard of lifestyling.  Her annual statements should say what the pensions are invested in.

Well putting my company pension hat on, I find it astonishing any major private scheme would not do that nearing state retirement age.  Company advisors have told me that the vast majority of members their leave investments on default settings, really don’t want to meddle, so are shepherded through medium risk options and automatic transfer into the safe/low return ones in the last 5 or 10 years.  I’ll do some digging in her docs.  But this close to retirement age (she'll get the state pension later this year) I would hope that whether aimed at drawdown or annuity, the element of risk would have been mostly over.  No doubt I am wrong about that too!

QrizB

Roy1234 said:

As @MallyGirl says that depends on how her pensions are invested....  Her annual statements should say what the pensions are invested in.

Well putting my company pension hat on, I find it astonishing any major private scheme would not do that nearing state retirement age. 

Most eployer DC scheles let the employee choose hw their pension is invested.

Whether derisking into eg. gilts and bonds makes sense or not will depend on your own investment choices, and those choices will depend on how you plan to use your pension.

If you're planning to take an annuity, derisking into a gilt fund might make sense. If you're planning to draw down over the next 30 years, it might not.

Roy1234 said:

Company advisors have told me that the vast majority of members their leave investments on default settings

Different pension schemes have different defaults.

Mine for example has a "default lifestyle" which is different from the three other lifestyles it offers - one targeting an annuity, one targeting drawdown and one targeting a cash lump sum.

I rejected them all and chose my own investments.

Roy1234 said:

... I would hope that whether aimed at drawdown or annuity, the element of risk would have been mostly over.  No doubt I am wrong about that too!

If she's planning todraw down, she's going to be invested for another 30+ years. Derisking too far is a risk in itself. If taking an annuity, she probably wants to be mostly in gilts. Two very different positions.

DRS1

Roy1234 said:

I have mentioned that I had a pension with SW and bought the related annuity from SW.  So the link has remained for that one.  The reason I stuck with SW was that my pension had a GAR and I would lose that GAR if I transferred the pension elsewhere or bought an annuity from a third party.  That is why it is important to check if she has any such benefit in her existing pensions.

Sorry if I’m being thick here.  I’ve spent my working life in company pension schemes; my wife’s private ones have complexities that are new to me.

Is this correct: If she gives say the SW pension to SW for the annuity, after her research via IFA/brokers, there might be a guarantee of other valuable perk she gets for loyalty to SW.  One that might sway the decision.  Correct? No.  Forget about loyalty bonuses or bribes to retain her.  The safeguarded benefits such as the GAR (if there are any) are part of the existing pension.  But there may not be any in hers.  It is a question to ask her providers.    If she doesn't have a GAR in her pension she is not going to get a better than market annuity rate from SW.  Oh and just to say some GARs are not better than current market annuity rates anyway.

Well that is another surprise.  Is that a reflection of the growing regulation etc on IFA's shrinking the pool of those still practicing? I don't know about that.  The thread I was thinking of was from someone who could not find an IFA who would just deal with the buying of the annuity.  Many of them wanted to do a full financial survey and give ongoing advice on all things financial.  Others just have trouble finding an IFA at all.  The usual source (unbiased) seems to have become the home for big firms not the smaller independents that you might prefer.  I think there is a box you have to tick to find them. 

Correct me if wrong here, but I thought that these days, IFA’s had no choice but to do full surveys for the products they sell?  If so, perhaps the few thousand they’d get from many modest pension pots just isn’t worth it? I am not an IFA but I think it is possible to find one who will do "transactional" work such as buying an annuity for you.  But it may not be easy because as you say there may not be much money in it for them.  But that shouldn't stop you having a look - there may be one in your local high street.

So she wants an RPI linked annuity - not 3%.  @dunstonh or others will have views on whether you need a guaranteed period if you go for joint lives.  If you have gone for 50% spouse annuity then it may make sense to have the 100% continue for x years if she dies early.  What I am not sure about is if the 100% would pay out at the same time as the 50% or if the 50% would only start at the end of the guarantee period.  Something an IFA or broker would know more about.  As to the effect it has on the annuity that is why you use the Moneyhelper or HL calculators.  They will give you a feel for the impact.

The issue of wanting joint lives was pretty much a knee jerk assumption, as my company schemes give that to her.  Perhaps I would cope better without a widower’s pension than she would?  A tricky decision, not least because she likes to leave these decisions to me. Women tend to live longer than men.  But again play with the figures to see how much impact it has.  Oddly I have seen some suggestions that a joint lives annuity can be better than a single life annuity.

As both pension companies have been given a retirement date of this June, isn't it normal/automatic for them to move investments into high security/lower return as that date approaches?  My work related pensions certainly do this.  As @MallyGirl says that depends on how her pensions are invested.  The older forms of lifestyling were based around buying an annuity at your selected retirement date but more modern ones can be geared towards drawdown and so glide into bonds/cash at a more gentle rate and leave a lot more in equities for longer.  And there was a time before anyone had heard of lifestyling.  Her annual statements should say what the pensions are invested in.

Well putting my company pension hat on, I find it astonishing any major private scheme would not do that nearing state retirement age.  Company advisors have told me that the vast majority of members their leave investments on default settings, really don’t want to meddle, so are shepherded through medium risk options and automatic transfer into the safe/low return ones in the last 5 or 10 years.  I’ll do some digging in her docs.  But this close to retirement age (she'll get the state pension later this year) I would hope that whether aimed at drawdown or annuity, the element of risk would have been mostly over.  No doubt I am wrong about that too! It is certainly true that most people just end up in the default option.  It is very easy to say that you and you alone are responsible for how your pension is invested but that won't stop people ignoring it and thinking the pension company will decide what is best.  That isn't really their job.  Only you and she have any idea how these pensions are actually invested.  You should be able to see that from the annual statements she gets.  Then you can see whether she is in some sort of lifestyle investment and how much she has in equities, bonds and cash.  You may need to look elsewhere to find out what alternative investments are available  SW have a funds centre here but before you look at that she would need to speak to SW to find out what bits to look at (there are an awful lot of funds and only a few will be relevant to her particular pension)

 Fund Prices, Charges & Updates | Scottish Widows

More bits in bold

LHW99

The issue of wanting joint lives was pretty much a knee jerk assumption, as my company schemes give that to her.  Perhaps I would cope better without a widower’s pension than she would?  A tricky decision, not least because she likes to leave these decisions to me.

Worth finding out what happens currently with each of the existing pensions when the holder dies then.

For example, NSP is not inheritable and only a portion of any protected payment would be paid to a surviving spouse. So if neither of you have a protected payment, one SP is immediately lost.

DB pensions usually have a spouse (/ dependent's) pension. The amount and conditions will be listed in the Ts & Cs.

Unused money in DC pensions passes to beneficiaries. Ideally you will each have named the other in an expression of wishes and there are no complicating factors (such as an out of date expression naming a long lost girl / boy friend).

Once you know what income will come to (both of) you when one passes, and how that matches to the likely needs of the survivor, it may give you a basis for the decision.

Roy1234

So I looked at both her statements dated December'25, from SW and People's Pension, formerly B&CE, a construction industry related scheme from her having worked mostly in that world.

Amazingly, neither SW nor PP statements show the type of fund anywhere!  The letters acknowledge her intended June retirement date, show contributions and current values, include a MoneyHelper booklet re decisions coming, but no named fund.  Getting her to log into SW on her phone (not sure if this was effectively the app or the website), despite similar fund info and options to vary investments etc, the fund is not named.

Does this seem odd for a giant like SW?  She'll try accessing both via PC shortly in case more info is there, but I just can't understand the fund name not being beside the value.  My work Money Purchase scheme has moved between about three providers (inc BlackRock & Aegon) but the name e.g. Lifestyle has always been there.

She says she's never meddled with any pension options so I'm hoping she has ended up in something like a lifestyle.  Like so many non-financial people, she doesn't really understand or want to be troubled with this stuff.

Her SW statement did however state that there are no special guarantees.  Her PP statement said nothing on the matter.  The SW statement had a paragraph saying under 75, remaining fund values can be passed on tax-free, whilst over 75 they are taxable.  But I'm not sure if this is some perk or just a restatement of government policy?

Re the widow's pension, I'm 5 years younger which might reduce the joint life offering; but I did survive a cancer episode 15 years ago, which I suppose 'might' push the calculation a little better?

Most employer DC schemes let the employee choose hw their pension is invested.  Whether derisking into eg. gilts and bonds makes sense or not will depend on your own investment choices, and those choices will depend on how you plan to use your pension.If you're planning to take an annuity, derisking into a gilt fund might make sense. If you're planning to draw down over the next 30 years, it might not.

My employer DC scheme has never offered options steered towards annuity of else draw-down.  The two options are discussed at periodic pension briefs, but not re type of fund chosen.

QrizB

Roy1234 said:

Amazingly, neither SW nor PP statements show the type of fund anywhere!

People's Pension offer a small range of investment choices:

https://thepeoplespension.co.uk/pension/basics/investments/

If she has never made an active choice, she's probably on the glide path from the "balanced" fund to the "pre-retirement" fund. 

Scottish Widows have several different products with different options. Here's an example of their lifestyling, "Pension Investment Approaches"; the glide path illustration on page 3 shows how the different approaches de-risk to different degrees in the final 5 years before retirement.

Roy1234 said:

Getting her to log into SW on her phone (not sure if this was effectively the app or the website), despite similar fund info and options to vary investments etc, the fund is not named.
Does this seem odd for a giant like SW?

Very odd. My SW pension account puts my fund breakdown on the front page when you log into the website, both on phone and laptop.

Roy1234 said:

My employer DC scheme has never offered options steered towards annuity of else draw-down.  The two options are discussed at periodic pension briefs, but not re type of fund chosen.

Who runs the scheme? Is it one of the big pension companies like SW?

Roy1234

People's Pension offer a small range of investment choices:https://thepeoplespension.co.uk/pension/basics/investments/If she has never made an active choice, she's probably on the glide path from the "balanced" fund to the "pre-retirement" fund. 

Yes I was hoping to see glide path or balanced profile on the PP statement, but neither was there. Let's hope that having stuck with defaults, that's what she's on.  Especially in her state retirement year.

Very odd. My SW pension account puts my fund breakdown on the front page when you log into the website, both on phone and laptop.

Well I looked & looked, trying to find the word Lifestyle or similar.  I will get her to log in to SW on a laptop, I can only hope that the phone version for some unknown reason leaves information out, e.g. if this was via the App, not the website viewed on a phone.

Who runs the scheme? Is it one of the big pension companies like SW?

Currently my DC company scheme is administered by isio, I have been quite impressed by them really.

QrizB

If you were looking in the app, this SW video shows where to find the info on your current investment choice:

https://youtu.be/c4JV2sKrnGk?si=Bu-NOLMk0ZgWb9pX&t=117

(Skip to 1:57 where the relevant part starts. It's only a few seconds.)