Old style with profits pension - should i move it?

FuzzyDick

Hello, i have an old style company with profits pension thats not accessible online. I have the chance to move it into a new scheme (at no cost) with similar risk but supposedly better returns & lower charges but don't know if its a good idea. I'm about 5 years from needing to access it. I have a reasonable amount saved in it. With the old scheme it will take 6 months to get access once i retire so this is a concern and can only be done by the pension broker.

any advice gratefully received :-)

DRS1

First thing to do would be to check if you would be losing any benefits by making the transfer. This could be something like a guaranteed annuity rate or an earlier access age.

You should also ask if there is a market value reduction if you move it now.

I am not sure why you can only deal with the pension via a pension broker. Do you not have a direct line of communication with the pension provider?

People on here may be able to give you more informed views if you say who the pension provider is and details of what the pension is or what vintage it is.

Aylesbury_Duck

https://forums.moneysavingexpert.com/discussion/6653851/old-style-with-profits-pension-should-i-move-it

Without knowing what investments are in the pension and what investments you are considering moving to, it's impossible to know if it's a good idea.

Lower charges are normally a good thing but not necessarily a reason to move. You need to check that the current pension doesn’t have features and benefits that would be lost upon transfer, such as a protected access age. There's also the matter of what bonus might be payable from the with-profits fund, or if there's a market value reduction to be applied.

I speak from experience. I was weighing up a transfer from an old pension with some with-profits to a SIPP. Good people on here advised what to look out for and I got answers to all of those things before pulling the trigger.

dunstonh

https://forums.moneysavingexpert.com/discussion/6653851/old-style-with-profits-pension-should-i-move-it

Any transfer should have justification (unless you are doing it yourself). Is this an advised transfer or one you are dong yourself or is it cold marketing?

You mention pension broker. What is that? its not a recognised term.

Albermarle

Without knowing what investments are in the pension and what investments you are considering moving to, it's impossible to know if it's a good idea.

As the current pension is a with profits fund, these funds tend to be opaque, so the OP will not know any more detail about what actual investments are in the fund. Probably at best there will be indications of what its objectives are.

If this was my only pension fund, I would be thinking it is too low risk/low growth. If I had other more aggressively invested pension/investment funds, then the with profits fund could be part of a wider portfolio to reduce risk.

I have the chance to move it into a new scheme (at no cost) with similar risk but supposedly better returns & lower charges

Normally it is possible to transfer out of these schemes when you want . What do you mean by 'I have the chance' Charges might be lower, but I would be wary of someone saying the risk is the same, but the returns are better as it sounds a bit of a dodgy claim. Usually to increase returns you have to take more risk,

FuzzyDick

Thanks everyone for your advice - here's a bit more info -

The existing is an employer/Trustee controlled scheme and i'm told is low/medium risk.

The employer scheme is now closed to new employees and is difficult to manage for the appointed IFA so they have therefore decided to give options of either staying or moving to a new auto enrolment scheme which is a mixed assets fund of the same risk level. The idea is that eventually all employees will be in the new scheme and the employer can manage this without appointing an IFA and incurring extra costs.

The IFA has given generalistic advice that anyone within 5yrs of wanting to access their pension should stay and others should switch, but this is not person specific.

I suppose one of my questions is about how accessible an AE pension would be when claiming and how easy it is to manage yourself, in comparison to the old scheme.

Also, the IFA says MVR doesn't apply so would my investment lose value immediately on switching or could I be better off fairly quickly/ why would they say 5 years?

I realise it's hard to give advice without all the facts but I am just looking to expand my knowledge through your replies, thanks again.

dunstonh

I suppose one of my questions is about how accessible an AE pension would be when claiming and how easy it is to manage yourself, in comparison to the old scheme.

It depends on the scheme and your planned method. Modern employer schemes tend to support the basic options and have limited pathways. Older schemes tend to not support most of the options (often just UFPLS).

If you move to a DIY provider at retirement, then they are geared for DIY investors. The AE scheme will not be as easy.

Also, the IFA says MVR doesn't apply so would my investment lose value immediately on switching or could I be better off fairly quickly/ why would they say 5 years?

If there is no MVR then it won't be reduced.

You would need to ask the IFA about the relevance of 5 years. It could apply to a number of things.

DRS1

I usually associate a with profits policy with a personal pension scheme (or the older retirement annuity contract) rather then an employer sponsored pension scheme. For employer sponsored schemes it is usually the employer who decides to close the scheme (to current members) not the "IFA". If the employer wants you to transfer is it offering any inducements? I must admit I would not expect an IFA to be "running" this sort of scheme so the bit about it getting difficult to manage sounds a bit odd - isn't the scheme with an insurance company like Aviva and wouldn't they be doing the "managing"?

When I bought an annuity (which is a bit like doing a transfer) a few years ago the broker suggested I ask the following questions of the old pension scheme.

"Does this pension plan have any safeguarded benefits? For example Guaranteed Annuity Rates (GAR), Guaranteed Minimum Pension (GMP) or Protected Tax Free Cash?
Does this pension plan have any penalties for transferring? For example, Exit Penalties or Market Value Adjustment?
Are there any other benefits attached to my pension plan which would be lost on transfer?"

I know the IFA has answered the one about market value reductions but it may be worth trying him with the others. The question about 5 years and could I be worse off is also best directed at the IFA. And get the answer in writing.

One feature of with profits policies is a terminal bonus. Maybe you get benefit statements each year which mention it? Perhaps with language saying it is not guaranteed? It would be nice to know what happens to the terminal bonus if you transfer - is it part of the transfer value? Hopefully it is.

For the new AE scheme are you sure there is only one available fund? That would be odd. Perhaps it is just the fund that is closest to what you currently have. You would expect there to be more choice. If new employees are in the AE scheme already perhaps ask them about it - what choices they have and how easy it is to use whatever online features it may have.

Who is the provider for the AE scheme? If you mention a name people on here may have experience with them

dunstonh

I usually associate a with profits policy with a personal pension scheme (or the older retirement annuity contract) rather then an employer sponsored pension scheme. For employer sponsored schemes it is usually the employer who decides to close the scheme (to current members) not the "IFA". If the employer wants you to transfer is it offering any inducements? I must admit I would not expect an IFA to be "running" this sort of scheme so the bit about it getting difficult to manage sounds a bit odd - isn't the scheme with an insurance company like Aviva and wouldn't they be doing the "managing"?

Some of the earlier Group personal pensions, group stakeholder pensions or COMPs/CIMPs could use With Profits.

It is likely that the employer has brought in an IFA to cover the process.

Most of these old schemes are not auto-enrolment compliant or cannot meet modern payroll system requirements or are just long in the tooth compared to modern options. So, its not unusual to see them being changed to AE specific schemes.

FuzzyDick

https://forums.moneysavingexpert.com/discussion/comment/81872437#Comment_81872437

Hi Dunstonh,

Although there is an IFA, the employer makes the decision. I think they don't really have to give us a choice as they are only obliged to provide a scheme for members.

The old with profits is with Aviva (as will the new AE scheme be) and you are correct that it conflicts with payroll etc.

I don't think there's a hidden agenda here just a management (of the scheme) thing.

Thanks.