Pensions with a Guaranteed Annuity Rate (GAR)

RainbowGeorge

Hi all,

I’m new to this forum but would like to ask if anyone has any experience with GAR pension policies. I have a relatively small but > £30k pension policy with a GAR, which I would like to transfer to a drawdown arrangement. I am in the fortunate position that I will not be reliant on this money to live on as I have other pensions and savings and ultimately I would like this money to be left to my daughters. I understand that I am what is termed an “Insistent Client” in that my IFA has recommended that I keep this annuity but I disagree with the advice for my personal circumstances.

My IFA has also admitted that he would give the same advice to all clients regardless of their individual financial position. I am a relatively experienced / sophisticated investor and am absolutely certain that this pension pot is of more value to me as a drawdown than an annuity, yet it seems virtually impossible to achieve this outcome. As background, the performance of this pension is poor and could definitely be better invested. I am also unable to start receiving the annuity for another 2 years. From online reading, it seems that from a legal and regulatory standpoint, I am entitled to make this choice but no provider will allow me to transfer this pension to them either manually or via Origo with a negative IFA recommendation. My question is, has anyone faced this issue and been able to find a way round it. Thanks for reading.

DRS1

You can search the forum - there are lots of threads about the need for advice and what you can do as an insistent client. @Marcon will tell you that a stakeholder plan can't refuse a transfer and then you can transfer out from the stakeholder to the plan you want to use.

You may still need to show you have had advice (even if the advice is DON'T DO IT). Your IFA would need to sign something saying you have had advice (not that you have advice to go ahead).

What is the GAR (ie what rate) - and does it expire (eg once you are past a certain age). I had one which expired once I hit 65 and so could do what I liked the day after.

RainbowGeorge

Thanks for coming back to me. I will search the forum as suggested, thank you.

The rate is 5.78 which is pretty good I know and it doesn't expire at a certain age.

dunstonh

I’m new to this forum but would like to ask if anyone has any experience with GAR pension policies. I have a relatively small but > £30k pension policy with a GAR, which I would like to transfer to a drawdown arrangement. I am in the fortunate position that I will not be reliant on this money to live on as I have other pensions and savings and ultimately I would like this money to be left to my daughters.

Why can't you take the annuity and reduce the draw on your other pensions and savings and gift those to your daughters?

The vast majority of GARs are very good value, which is why they exist as a safeguarding benefit. There are a small number of naff ones that are easy to overrule but if the annuity rate is good then it would be a shame not to take it.

 As background, the performance of this pension is poor and could definitely be better invested.

The performance is only one part of it. The GAR is the other. Typically, those plans with better GARs tend to have lower growth rates or even nil growth. The value is in the annuity rate rather than the return.

 From online reading, it seems that from a legal and regulatory standpoint, I am entitled to make this choice but no provider will allow me to transfer this pension to them either manually or via Origo with a negative IFA recommendation.

That is not quite correct. The advice requirement is there to stop people making a bad decision that, statistically, is unlikely to be in their best interests in the majority of cases. However, you are free to overrule the advice. Most providers will accept the transfer if the adviser signs that advice has been given. Not whether the advice was to do it or not.

My question is, has anyone faced this issue and been able to find a way round it. 

Yes, they have.

The rate is 5.78 which is pretty good I know and it doesn't expire at a certain age.

A GAR of 5.78% is low unless it's indexed or it's from 55 rather than 60 or 65.

xylophone

but no provider will allow me to transfer this pension to them either manually or via Origo with a negative IFA recommendation.

SEE

https://www.gov.uk/government/publications/pension-benefits-with-a-guarantee-and-the-advice-requirement/pension-benefits-with-a-guarantee-and-the-advice-require3.1 Guaranteed annuity rate

https://adviser.royallondon.com/technical-central/pensions/transfers/safeguarded-benefits/

The adviser does not need to agree with your wish to transfer - what is required is that he confirms in the appropriate format that the advice has been provided.

Had you/adviser considered

a stakeholder pension to take the transfer

Example https://static.aviva.io/content/dam/document-library/adviser/pensions/sp01006.pdf

See

https://forums.moneysavingexpert.com/discussion/comment/81937316#Comment_81937316

DRS1

This thread is not about GARs but it is about safeguarded benefits (which is what a GAR is). The post by @Marcon at the foot of page 2 is well worth a read.

Cannot get pension pot without IFA, cannot pay IFA without pension pot…help please? - Page 2 — MoneySavingExpert Forum

One issue with getting advice is the cost of getting it. You may know that already but it makes some transfers uneconomic. This thread touches on the subject

Tax Free Lump sum — MoneySavingExpert Forum

A GAR of 5.78% doesn't seem great. But it does depend on what age that applies at and what annuity it will buy. Mine was 11.1% at 65 but that was to buy a level single life annuity. If you started to add bells and whistles (eg the annuity increased over your lifetime) then the rate came down a lot. Normal annuity rates have increased in the last few years so the best normal rate for a single life level annuity at 65 is about 8%.

Aretnap

I understand that I am what is termed an “Insistent Client” in that my IFA has recommended that I keep this annuity but I disagree with the advice for my personal circumstances.

On a slightly pedantic point, this isn't quite correct. "Insistent client" refers to the scenario where the IFA advises you that the transfer is a bad idea, but agrees to arrange it for you anyway as you are quite insistent that it's what you want to do. Few or no IFAs will arrange a transfer under those conditions these days - insistent client transfers are not really a thing anymore.

Much more likely the IFA has advised against the transfer and (beyond confirming this in writing) will play no further part in the process. If you want to transfer anyway then in principle you are free to do so without his assistance - not as an insistent client (your not his client any more) but just as a bog standard pension transfer. The difficult part is finding a provider who will accept the funds without evidence of a positive recommendation from an IFA - but see above for the stakeholder pension option.

xylophone

One issue with getting advice

It appears that the OP has received/is in the process of receiving advice. With regard to the advice required

A pension transfer specialist is not needed for cases involving only a GAR but the adviser's firm must have the necessary permissions to conduct such business.

Albermarle

https://forums.moneysavingexpert.com/discussion/comment/82117237#Comment_82117237

Plus I think the cost is significantly less than advice on a DB pension transfer.

dunstonh

https://forums.moneysavingexpert.com/discussion/comment/82117237#Comment_82117237

I suspect that every IFA will have that permission. However, a good number of FAs won't.

Plus I think the cost is significantly less than advice on a DB pension transfer.

It can still be quite high. PI insurance proposals ask about advice given to transfer and disregard the guaranteed annuity rate. The question typically is, have you ever….. And they ask specific details about each and every case you've done it on. So it's one of those things that is a cost to the advisor, not just in the year after, but every year thereafter.

If I had someone out of the blue asking me to transfer a pension that's got a GAR on it, I wouldn't do it. It just isn't worth it commercially. However, if it was just a case of sign in the advice given form but not carrying out the transfer through our agencies, then I can't see it being much of a problem. It would still need the advice process to be carried out, but as the transaction wasn't carried out by the adviser, the liability is a lot less.