'with-profits' and 'protected rights'

luckylizard

wud be very grateful if someone could explain to me whether 'with-profits' pension funds are categorised as 'protected rights'.

(i want to transfer my small and poorly performing 'with-profits' fund to a SIPP and am trying to get my head around the terms)

many thanks!

dunstonh

wud be very grateful if someone could explain to me whether 'with-profits' pension funds are categorised as 'protected rights'.

With profits is a type of investment fund held within the pension. Protected rights is not an investment but part of the second state pension or SERPS which you contracted out of.

(i want to transfer my small and poorly performing 'with-profits' fund to a SIPP and am trying to get my head around the terms)

If it has protected rights you wont be able to as SIPPs cannot take protected rights currently. Hybrid SIPPs, Plaforms and fund supermarkets can though.

Dont assume that with profits poor bonus rate is the only measurement of the return. Older (typically pre 1988 plans, although some did go as late as 1995) pensions often had guaranteed annuity rates which are far higher than what is available to today and likely to be in the future. These higher annuity rates can often be highly valuable. In some cases you may need the SIPP to grow as much as 50% in value just to break even with the old pension. I have also come across some over the years which have guaranteed minimum maturity values. Whilst the annual bonuses are rubbish on these, it doesnt matter as the guarantee is where the value is.

Does yours have guaranteed annuity rates, guaranteed basic annuity or guaranteed minimum maturity values?

luckylizard

thanks alot dunstonh, i'm trying to get answers to those last three questions. from the impersonal and vague letter Standard Life have sent me, the with profits part is 'guaranteed to grow by at least 4% a year'. they 'generally guarantee not to reduce the the unit price' if i buy an annuity at retirement. they 'may also pay a final bonus when with profits units are cancelled'. i'm not impressed.

the bottom line, though, is that the whole policy, which I started in 1998, is worth only about 2k and the with profits element is only 600 of that. so i don't think i will be missing out on much if i just switch it to a SIPP, where all will be blissfully simple and transparent by comparison.

from your reply, it seems 'with-profits' funds are not 'protected rights' so I can do the transfer. i think.

EdInvestor

A protected rights pension may contain money invested in a With profits fund, but not necessarily. A WP pension could be either PR or non-PR.

Were you contracted out of SERPS (S2P the state second pension)?If you were, and the contracted out rebate money went into this SL pension, then it will be protected rights and can't yet go into a SIPP, should be fine after October.

Call up SL and ask if it's a PR pension.