Standard Life Pension - Help!

pre9pms

Hi,

I was hoping to get some help for my mam, she's just received all her forcasts through for her Standard Life pension.

She is 59, and due to retire february next year. She has been paying £10 a week for 22 years (doesn't sound a lot today, but suppose it was 20 yrs ago). Whilst the money in the pension pot is around £18,000, they say she can only have a £2000 lump sum and £10 a week pension (forcast £80 when policy taken). Hardly worth it, and numbers mean she needs to live another 32 years to get it all.

Can anyone advise what they would do? I'm sure there is a minimum requirement of at least 25% lump sum in cash, but couldn't swear to it.

Also, does anyone know who the best people would be to transfer the pension pot to? I'm kind of hoping another pension company may be able to give her a little more a little quicker.

Any help appreciated.

Cheers,


Phill.

EdInvestor

Hi Phill

Is your Mum's money in the With profits fund?

If so, she might be wise to delay her retirement a bit to take advantage of the windfall she would expect when SL demutualises next year probably around June

If she does decide to delay her retirement, make sure she personally chooses a new "Normal Retirement Date" (eg Jan 2007) and gets that recorded.Otherwise the insurer will just put any old date in (probably the year when she turns 75) - but this could mean when she did retire she could be charged a penalty for not going on her NRD (it has happened at other companies, they can be sneaky like that)

Meanwhile you could do a bit of "shopping around" on your mum's behalf to see what other companies offer.Various websites have current annuity rates, and also explain all the different types (flat rate, index linked etc etc).Here's one:

https://www.annuitybureau.co.uk

Regarding the tax free cash, 25% is the usual amount.If your Mum is being offered less, this suggests she might have a different type of pension than a normal "personal pension". Was this pension for instance originally a company pension of some kind? An EPP, or a Section 32 buyout bond, maybe?

Does the pension contain a guarantee - a "GMP"?

If so she may need to later to convert her existing pension into a Personal Pension in order to get the full tax free cash ( this is not difficult).

Does the existing pension have any "guaranteed annuity rate" attached to it? This is unlikley at SL, but there were a few.Check for that as it could be valuable.

Sorry it's so complicated, but that's pensions for you.

DavidLaGuardia

22 years ago Personal Pensions as we know them now did not exist. She almost certainly has a Retirement Annuity Contract/Plan (also known as a section 226 contract from the relevant parliamentary Act) a lot of people referred to these as "personal pensions" as that is what they provided in essence.

The tax free cash is calculated on the basis of 3x the single person's pension with no frills that can be taken from the remaining fund. At your mother's age this is less than 25% of the fund (it can be more depending on age and annuity rates).

It CAN be increased to 25% by transferring to an Immediately Vested Personal Pension (a modern pension which is changed into benefits immediately). Many people do this, for example, if they want benefits before age 60 which is the minimum age for the old style contract. The only disadvantage may be if the orginal contract has very good guaranteed annuity rates (the thing that brought Equitable Life down) as these could have been set when annuity rates were much higher. However, the only way you can compare is through a comparrison such as an "Open Market Option" quote, which you can get from an IFA

Note from April 2006 quotes will change as new pension simplification rules will allow her to take 25% from the plan, but if you want benefits before you need to do what I suggested above.

Additionally note Edinvestor's comments above on demutualization!!

DavidLaGuardia

EdInvestor wrote:

she might have a different type of pension than a normal "personal pension". Was this pension for instance originally a company pension of some kind? An EPP, or a Section 32 buyout bond, maybe?

Does the pension contain a guarantee - a "GMP"?

Ed, to assist you:
A Section 32 buyout bond is a single lump sum transfer from an occupational scheme and could not apply in this case referring to regular premiums
B. A "GMP" is the element in occupational schemes that is convereted into protected rights in a Personal Pension. It is the minumum pension that a cotracted out scheme should provide (all benefits being treated as GMP after 1997). There may be guanteed pension rates but they are not referred to as "GMP" in this context.

EdInvestor

Thank you David.:)

It's useful to hear more about the restrictions - most of what you hear is inevitably Equitable-related.Very few GARs at Standard Life we are told, but I thought it worth mentioning.