Protected Rights

greco_2

Would someone mind explaining in layman's terms what this means?

My wife has a chunk of money in the Standard Life Millenium With Profits fund. About half of this is Protected Rights. In view of the less than stellar performance of this fund and the fact that she won't be drawing her pension for at leat 15 years, we are looking to transfer to a different fund. What we don't want to do is find that we've given up some valuable guarantees.

jonathon_hart

Hi.

Protected Rights is a replacement for your State Second Pension. The time during which the Protected Rights money is a period of time during which you were not collecting any further benefits under the State Second Pension.

The Protected Rights are subject to some restrictions in the way in which the pension has to be paid - but there are no guarantees attached to it due to it being Proected Rights.

So by transferring Proected Rights you will not be giving up any guarantees. I don't know if there are any potential very good bonuses or benefits you would be giving up by transferring it out of that specific fund (e.g terminal bonuses only added to your plan on retirement) you will need to check that with Standard Life.

EdInvestor

There are no guarantees attached to the SL Millenium WP fund. This fund replaced a previous WP fund which did have a guarantee, of a minimum 4% annual return.

cyclonebri1

I think to answer your question as simply as possible I would say that in general a protected rights fund has to be used to buy an annuity and has to provide a pension for the surviving spouse?

At least this is the answer I got when I asked the same question earlier thia year:beer:

dunstonh

I think to answer your question as simply as possible I would say that in general a protected rights fund has to be used to buy an annuity and has to provide a pension for the surviving spouse?

No. You can do income drawdown/USP with protected rights. However, currently, when you do buy an annuity eventually, it has to include provision for a spouse, whether there is one or not.

EdInvestor

dunstonh wrote: »

However, currently, when you do buy an annuity eventually, it has to include provision for a spouse, whether there is one or not.

This phantom spouse rule really takes the biscuit for batty pensions regulation.:mad:

One assumes the DWP requires a spouse pension to be purchased so as to replicate the provisions for spousal inheritance of the SERPS/S2P part of the state pension, which protected rights pensions replace.

But a pensioner's S2P component is not reduced by the amount required to "pay for" the spouse's 50% inheritance right: the latter is effectively a freebie.With a protected rights pension, it's quite different - the total fund has to pay for both the individual's pension and the 50% for the spouse, so the first pension will be reduced to pay for the latter.

How ludicrous that an individual is forced to accept a lower income to pay for a pension for someone who doesn't exist. It's bonkers.

The rule also forces both spouses to accept a lower income without any regard for what provisions the spouse may have made: I know of a case where the (female) spouse has a full state pension plus full S2P, plus private pensions, plus a large investment fund, whereas (disabled) husband has only a small PR pension and the BSP. He is forced to take a lower pension, to provide a 50% annuity for her!

Just crazy.

dunstonh

This phantom spouse rule really takes the biscuit for batty pensions regulation.:mad:

It does seem a bit daft. I know they want to make sure contracted out funds are comparable to contracted in but surely it would be better to allow choice. I dont think it will last much longer and can see it being abolished in a future finance act. Another good reason to do income drawdown on protected rights.