Help with Personal Pension

fishingdobbie

Hi all, I have been paying £40.00 a month into a Friends Provident pension since 1988 it matures when I am 60 in August 2009.
I have only just started to take an interest in it, so I registered on the Friends Provident website which is pretty good, as it gives me loads of information about it, but unfortunately I understand none of it !
When I log in there are 2 policy numbers each showing exactly the same as shown below.
Each states I have been paying £20.00 a month into each one, so do I have £20,473,78 or £10,236,89 in the pot? Also if possible, would it be to my benefit to put as much money as I can into it before it matures. Is the projected values at the bottom what I may get as a monthly income, and has this pension been worth it. Thanks for any replies. Sorry the copy and paste of the projected values as not come out right.
Personal Pension
Plan Overview
Policy Number
xxxxxxxxxxxx
Value as at 27/05/2008
£10,236.89 #
Payment if Death Occurs Today
£10,236.89
Value as at 27/05/2008
£10,236.89 #
Investment Choice
INVESTMENT TRUST T (100%)
Investment Value as at 27/05/2008
INVESTMENT TRUST T (£10,236.89)
Therefore, value as at 27/05/2008 is
£10,236.89 #
Regular Payment
£20.00 Monthly
Who does the Plan Cover
H Dobson
Scheme Name
LMA SELF MADE MAN
Start Date
30/06/1988
End Date
17/08/2009
An element of Life cover may apply to this policy. This may be payable on death as well as the gross policy value. Please contact us for further details if you think this may apply to you.
# This is the gross policy value and not the transfer value. If you have invested in the With Profit Fund a Market Value Reduction may be applied, therefore a reduced unit price may be used in this case and in the case of a transfer value.
This figure is an indication of the value of your policy based on the most recent fund prices. It is not a surrender value and does not show the effect that future charges, including surrender penalties will have on the policy's value
Projected Values for Policy





Non-Protected Rights





Transfer Value
10186.16 GBP











Projected Benefits at 17/08/2009 (age 60)









Non-Protected Rights










at 5% a year
at 7% a year
at 9% a year






Fund value:
11,000.00 GBP
11,200.00 GBP
11,500.00 GBP






A pension of:
525.00 GBP
681.00 GBP
855.00 GBP






OR









A tax free sum of:
2,750.00 GBP
2,810.00 GBP
2,870.00 GBP






and a reduced pension of:
393.00 GBP
511.00 GBP
641.00 GBP






(Pension basis: paid Monthly/In Advance, guaranteed for 5 years, 0% escalation, 0% spouse's pension)

Dark_Pariah

I would say that if you are paying £40 per month and each statement shows £20 a month, then based on the above,the total ought to be £20,000,000 odd. I would have a second look at the two statements- usually one covers Protected Rights and the other Non-Protected Rights.

If you can find someone who can give you a simple explanation of the difference between the two I wish you luck:rolleyes:

Retired_I.F.A.

Theres just enough info showing there methinks to explain it.

You have a total fund value of £20,473.78p which is the amount payable on death as of the statement date, plus any life insurance lump sum on top of that to which I cant see any figure.

Presuming there is no life cover the plan which has been going 20 yrs exactly has produced to date a yield of 7.36%p/a after charges. If there is a life insurance element the yield would be greater as the £40 gross contribution would have been less unless the cost for the life cover is shown seperately.

All of this 20k is from your contributions(non protected rights) of which I am 99.999999999% certain as you have not contracted out of Serps/SP2 via this plan (contracted out statements are usually shown seperate but not in this case as they are shown but we can see no figures whereas we can with the non protected rights.

The transfer value totals £100 less the difference being a charge effectively to transfer to another plan.

I have no idea what "Investment trust a" is without going to their site or googling for more info but after 20 years yielding under 8% it's nothing to shout about.(again note if the £40 excludes any life cover)

Should you up the contributions? Thats up to you, yes you'll increase the fund assuming it does not nosedive but unless your talking of bunging in a few thousand its hardly going to make a great difference with only a year to go and if so you may be better advised to look at another contract possibly with lower charges or an ISA.

Personally I'd go talk to an IFA now, learn about drawdown as opposed to annuity purchase which this plan almost certainly does not offer and transfer the lot into a drawdown plan where the benefits quite frankly blow annuity purchase out the water.

fishingdobbie

Retired_I.F.A. wrote: »

Theres just enough info showing there methinks to explain it.

You have a total fund value of £20,473.78p which is the amount payable on death as of the statement date, plus any life insurance lump sum on top of that to which I cant see any figure.

Presuming there is no life cover the plan which has been going 20 yrs exactly has produced to date a yield of 7.36%p/a after charges. If there is a life insurance element the yield would be greater as the £40 gross contribution would have been less unless the cost for the life cover is shown seperately.

All of this 20k is from your contributions(non protected rights) of which I am 99.999999999% certain as you have not contracted out of Serps/SP2 via this plan (contracted out statements are usually shown seperate but not in this case as they are shown but we can see no figures whereas we can with the non protected rights.

The transfer value totals £100 less the difference being a charge effectively to transfer to another plan.

I have no idea what "Investment trust a" is without going to their site or googling for more info but after 20 years yielding under 8% it's nothing to shout about.(again note if the £40 excludes any life cover)

Should you up the contributions? Thats up to you, yes you'll increase the fund assuming it does not nosedive but unless your talking of bunging in a few thousand its hardly going to make a great difference with only a year to go and if so you may be better advised to look at another contract possibly with lower charges or an ISA.

Personally I'd go talk to an IFA now, learn about drawdown as opposed to annuity purchase which this plan almost certainly does not offer and transfer the lot into a drawdown plan where the benefits quite frankly blow annuity purchase out the water.

Thanks very much for your time, it as explained a lot, Bert

Retired_I.F.A.

No problem mate, you owe me a netful of carp be behind my peg with them ready when the allout shout goes up ok?

EdInvestor

Assuming you take 25% in tax free cash you can see what you'll get as an annuity roughly by checking here:

https://www.fsa.gov.uk/tables

Should be higher than the FP estimate.

fishingdobbie

EdInvestor wrote: »

Assuming you take 25% in tax free cash you can see what you'll get as an annuity roughly by checking here:

www.fsa.gov.uk/tables

Should be higher than the FP estimate.

Hi Ed thanks for your reply,I was not considering taking a lump sum as I have £150,000 in isas and high interest accounts, is there a reason why I should take the lump sum? Thanks for the link but what should I be clicking on, cheers Bert

EdInvestor

Click on "pension annuities".

If you don't take the tax free cash, then you won't have had any tax relief on your pension, as you have to pay tax on the income you receive from the annuity.

It is always sensible in principle to take the tax free cash - if you still want to turn the money into a guaranteed annuity income , you can buy a "purchased life annuity" which will give you a higher income than a pension annuity because you will not be taxed on the part of the income which represents your capital being returned to you.

A PLA wouldn't really be an option for a lump sum of 5k though, and they are better value for older people.Not that they are popular of course - few people buy annuities if they are not forced to.

Retired_I.F.A.

"A PLA wouldn't really be an option for a lump sum of 5k though, and they are better value for older people."

To say they are better value for older people is rubbish. All annuities offer the same value for money (which is pretty crap today at 4.7% or thereabouts) regardless of age or life expectancy.

PLA's can be bought for 5k but the reality is that there is a far smaller number of providers around and rates are not so competative. You'd be best advised today to put the tax free cash in a deposit account and draw your own annuity from it.

purch

To say they are better value for older people is rubbish

I think what Ed means is that an Annuity are better value for older people, compared to an Annuity for a younger person, rather than the Annuity being better value compared with not having one.

i.e. if you are 97 and the Doc gives you no more than a fortnight to live the annuity provider might deign to give you £ 50 a month for your £ 5K, rather than, rather than £10 a month if you are 75 and in good health.

Retired_I.F.A.

I think what Ed means is that an Annuity are better value for older people, compared to an Annuity for a younger person.

Yes she does and she is wrong.

It's a higher annuity payable for a lot shorter a period, that does not mean its better. All an annuity effectively is is an account paying a fixed forever amount of interest. How much you draw out of it is determined by the maths formulas to strip it out completely by the day you are likely to die. Live beyond life expectancy and your on a winner, die before and you lose.

As the underlying interest rate is the yield on long dated gilts currently around 4.7% thats what your locking into for life.