Equitable Life - with profits

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naive_investor
naive_investor Posts: 23 Forumite
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in Pensions, annuities & retirement planning
I have hung onto this pension which comes with no guarantees.

I am planning to open a Sipp.

Is it now time to transfer out and put it in the Sipp.

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  • Dox
    Dox Posts: 3,116 Forumite
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    How do the charges compare?
  • woolly_wombat
    woolly_wombat Posts: 819 Forumite
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    edited 8 May 2018 at 12:22PM
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    naive_investor wrote: »
    I have hung onto this pension which comes with no guarantees.

    Are you quite sure about that?

    Guaranteed Annuity Rates (GARs) went a long time ago but you might still have other less well publicised guarantees.

    http://www.equitable.co.uk/media/46103/equ073_rplusa-2018-webv5.pdf

    The Society has in issue two principal types of with!!!8211;profits policy: RSP policies and CWP policies. These policies represented 98% and 2%, respectively, of the total policy values at 31 December 2017 (98% and 2%, respectively, of the total policy values at 31 December 2016). For the majority of RSP policies issued before 1 July 1996, each premium (after charges) secures a Guaranteed Investment Return (!!!8220;GIR!!!8221;), typically at the rate of 3.5% pa. For the majority of RSP policies issued after 1 July 1996, the GIR is nil%.

    For CWP policies, guarantees are payable at specified dates or on the occurrence of specified events.
    The guarantees in respect of the Society!!!8217;s with!!!8211;profits business relate to a guarantee on contractual termination (for example, on retirement, maturity, death or on payment of an annuity). The terms of the guarantee vary by contract. For the Society!!!8217;s RSP contracts where there is a GIR, the value of that guaranteed return is assessed based on assumed retirement ages of policyholders. Certain policies also contain a guaranteed minimum level of pension as part of the condition of the original transfer of state benefits to the policy.
    .
  • woolly_wombat
    woolly_wombat Posts: 819 Forumite
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    Strange how the system inserted a smiley there, but rather apt I thought.
  • naive_investor
    naive_investor Posts: 23 Forumite
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    Thanks for your comments.

    The charges on my with profits policy is 1% plus 1/2% to meet the expected cost of guarantees.

    I took out the policy in 1989 during a period when my employer didn't offer a pension scheme. Looking back at the paperwork I realise I was even more naive then than now and didn't understand it. Still don't!

    I don't believe I have ever had a GAR (guaranteed annuity rate) but in a sense I do have a guarantee sum. Being with profits it shouldn't go down like a sipp might do in the case of a market downturn (depending of course on what it is invested in.)

    At present I have a guaranteed value and the current uplift to the transfer value is 35% (but not guaranteed). As it seems this won't be further increased this might be a good time to take the money and run?

    I am really grateful to you woolly wombat. I have kept the policy because I keep getting 3.5% a year increased value but didn't appreciate this was a guarantee. It was poor in periods of high interest rates and when the stock market produced high returns but is currently better than the rate I get on money in savings accounts. It was a small part of my pension total so in my mind I thought I could be a bit more adventurous with other pensions. I am afraid the terms RSP and CWP (conventional with profits) meant nothing to me and I can't find them in the many pages of literature and definitions I have (in fact I still don't know what RSP stands for). I do though if you are right have an RSP policy (how can I tell?)

    My decision then is whether to forego the safety net of a value which will rise by 3.5% and never go down other than if the uplift is withdrawn or move the money (taking the 35% uplift) and move to a SIPP. I think my inclination is to move it to a SIPP.

    I should say the sum of money is about 15% of my pension and I have other savings so this isn't a make or break decision

    Am I right?
  • woolly_wombat
    woolly_wombat Posts: 819 Forumite
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    naive_investor wrote: »
    I took out the policy in 1989

    I took out a with-profits Retirement Annuity in 1989 during a period of freelance working. I believe all Retirement Annuities came with GARs, which were subsequently overturned but which did, I understand, mean that I was one of those who had an uplift in value after the notorious 'compromise' scheme downgraded the value of our policies.

    Fortunately, like you, I have other pension provision. I will probably stay put until my maturity date in a few months time.

    The report I linked to is worth looking at. It explains why they have been unable to increase the uplift in transfer value from 35%, due to the cost of providing for the GIRs, although they say they want to do so.

    For safety they are invested largely in gilts, and I suppose that if gilt yields were to suddenly increase and prices collapse then I might regret hanging on, but I'm hoping that they might find a way to increase the distribution in an effort to get more of us to push off!

    Time will tell.
  • naive_investor
    naive_investor Posts: 23 Forumite
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    Interesting we are in the same boat. I was told several times over the years by financial advisers to bale out but resisted. Still don't know if that was the right decision.I have 21/2 years to go and my reading is that the 35% won't be increased though hopefully won't go down.

    My motivation is to reduce costs and get all my pensions in one place. I reckon I could save a whole drawer of a filing cabinet too...
  • kidmugsy
    kidmugsy Posts: 12,709 Forumite
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    naive_investor wrote: »
    My motivation is to reduce costs and get all my pensions in one place.

    I'd prefer two places: diversification to protect you from Lord-knows-what. Even the strange cove who runs the monevator blog understands that.
    http://monevator.com/even-brokers-can-fail-you/
    Free the dunston one next time too.
  • naive_investor
    naive_investor Posts: 23 Forumite
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    I wouldn’t want all my assets in one place, but having pensions in one place would simplify things for my dependents and be easier for me to manage.

    I am having problems because of the ‘guarantees’ on my with profits funds. Settle for a guaranteed x% or go for higher growth and greater risk, The age old decision.

    How do you decide?
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