Some ideas please
Options
Comments
-
That suggests that it is a guaranteed minimum fund value, applicable to the 80% With Profits part only.
In this day and age, if they really would pay you a lower amount if you went into drawdown rather than buying an annuity, I would be tempted to complain and take it all the way. It's none of their business and makes no difference to them whether you transfer out to buy an annuity or transfer out to a drawdown policy.
However, that may not be necessary. How much in £ is the guaranteed minimum payment now, and how much is the current With Profits fund value?
*edit* Also, I would ask them whether the plan has "safeguarded benefits". If this guaranteed minimum payment qualifies as "safeguarded benefits", you will need professional advice to transfer the plan.0 -
Thank you so much Malthusian for your help on this. I have a further explanation from Standard Life below:
To help with the explanation, I will quote some figures that were calculated at the close of business last night. Your With Profits 'Fund Value' is £79,102.71. The unit price of this fund is guaranteed not to drop. This is the only guarantee you have on the With Profits fund. Therefore, £79,102.71 is the lowest the 'Fund Value' will ever be in future. Your With Profits 'Transfer Value' is £122,796.77. This is not guaranteed. This is made up of your 'Fund Value' of £79,102.71 (which is guaranteed) and a potential bonus of £43,694.06 (which is not guaranteed). The potential bonus is currently growing at a rate of 0.75%. The Transfer Value quoted above assumed you used last nights figures to transfer, so it is our best estimate. There is no guarantee that you will receive a bonus between today and your 60th birthday. To answer your question, you may be at a disadvantage at a future date, as the With Profits bonus is not guaranteed to be paid when you switch funds or retire in future.0 -
That suggests there are no guarantees and it is a standard With Profits policy.
The vast majority of With Profits policies can apply a "market value reduction" if the investments have fallen in value, which means the transfer value can fall below the fund value.
However, if a "market value reduction" is being applied, policyholders are often exempt if they are willing to wait until their originally selected retirement age. This may be where the bit about "as long as you buy an annuity" comes from. The terms of the policy may say that there is an exemption from market value reductions if the policyholder is taking their retirement benefits, which in þe olden days meant buying an annuity.
At the moment it sounds like no market value reduction is being applied to anyone, so this point is moot.
There is in reality very little that is guaranteed about With Profits policies. If we had a market crash Standard Life has the right to cut the "potential bonus" to zero, which would mean your pension would fall in value by 36%. Which is the kind of crash you would expect from equity-heavy unit-linked funds (the other 20% of your pension). On the other hand, future growth is restricted because you are dependent on Standard Life choosing to add bonuses, and their With Profits fund is probably mostly invested in fixed-interest. So you have the risk of equity investment without the upside.0 -
They have also confirmed the following:
The With Profits unit price is guaranteed, therefore the Fund value is safeguarded as a result. It therefore looks as though I will need advice should I want to transfer in order to access my TFLS and enter into drawdown. As others have commented, 60 is probably too early to annuitise so it I will probably seek advice nearer the time if I want to adhere to the timetable I posted earlier.0 -
It doesn't meet the definition of a safeguarded benefit so you don't need advice to transfer out. There's no guarantee on what level of retirement income you'll get which is the trigger for advice. Your guarantee is that your capital value, excluding bonus, can never fall.0
-
It doesn't meet the definition of a safeguarded benefit so you don't need advice to transfer out. There's no guarantee on what level of retirement income you'll get which is the trigger for advice. Your guarantee is that your capital value, excluding bonus, can never fall.
...which in practice means that the actual value, the amount that you could access right this moment, can fall by 36% at any time of the actuary's choosing.
The "potential bonus" is not some money that Standard Life are offering you out of the goodness of their hearts, it is money that has been made by the growth in the With Profits fund. If you were in a unit-linked rather than With Profits policy, the growth would be yours by right, but as it's With Profits it's described as a "potential bonus".
The fund value should be viewed as the amount that you could transfer to another policy or fund right now, which is £177,800. This is not one of those cases where you say "I've got £134,800 and anything else is a bonus".
Of course switching out of With Profits into unit-linked funds would not eliminate the risk of Standard Life cutting the potential bonus, because if there was a market crash - which is the time Standard Life would usually be cutting the potential bonus - the fund value will fall, possibly by 36% or more in a 2008-style crash depending on what you invested in. What switching into unit-linked funds will give you is higher potential growth on the upside with largely the same risk on the downside.0
This discussion has been closed.
Categories
- All Categories
- 343.2K Banking & Borrowing
- 250.1K Reduce Debt & Boost Income
- 449.7K Spending & Discounts
- 235.3K Work, Benefits & Business
- 608.1K Mortgages, Homes & Bills
- 173.1K Life & Family
- 247.9K Travel & Transport
- 1.5M Hobbies & Leisure
- 15.9K Discuss & Feedback
- 15.1K Coronavirus Support Boards