Originally posted by ASB
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Reply to: Pension transfer
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Previously on "Pension transfer"
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Originally posted by ASBThe "guarantee" is such that it varies from 9.7% at 60 to 13.9% at 70. According to the latest blurb they are still on target with the bonuses etc. However no bonus has been added for about 8 years. They have reintroduced final bonuses in the last couple of years but of course that may well go. I guess that they would pull the final bonus before renegeing on the g'tee.
My intention was to leave it - which does concur with the advice I got at my last full review a few years ago.
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Originally posted by BradleyWhy would anyone want to buy commercial property these days? That ship has already sailed.
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Originally posted by IR35 AvoiderWhat I wouldn't do is assume you will get more growth elsewhere from cleverer management. I don't really believe such a thing exists, without the benefit of hindsight.
If I've understood correctly, your invested funds will grow to £41K if they grow at 5% per year after charges, but the money invested elsewhere will have to grow at 8% a year after charges to buy the same pension.
I assume the 5% is just a projection, and not guaranteed.
I would do the calculation as follows: assume investment growth of 7% (4.5% real plus 2.5% inflation) for a fund invested in shares or property (Co-incidentally I think the real projected yield on both is about the same, between 4.5% and 4.7% at the moment.)
Subtract actual charges for the current scheme and the cheapest alternative (0.3%?) then project forwards to get final lump sums, then apply respective annuity rates.
So I think what I'm saying is ignore the 5% projection, do your own, assume the same underlying growth rate whether you stay put or leave.
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What I wouldn't do is assume you will get more growth elsewhere from cleverer management. I don't really believe such a thing exists, without the benefit of hindsight.
If I've understood correctly, your invested funds will grow to £41K if they grow at 5% per year after charges, but the money invested elsewhere will have to grow at 8% a year after charges to buy the same pension.
I assume the 5% is just a projection, and not guaranteed.
I would do the calculation as follows: assume investment growth of 7% (4.5% real plus 2.5% inflation) for a fund invested in shares or property (Co-incidentally I think the real projected yield on both is about the same, between 4.5% and 4.7% at the moment.)
Subtract actual charges for the current scheme and the cheapest alternative (0.3%?) then project forwards to get final lump sums, then apply respective annuity rates.
So I think what I'm saying is ignore the 5% projection, do your own, assume the same underlying growth rate whether you stay put or leave.Last edited by IR35 Avoider; 12 July 2007, 19:46.
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Originally posted by glashIFA@ParamountNo - all cases on their own merits. If you wanted to consider commercial property purchase via your pension you might want to look at transferring it. If you were concerned about Scottish Mutuals fund range / performance you might want to consider it. If you wanted to retire at a different age and take the benefits at a different time it may be worth considering. The g'teed annuity rate may only apply if benefits are taken at a specific date. Also worth remembering that they wouldn't be the first pension provider to default on g'teed annuity rates - Equitable Life???......Just some thoughts.
My intention was to leave it - which does concur with the advice I got at my last full review a few years ago.
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Commercial property
Originally posted by glashIFA@ParamountIf you wanted to consider commercial property purchase via your pension you might want to look at transferring it.
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Originally posted by ASBI have an old scottish mutual paid up section 226 policy.
It has a current transfer value of 22,000. In 13 years time (when I'm 60) - assuming there are no further bonus and there is no final bonus this will have a value of 41000. Because of the guaranteed annuity rate this 41k will produce a pension of 4,000.
At age 60 in order to produce this pension with an annuity rate of 6.7% I would need a fund of 59k on the open market. This would imply a compound growth rate of 7.75%.
If the current final bonus rates are maintained - by no means certain - then the value will be 63000 producing a pension just over 6000.
This would need a fund of about 90k - or a compound growth rate of 11.5%.
It therefore seems to me that there can be no reasonable reason why I might transfer - but have I missed anything ?
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Pension transfer
I have an old scottish mutual paid up section 226 policy.
It has a current transfer value of 22,000. In 13 years time (when I'm 60) - assuming there are no further bonus and there is no final bonus this will have a value of 41000. Because of the guaranteed annuity rate this 41k will produce a pension of 4,000.
At age 60 in order to produce this pension with an annuity rate of 6.7% I would need a fund of 59k on the open market. This would imply a compound growth rate of 7.75%.
If the current final bonus rates are maintained - by no means certain - then the value will be 63000 producing a pension just over 6000.
This would need a fund of about 90k - or a compound growth rate of 11.5%.
It therefore seems to me that there can be no reasonable reason why I might transfer - but have I missed anything ?Tags: None
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