I have a traditional with profits pension policy (under the old S226 ICTA
1970) with Scottish Widows. It has a guaranteed annuity rate of 9.8%. I am in the process of transferring various ragtag other policies (including some shocking under-performers from London Life and Equitable which were made paid-up years ago) to a SIPP. But the SW one has been kept up throughout, and I have 18 years of premiums at 100 a month. I am therefore weighing up whether to transfer it over or keep it till the original pension date - which is about 100 months away (I am nearly 52).The total of basic benefit and bonus is about 55k, which would produce about 5500 per year for life from age 60 (I am assuming that the only way to get the guaranteed annuity is to take the benefit on the original pension date), but to know whether this is worth it I need to know both (a) the transfer value of the fund if I transfer out (I have asked SW for this information) and (b) the likely level of terminal bonus. It is this last piece in the mathematical jigsaw puzzle which I cannot discover. If the terminal bonus were to lift the pot to (say) 70k then I think I would probably be better off leaving things as they are - because that would be the equivalent of a fund of over 100k with an annuity at normal rates. Is it the case that SW will adopt the Equitable line - "you can have the guaranteed annuity, but we will reduce your terminal bonus so that the effect is the same as if you did not"? If so, that sort of dishonest approach - for such it was with the Equitable - would be an argument in favour of switching now.
The other thing that puzzled me is why SW stopped paying any bonuses at all on pre-1999 policies in about 2003. What was the reason for this? It seems to be in relation to all policies and not merely those which had guaranteed annuity rates. Is this likely to change?
Regards
Jonathan Morton