Today is a good news day for with-profits pension policyholders. Phoenix Life Group, the owners of a book of pensions sold by Sun Alliance, are writing to policyholders with a retirement date beyond 1st January 2020 to give them an option to amend the terms of their contract. Policyholders can give up their Guaranteed Pension Rate in return for an uplift in their current fund value.
I think it's a great initiative.
With-profits plans with Guaranteed Pension Rates are extremely valuable but they are awkward. To maximise the value policyholders might have to accept a single life income that ceases on their death rather than include a pension for a spouse on death, they might opt to not take the Pension Commencement Lump Sum, and they might put up with low growth prospects and poor death benefits in the meantime.
Offering to enhance the current fund value in exchange for the Guaranteed Pension Rate introduces much improved flexibility for policyholders.
Up until now, affected pension plan holders and their advisers have had to leave these plans in the filing cabinet and plan around their inflexibility. Now, for those policyholders who are comfortable with the investment and longevity risk and who vote yes to the scheme, there exists the option to plan a retirement that suits them rather than just accept what's given.
Affected policyholders might like to know that we've set up a website dedicated to helping you work through the main points to consider before you vote - http://www.phoenix-scheme.com/
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