Should I transfer my NPI pension?

The National Provident Institution (NPI) was a mutual society that existed from 1835 to 2012, when it was finally merged and absorbed into Phoenix Life. NPI initially offered savings products to help individuals build financial security for their future.

When pensions were introduced, it expanded into the pensions market. 

About the NPI pension

In the 1980’s the UK government introduced personal pensions and NPI started offering personal pension products through brokers.

Over the years NPI pension funds have undergone several changes of ownership and during certain periods have been affected by some poor investment strategies and decisions that have caused lower than originally expected returns. 

New NPI pension products are no longer marketed.

NPI was acquired by Pearl Assurance in 1970, and later in 1999 became part of the AMP Group following a merger between Pearl Assurance and the Australian Mutual Provident Society (AMP).

In 2003 AMP Group pulled out of the UK market and NPI was closed for new business. In 2006 NPI became part of AXA Group and finally in 2016-2017 it was acquired by the Phoenix Group.

If you had an old NPI pension scheme it is now most likely to be in the Phoenix Life NPI with-profits fund.

The payments you make into your policy go into the NPI with-profits fund. Your contributions are pooled together with the premiums of the other policyholders who invest in this fund. 

The investment returns are dependent on income from investments along with profits and losses which increase or reduce the value of the fund.

Guarantees and benefits of the NPI pension fund

A with-profits fund is designed to protect your pension in falling markets, but still allow you to benefit from some market growth, providing a more stable return.

Some older policies also guarantee a minimum annual growth rate of 4% or more and sometimes additional annual and final bonuses may apply.

Your policy may also have the reassurance of a guaranteed annuity rate (GAR). It is important that you fully understand the guarantees and terms of your individual policy which are stated in documentation from your current pension provider.

If you have difficulty understanding your benefits and guarantees you should consult with an FCA regulated financial advisor.

Originally these policies were set up on the basis that on the selected retirement date stated in the policy that you would use the funds to buy an annuity.

The policies, provided they are held until the selected retirement date, guarantee to pay back a certain minimum amount. Annuities are products that provide an annual income for life after retirement. 

If you choose to buy an annuity, the income that you can buy will depend on the size of the final cash sum at maturity, and the terms available at retirement for purchasing an income.

If your policy has a guaranteed annuity rate (GAR), and you choose to take an annuity from your pension policy, you are entitled to the guaranteed rate. This proves to be extremely beneficial when the market annuity rate is lower than the guaranteed rate.

It is important to check whether you have a GAR and how it operates, as this may give you a higher pension income.

Should I transfer my NPI pension?

Following the new pension freedoms introduced by the government in April 2015, you no longer have to purchase an annuity and you can choose to take your retirement benefits in different ways.

You can also access your pension benefits from age 55, rising to 57 in April 2028. 

When transferring out of with-profits funds before your normal retirement date stated in your policy, your provider will not guarantee the amount that you will get back from your policy, also your funds would be subject to market value reduction (MVR), which can drastically reduce the transfer value of your pension fund, in some previous historical cases this has been up to 30%.

You will also be giving up your entitlement to the guaranteed annuity rate stated in the policy.

Transferring a pension is a significant financial decision and it is very important to weigh up the advantages and disadvantages of transferring before deciding whether it is the right choice for your personal circumstances.

Get expert advice

It is always recommended that you get professional advice from a qualified FCA regulated financial advisor who can explain everything and help you fully understand the financial implications of transferring out. 

Let Regulated Advice match you with a financial advisor for expert advice.