Screwed up....I think....

jeannieblue · 12 January 2008 at 4:41PM

Boy do I need some advice....

Four months ago I approached prudential re my stakeholder pension cos I'd heard you could take 25% in advance tax free sum. As my finances were not very good at all, I asked them to send out forms etc.

It did take three lots of attempts, firstly they lost the first lot of forms, second lot I missed a bit and eventually, very much stressed, I sent the next lot of forms - I'll give them credit, they pushed it through quickly and the money went into my bank just days before Christmas. The relief, could feel myself relax.

I got a letter from them today to say that payment has commenced on paying my pension. What? I remember ticking the box saying that I had no idea when I would be retiring. I can't afford to retire yet, not for years! Even tho am in my mid fifties. I was under the impression that the 75% would stay with them until I told them I'd be retiring.

I checked my bank - first payment went in three days ago! I've checked the last lot of 'gumph' they sent me and a letter confirming the 25% tax free sum had been paid into my account, which I'd not read all the way down (I know I know but was stressed/busy etc) and it does say that my annuity (whatever that is - I'm really dense on these things) would be commencing soon.

I work full time, so I guessed that I am going to be taxed on this sum which I wouldn't be if I was retired. And secondly, I don't want this money yet!

I have emailed them - can only phone Mon to Fri - and I'm at work then, and previous experience of ringing them in my lunch hour involves being on hold for at least fifty minutes and sweating that the battery on mobile doesn't run out.

I've probably made a monumental !!!! up with all of this, and I know that cashing in the 25% of the 'tax free sum' probably wasn't a good idea originally but my finances called for desperate measures.

Any sensible, clever people out there that can help/advise please..

dunstonh · 12 January 2008 at 5:36PM

You have I'm afraid made a monumental !!!! up.

Stakeholder pensions cannot do income drawdown (they can technically but no provider does it). Prudential can only commence benefits or transfer them to another provider (who did allow drawdown).

The annuity is the pension income.

Any sensible, clever people out there that can help/advise please..

If you are still within the cancellation period you "may" get lucky and be able to get this resolved by transferring the pension to a personal pension or SIPP and do income drawdown. However, if it is too late then you cannot change what you have done. Benefit crystallisation is a once only transaction (with that pension chunk) and once you have purchased an annuity and cancellation rights are over you can never make any changes to that.

You should have got advice. it would have cost you nothing. Pru kept the 1.3% commission they pay for themselves. Had you seen an adviser this would not have happened and a switch to a PPP/SIPP would have taken place and income drawdown could have been set up for you.

jeannieblue · 12 January 2008 at 6:07PM

Monumental !!!! up is probably being polite.

I was under pressure - and i'd not found this site at the time - but no excuse. I have been stupid.

To move forward now - can anyone help?

Will I have to pay tax on it? Could i move this money/pension amount - its quite paltry at £326.44 per month (see, told you can't afford to retire!), to a savings type account, which could enable me to retire one day.

Or, can anyone advise me how to pick a jackpot lottery ticket? but then if you knew.... you wouldn't tell....

Trying to lighten the mood before i go off and weep....:(

dunstonh · 12 January 2008 at 6:17PM

Will I have to pay tax on it?

It is taxable income and if you are a basic rate (or higher rate) you will pay tax on it.

Could i move this money/pension amount - its quite paltry at £326.44 per month

No. Unless you are still within cancellation rights, this decision is stuck with you for the rest of your life.

to a savings type account, which could enable me to retire one day.

You can put the £326 (or net figure) into a monthly contribution ISA (stocks and shares ideally if you are 5-10 years away from proper retirement). At least you get that back into a tax free environment. You can also put £3600 a year back into a pension each year without having to prove income so you could in effect put it back.

jeannieblue · 12 January 2008 at 6:45PM

I've got an ISA with my bank, RBS, so could put it into that - but how do I deduct tax - should I contact Inland Revenue first?

Oh, and yes, out of cancellation date...

Don't know how where or why or who or what re starting new pension, I'm pretty old now. And clueless. Am good at English and spelling but maths and financial world go straight over my head!:D

EdInvestor · 12 January 2008 at 6:52PM

In this case I would contact your local IFA pronto to see if you can undo this transaction. Waste no time.

What you need to do it to transfer the original money into a "SIPP" or insured drawdown at another life company, where you can then take 25% tax free cash and leave the rest invested until you need to take an income later.This process is called "income drawdown" or "unsecured pension".

If you did make it clear to the Pru that you wanted to take the 25% tax free cash only, and leave the rest invested until later , then they shouldn't have sold you an annuity.If they won't roll back the transaction (via the IFA) then suggest you make a formal complaint.

They are required to treat customers fairly and not take advantage of people's ignorance of the way the system works.If they reject your complaint take it to the Ombudsman.

https://www.financial-ombudsman.org.uk

dunstonh · 12 January 2008 at 7:19PM

I've seen the forms Pru use many many times. They are clear and reasonable. They even ask how you want to take the income, what frequency, what guarantee period and what bank account you want to pay it into. They also provide an illustration of benefits and a key features document.

Also remember that no advice was sought or given. Pru supplied the forms for the only option they themselves have to offer. They are not under any obligation to tell you about what other pensions or providers have to offer. Pru also tell you to seek independent financial advice. Indeed, I think they are probably one of the best ones at doing that. I have had more phone calls from people telling me that Pru gave them my number than any other company. Pru actually do the IFA lookup for you and give you the three nearest in your postcode.

There is only so much that they can do for someone that isnt asking them for advice.

jeannieblue · 12 January 2008 at 8:35PM

I didn't find their forms clear at all. And not asked re frequency of payments etc otherwise i would've thought - what? As i was only requesting the 25% tax free sum. The annuity bit only came into the equation paper wise on final days - which I admit, i didn't look at properly because was pressing for the above forementioned 25% bit to get me out of the sh*t. Trying to talk to them was difficult as their hours clashed with mine and it was all so hectic, sending me forms - telling me to just fill in highlighted bit etc.

I know I am to fault here, but kinda trusted them to do what I had asked and they never ever said about pension would be payable now too because that would've stopped me in my tracks.

Sorry, but re the ifa etc. Can you spell it out to a thicko please....:embarasse

jeannieblue · 12 January 2008 at 8:43PM

Edinvestor...

Will copy out what you've said and talk to the pru. Cos you've summed it up. I will have to ask my company to let me take some time off to sort it as making calls at work not a good idea!

Its not easy for ordinary people to know all the lingo, to understand all the forms, and to understand all the stuff they say on the phone - that is if you're lucky to get a chance to speak to anyone.

Anyone elso offer any advice, in common English Speak! that I can use to get me out of the mire, would be grateful!:D

I'm not a stupid person, ok my sons may debate that, but we all have our talents and gifts, and maths/sums/finances are not mine!

lilac_lady · 12 January 2008 at 8:53PM

jb - don't beat yourself up any more if you find out that you can't undo the annuity payments. As long as you save the money as suggested by dunstonh and not squander it you'll be ok. Not easy talking to insurance companies via call centres now.

jeannieblue · 12 January 2008 at 9:45PM

Thank you lilac lady - haven't got the energy to beat myself up anymore to be honest! Its done anyway. Just want to know what to do for best now.

Whats a 'SIPP' anyway? Wouldn't know one if it came up and bit me on the bum - this is the trouble really - its ok if you're up on all this stuff, but if you're not, you can be suckered in to anything.

When getting mortgages, pensions, insurance or anything like that, there seems to be a lack of information or a lack of people who can talk to you in lay man's terms - and therefore, you kinda get conned by all the jargon, and you have to 'trust' the so called 'experts' because you don't know any better or can argue a point because its not your field.

I'm not stupid, honest! Its just not my field, its way out of my area.

_pale_

Screwed up....I think....

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