Badly advised

houseselling_help

Recently my parents had advice from a combined IFA and accountant that they could reduce their tax payments through passing the money through various vehicles including a pension until it came out the other end and had significant tax reductions.

Unfortunately part way through this process the accountant died, and the money is now tied up in a pension that they cannot touch. The IFA took his cut and my parents are now effectively penniless.

Is there anything they can do, they expressly told the IFA at offset that putting the money into a pension was a definitie no go. I know this is vague but can anyone advise please ?
regards#Stuart

seven-day-weekend

How old are your parents?

dunstonh

I know this is vague but can anyone advise please ?

Far too vague I'm afraid and also inconsistent.

they expressly told the IFA at offset that putting the money into a pension was a definitie no go.

A few clarification points here and a pointer to the sort of things that will need to be considered should a complaint be made.

1 - They went to an accountant to reduce their tax payments through passing the money through various vehicles including a pension until it came out the other end and had significant tax reductions.
2 - they expressly told the IFA at offset that putting the money into a pension was a definitie no go.

So, they went to an accountant to reduce their tax bill and put money in a pension. Yet they then told the IFA they didnt want to use a pension. Despite this they managed to miss the illustration that would have said pension, the key features document that said pension, completed an application form that would have said pension, received a suitability report that would have recommended the pension and said that was what they were doing, the cancellation rights that would have mentioned pension and issued another illustration that would have said pension and the policy booklet that would have said pension.

Despite all that, they didnt know it was a pension?

The IFA took his cut and my parents are now effectively penniless.

How much was paid into the pension (gross or net but do specify which) and what was their income for the year of the contribution?

whiteflag_3

houseselling_help wrote: »

Recently my parents had advice from a combined IFA and accountant that they could reduce their tax payments through passing the money through various vehicles including a pension until it came out the other end and had significant tax reductions.

Unfortunately part way through this process the accountant died, and the money is now tied up in a pension that they cannot touch. The IFA took his cut and my parents are now effectively penniless.

Is there anything they can do, they expressly told the IFA at offset that putting the money into a pension was a definitie no go. I know this is vague but can anyone advise please ?
regards#Stuart

Sorry Stuart but this makes no sense at all

Why would an accountant dying mean that money in a pension becomes "tied up"?

seven-day-weekend

Wouldn't money in a Pension always be 'tied up', until the person is 55?

That's why I asked how old they were in my first reply.

houseselling_help

Your right I am on the outside and don't have all the information. The accountant dying meant that the process was only half completed and left in the pension pot. They are about 55 y/old.

And yes I am sure the small print may have said that this was a pension at some stage, but to all intents and purpose the money was "not going into a pension". As I understand the money put in was around £120k gross, earnings for the year c.£40k. The money came from their business on the back of recent property sales.

Thanks for your replies so far.

Andy_L

They may have been going for an "immediate vesting pension" were money is paid into a pension to gain the tax relief but then, almost, immediately taken to get the tax free lump sum & pension payment.
If that's the case then the account/IA dying has no effect. They can either complete the transaction themselves or task a new (the same?) IFA to do it for them

dunstonh

The accountant dying meant that the process was only half completed and left in the pension pot.

Its either in the pension or not. You dont get a half measure here.

And yes I am sure the small print may have said that this was a pension at some stage

I think you need to be more realistic. Its not small print. The front cover of the key features document would have pension in big letters. The illustration first page would say at the top what the product is. The application will be titled pension application. The suitability report says exactly what is being applied for. The cancellation rights would start by saying something along the lines of "thank you for your appliction for a personal pension".... and so on. The word pension would appear hundreds of times across the paperwork.

Andy may be right with it being an immediate vesting personal pension. Or it may have been a personal pension or SIPP to be placed into an unsecured pension.

The money wont be lost. All they need to do is speak with the IFA that was dealing with the transaction (and not the accountant). Or they can get the locum to take over if its the IFA that has died or they can appoint a new adviser to take over.

Robert_Sterling_3

I think Andy is right about what happened. :T :T :T

EdInvestor

There are two processes.First you put the money in the pension, picking up the tax relief as you go.Then you "vest" (take benefits from) the pension by extracting the 25% tax free cash and turning the rest either into an annuity (a guaranteed income for life but capital is lost) or "income drawdown" (the money remains invested and you draw an income from it).

It sounds as though your parents have got stuck halfway.

They should contact either the original IFA or a new one to activate the 2nd procedure.

whiteflag_3

Robert_Sterling wrote: »

I think Andy is right about what happened. :T :T :T

quite possibly , but then how would this mean" my parents are now effectively penniless."

Wont they have the tax free cash and the income?

ITs simply not possible for an IFA to shelve a transaction halfway through.