Zurich pension plan...cash in or change?

building

my partner took out a private pension plan with Zurich a few years back. He paid into it about 550 pounds for about a year and a half. then with divorce he stopped. i have looked into the policy for him and it seems that those 550 pounds only went into zurich fees. Obviously he was not told about how the fees worked. They are now offering to pay back this amount (probably because of all the pension scandals?) and say that he will need to claim the tax directly from inland revenue. 2 questions:
1. How does he get this tax back? we are thinking in investing in shares ourselves to build up our own pension
2. He has lost out on pension money _ could he get higher compensation for this from Zurich? And what are your thoughts on this matter?
thanks in advance for any help.

dunstonh

In response to your questions.

1 - How and why are they offering the money back? If the policy is being voided, then there should be a tax penalty equal to the tax relief being applied to the refund. As he got tax relief on the contributions originally (or if self employed, through the tax return) then he owes the taxman, not the other way round.
2 - How has he lost money if they are returning his premiums?

The fact there was initial charges on the pension suggests it would be a pre 2001 policy. In which case, he would have invested prior to the stockmarket crash. Chances are he is at breakeven point. Although that would be based on the funds he chose to invest in (Zurich, assuming Allied Dunbar at that time would not have been able to recommend investment funds as they were tied agents. That choice would have been with your partner).

building

yes he was self employed not sure whether he may any money or not for those years. Can we move these funds including part the inland revenue puts in into other fund in that case that we have chosen at our end for pension? just started reading about pension things so excuse any ignorance on terms.

dunstonh wrote:

In response to your questions.

1 - How and why are they offering the money back? If the policy is being voided, then there should be a tax penalty equal to the tax relief being applied to the refund. As he got tax relief on the contributions originally (or if self employed, through the tax return) then he owes the taxman, not the other way round.
2 - How has he lost money if they are returning his premiums?

The fact there was initial charges on the pension suggests it would be a pre 2001 policy. In which case, he would have invested prior to the stockmarket crash. Chances are he is at breakeven point. Although that would be based on the funds he chose to invest in (Zurich, assuming Allied Dunbar at that time would not have been able to recommend investment funds as they were tied agents. That choice would have been with your partner).

dunstonh

Can you clarify something first before we look at options. Are Zurich returning premiums and voiding policy or have they just given a transfer value?

At this moment I am confused to what Zurich are doing.

EdInvestor

DH

Although that would be based on the funds he chose to invest in (Zurich, assuming Allied Dunbar at that time would not have been able to recommend investment funds as they were tied agents.

You keep saying that tied agents could not or do not give investment advice, that in effect choice of funds is/was on an execution-only basis. Is that what you actually mean?

Perhaps you'd like to provide some evidence of this.When was this regulation introduced?

dunstonh

EdInvestor wrote:

DH



You keep saying that tied agents could not or do not give investment advice, that in effect choice of funds is/was on an execution-only basis. Is that what you actually mean?

Perhaps you'd like to provide some evidence of this.When was this regulation introduced?

I do not say that. They are allowed to give investment advice. However, they are not allowed to build portfolios or recommend specific funds where multiple funds exist within that risk profile. Now I will admit my experience is based on my time as a tied agent many years ago. However, i worked with two tied companies and the position was the same with both. Things may have changed but I have seen no evidence of that.

Tied agents have never been allowed to recommend investment funds unless they only offer one fund in that risk rating. Where there are multiple funds available, the tied advisor is meant to present the fund options to the client for them to pick the appropriate fund that matches their risk profile.

This is why many tied agents only have one fund available or a very small fund range across the risk ratings.

Fund choice is not execution only just limited selection.

Example.

You go to tied advisor who records you as medium risk. If they only offer one medium risk fund, then you will be placed in it (hence why banks like GEBs). If they have more than one fund available in the medium risk profile, they are meant to get their funds list out and show you the funds that match your risk profile and you have to pick one. They are not meant to steer.

Now, thats the text book way of doing it. In real life, tied agents are more likely to put you in the fund that is currently doing really well and make all the paperwork match that. There is a tendency to pick the fund for you.

EdInvestor

OK, thanks, I understand what you mean now.