Why are some schemes not playing ball post A-day?

titewelshgit

Further to my post below re tax free lump sum, I have started making enquiries with my various plan holders. I was quite shocked to find that two of them (final salary schemes) have little intention of providing me with a lump sump and being able to leave the remainder i.e. they inisist that I start drawing an income from what is left, which is something I do not want to do and pay higher tax. Are they right? If so, A-day is just a guideline that the big boys who have got our money do not have to conform to anyway! Bit angry now as I would dearly like to free a lump sum to radically reduce my mortgage.

Would appreciate advice from anybody as to what pressur I am within my rights to exert.

Andy_L

A-Day ALLOWS pension schemes to do certain things that wern't possible before. It does not COMPELL them to do them. You could lobby the trustees to change the schemes rules.

Andy

exil

Remember the trustees are there to protect the interests of scheme members.
If your scheme is underfunded, for example, they are not allowed to give you
a full transfer value out of the scheme. Trustees are not "big boys who have got our money". The money is there to provide you and the other scheme members with a pension, not to allow you to take a quick tax-free profit.

MrChips

Andy_L wrote:

A-Day ALLOWS pension schemes to do certain things that wern't possible before. It does not COMPELL them to do them. You could lobby the trustees to change the schemes rules.

The Trustee(s) can only implement the Rules as they stand, it is the Sponsoring Employer who has the power to change the Rules. You could try lobbying them, although most employers have been considering their responses to the changes for about a year now and have probably already made their mind up as to what they will allow the Scheme to do. Most will be happy to make reasonable concessions to the A-day changes, as long as it doesn't cause too much administrative hassle, or disadvantage other members as might be the case if the Scheme is currently underfunded.

whiteflag_3

titewelshgit wrote:

Further to my post below re tax free lump sum, I have started making enquiries with my various plan holders. I was quite shocked to find that two of them (final salary schemes) have little intention of providing me with a lump sump and being able to leave the remainder i.e. they inisist that I start drawing an income from what is left, which is something I do not want to do and pay higher tax. Are they right? If so, A-day is just a guideline that the big boys who have got our money do not have to conform to anyway! Bit angry now as I would dearly like to free a lump sum to radically reduce my mortgage.

Would appreciate advice from anybody as to what pressur I am within my rights to exert.

I take it youve left the schemes , so why dont you just transfer out to your own arrangement and then youll be in control?

titewelshgit

Thanks Whiteflag, I looked at transferring out of both schemes last year but the provider I wanted to transfer to would not accept unless it was done through an IFA, which would be a significant extra cost. Besides, I cannot imagine that any provider would be impressed with transferring in and then wanting to take a lump sum.
My main point is that A-day sounds great to those like me who are over 50 and would like to take a lump sum without drawing an income on the remainder, leaving it to accrue until retirement but the providers are under no obligation to follow the proposals - and I can imagine that there will not be many who will oblige, why should they?!!!!!

whiteflag_3

titewelshgit wrote:

Thanks Whiteflag, I looked at transferring out of both schemes last year but the provider I wanted to transfer to would not accept unless it was done through an IFA, which would be a significant extra cost. Besides, I cannot imagine that any provider would be impressed with transferring in and then wanting to take a lump sum.
My main point is that A-day sounds great to those like me who are over 50 and would like to take a lump sum without drawing an income on the remainder, leaving it to accrue until retirement but the providers are under no obligation to follow the proposals - and I can imagine that there will not be many who will oblige, why should they?!!!!!

And I thought I was the only tite welshman!

There are plenty of providers who will do what you want but you will have to pay an IFA to sort it out. To help you understand IFAs carrying out this work have to have extra insurance cover for this kind of work and coupled to the fact the advice is complex hence high costs.

You should shop around and see if you can screw down an IFA to do you a special deal. Even if it costs you a bit of cash up front wont you save in the long run on your mortgage?

Debt_Free_Chick

The difficulty is that whilst the legislation is called "simplification" it is far from simple! All that's happened is that eight complex tax regimes have been replaced by a single complex tax regime.

In addition, this legislation only affects the taxation of pensions - it doesn't take account of all the other pensions rules & regulations e.g. preservation - the one that says you are entitled to the benefits you have already built up.

I've tried to implement this new flexibility (where you take your tax free cash and leave the rest of your pension) in the two schemes I manage (for my employer) and I've given up! Same with the new rule that allows you take some of your pension now and some of it at a later date.

I don't know of many employers or trustees who would simply not "play ball" - there's generally a good reason why they don't do something. And in this case, I rather suspect that the answer is essentially complexity - and that the administrators would need to be paid to administer that extra complexity too!

Unfortunately, you have no rights in this issue - it's up to individual schemes to decide which of the new rules they wish to implement and how they go about it.

Debt_Free_Chick

titewelshgit wrote:

Besides, I cannot imagine that any provider would be impressed with transferring in and then wanting to take a lump sum.

They don't give a jot - there's plenty doing it and have been for some time now

So don't rule it out on that point, but transferring needs careful consideration of all the pros & cons, not just the availability of the lump sum.

EdInvestor

Most IFAs won't recommend transfers out of final salary pensions because of the huge misselling scandal in this area in the 1990s, though the issues are different now.This is because they have such problems with insurance costs.

It's very frustrating for some, because quite a lot of providers won't accept a transfer in without an IFA OK, which means you are trapped, even if you are fully informed about future possble loss and happy to sign a disclaimer.

whiteflag_3

EdInvestor wrote:

Most IFAs won't recommend transfers out of final salary pensions because of the huge misselling scandal in this area in the 1990s, though the issues are different now.This is because they have such problems with insurance costs.

It's very frustrating for some, because quite a lot of providers won't accept a transfer in without an IFA OK, which means you are trapped, even if you are fully informed about future possble loss and happy to sign a disclaimer.

Titewelshgit- no providers will accept a transfer without an IFA so dont waste your time trying to find one