Is this possible (Pension)

dunstonh

Fair enough. Just remember that switching funds within the existing pension or switching to a stakeholder pension and selecting lower risk funds could be the cheapest option available.

I was a little confused as your post #1 suggests SIPP would be best but your post #4 suggests existing provider or stakeholder would be better. Both these posts indicate different goals and that would lead to confusion. You need to make it clear whether it is the risk of the investment funds or the access to the tax free lump sum is your priority.

You also need to be aware that taking the tax free lump sum early can cost you more in the long term and if you dont need the lump sum, then you shouldnt take it.

EdInvestor

You also need to be aware that taking the tax free lump sum early can cost you more in the long term...

It's also the case that leaving it where it is could cost you more in the long term.IMHO there are way too many factors involved to make any clear statements or predictions about this.

Taking the tax free cash at 50 is anyway not a new policy, it has been allowed for personal pensions for years.The only thing that has changed is that you don't have to take an income from the remaining fund any more, which was a deterrent for many people because the income is taxed, and if they are still working, the added pension could impact their overall tax rate badly.

Of course A day has also extended the "cash at 50" idea to other types of pensions such as AVCs and contracted out (protected rights) pensions.

*Note BTW that you can't yet move PR pensions into SIPPS. Not allowed until next year when SIPPs will be regulated, though there may be a transitional phase from October.Watch this space.*

dunstonh

It's also the case that leaving it where it is could cost you more in the long term.IMHO there are way too many factors involved to make any clear statements or predictions about this.

Both options involve investment returns so that part is unknown. However, one thing is known is the charges and removing the tax free lump sum could increase the annual managment charges due to fund based discounts not being applied.

What part would cost you more?

Also, take 25% out now and you cannot take 25% out later. If you assume the fund was going to rise, then this means you reduce the amount you have been able to remove tax free from the pension.

If you dont need the tax free lump sum, then taking it could increase potential IHT libility if applicable. Leaving it in the pension keeps the value out of the estate.

So, I stick by my statement that if you do not need the tax free lump sum, then you should not take it. You only end up paying charges you dont need to pay, potential tax you dont need to pay and reduce the amount you are going to be able to get out in the future.

EdInvestor

As far as charges are concerned, look for a low cost online SIPP, and do the transfer yourself - if you go through an advisor you may find that a fee of 3% gets deducted from your fund.It's really not necessary to pay this fee.

dunstonh

EdInvestor wrote:

As far as charges are concerned, look for a low cost online SIPP, and do the transfer yourself - if you go through an advisor you may find that a fee of 3% gets deducted from your fund.It's really not necessary to pay this fee.

But dont rule out the benefits of an advisor. I just completed the paperwork on an investment done 29th March and its 3% up already with charges taken. The person I did the investment for would not have picked the funds I chose. So although they could have done it cheaper, they would have invested a lot differently and missed out on the gains. So, they would have paid less in charges but would currently have a lower value.

Advice costs but good advice is worth the cost.

A common failure on this board is the assumption that money saving means paying nothing. It doesn't. It means getting value for money. What is best? Pay nothing and get little or pay a little and get lots. Its when you pay lots and get nothing that you have to avoid.

peter4076

dunstanh & EdInvestor
Your help in my wife's financial situation is most appreciated, I approached this forum with some trepidation, but you both have allayed any fear I might have had, you speak in a language that we appreciate & most importantly understand, rather than drag her screaming and shouting to my computer ( she works on one all week so not interested at all in computing................I've told her this is a different kind of computing and totally pleasurable) I have printed out all the comments made on this thread, so that she can peruse at leisure. :j

At a later date I will be posting my own query into a AVC I paid into and such terminology as "Trivial Amount", but that will have to wait until I get the paperwork together, so that I can produce it on a thread properly. :eek:

canny_yorkshireman_2

Advice costs but good advice is worth the cost.

A common failure on this board is the assumption that money saving means paying nothing. It doesn't. It means getting value for money. What is best? Pay nothing and get little or pay a little and get lots. Its when you pay lots and get nothing that you have to avoid.

Dunstonh the best advice given on here to date

EdInvestor

The big problem everyone has of course, is finding an advisor who gives good advice.

A fundamental problem for many is that they have no way of checking what is good and what is bad in advance of suffering the consequences.

IMHO this is where websites like MSE are very helpful - in helping people to learn enough about the subject to spot the difference in advance and know when to walk away.

peter4076

An Adendum

My wife omitted to tell me that almost 50% of her pension pot is Protected Rights.
She would not want to move her personel pension without the PR, does this mean that she will have to wait until next year?.
My wife thinks this might be a good thing anyway, because she can then make a more informed decision.

EdInvestor

My wife omitted to tell me that almost 50% of her pension pot is Protected Rights. She would not want to move her personel pension without the PR, does this mean that she will have to wait until next year?.

Maybe not quite that long :)It's possible that from around October it will be possible to move a pension containing both non PR and PR money to a SIPP in one go, but the PR money will probably have to wait in the cash account (where it would earn interest) until SIPPs are fully regulated around a year from now.

At that point the nannies at the DWP will again let you take a risk with your PR money, same as as you are allowed to now, and maybe even a bit more. :rolleyes:

To deal with this problem at the moment, people usually split up the money, move the non-PR money to the SIPP and then start a new ordinary modern low-cost personal or stakeholder pension with the PR money.

This can actually work quite well if you want to invest some of your total amount in commercial property, or bond funds, where the insurers have a very good selection of products - they tend to be better at the low risk stuff.As long as you get a low charging option, this works well.

Then you put the SIPP money into equities, either directly into shares or into a selection of the best unit trusts. The insurers cannot really compete with the array of equity products at SIPPs.

Thus it's possible to get the best of both worlds - assuming you can get your asset allocation needs to line up with your PR/ non PR asset split.

There's usually a way around red tape if you look hard enough, one finds.