Umbrella pension fund?

Zarka

We've been advised to move our pension pot of around £95,000 to an Umbrella pension fund rather than take an annuity of around £8,000 pa (higher because of diabetes & potential kidney failure). We've not heard of this before but we've been told that we just draw down money as we want & it's treated as a tax-free loan. The up-front fees are £17,500 for this scheme plus an annual fee of around £200.

Does anyone know if this a good alternative to an annuity as we can have more flexibility with the lump sum?

dunstonh

The up-front fees are £17,500 for this scheme plus an annual fee of around £200.

£17,500. Hold on let me say that again as it hasnt sunk in. £17,500. Thats around ten times hight than the typical maximum charges you see. That equates to 18.4% of your fund value. Even worse than that as you take your 25% tax free cash out and their charge wipes out another 24.5% of your fund value.

Instant reaction is that this is either some non-regulated scheme (so no FSA based consumer protection and possibly HMRC issues later down the road) or some firm is taking the P big time.

Given the mention of the word "loan", I suspect it is a scam.

claretmatt

I can only echo Dunstonh's point.

The only beneficiary of this is the "adviser".

You are effectively looking to give up a guaranteed enhanced income for life in return for what seems like an unregulated scheme full of risk, uncertainty and high costs. Not a good idea

atush

17.5K. On less than 100K pot.

Scam. Avoid.

Zarka

Thanks for replies. Apparently the way the money's handled is that it's set up as funds for a company registered to us (offshore I think) then we can use the money as we want, including investing it elsewhere, but any cash we withdraw is treated as a loan to us from our company so therefore tax-free. The cost is supposed to cover the legal expertise involved in devising the scheme and keeping it free of HMRC attention. We've already taken the 25% tax free element.

It still feels as though it's the sort of thing you'd do with a much larger amount of money, even if it isn't a scam.

jamesd

It is a scam. Do not even remotely consider doing it and cease doing any business with whoever advised you to do it - they have demonstrated that they cannot be trusted.

If you want to legitimately draw down money at a higher rate than the GAD limit you should use unbiased.co.uk to contact a real Independent Financial Adviser and ask them about "scheme pension" providers. Those do not use the GAD limit but instead have an actuary work out an individual life expectancy and income limit. In the circumstances given that would be higher than the GAD limit.

Income drawdown, including via a scheme pension, is a legitimate and good alternative to buying an annuity, particularly at the moment when annuity rates are reduced in part because of quantitative easing and remarkably low gilt (UK government bond) yields (interest rates).

dunstonh

The cost is supposed to cover the legal expertise involved in devising the scheme and keeping it free of HMRC attention.

Doesn't that concern you? Especially given the current focus on pension loans and overseas pension transfers. Most people heading to retirement would not be looking at ways to defraud HMRC or leave their income open to complete collapse. Especially when the alternatives, such as drawdown, make a much more attractive option.

Loughton_Monkey

Offshore!!!!!!?????????

Umbrella Fund [whatever that is!]!!!!!!!!!

Do not even dream of going there. Cut off any communications you have with these people immediately, unless you are happy to be creamed out of the majority of your fund.

atush

You can try to lead a horse away from water, but it is hard to stop him drinking if he wants to.

dunstonh

money marketing is running an article today:

http://www.moneymarketing.co.uk/pensions/pension-reciprocation-clients-facing-significant-losses/1039551.article

Note that Money Marketing said they first reported it in May. On this site we have been warning about them for much longer.

sammie2020

Hi everyone,
Has anyone heard of a company called Forensic Review Ltd. My sister has recevied a call saying if she transfers everything from her pension fund into the above company, they can double her investment and for her trouble they will give her a £3000k cash prize. She have recieved paperwork to fill in but it looks a lot like mickey mouse has issued it. I think this has SCAM written all over it. I have been online and cant find anything out about them. I am really worried in case someone falls under this spell and ends up losing all thier hard earned saving, please if anyone has any info please let the rest of us know. If this is a genuine company no harm or malice is meant but i think the company will understand. The name of the company... Forensic Review. Registered in Gibralter. Working from Mayfair and various other location around the uk.