Transfer from Final Salary to SIPP?

jamesd

Thanks. That post of mine was a right mess.

Linton

zagfles wrote: »

You can get tax relief on your entire earned income even if part of it is within the personal allowance, if you're using a RAS scheme (eg SIPP, personal pension). Basic rate tax relief at source is claimed by the scheme even if you paid no tax.

If your earned income is £15k and you have no other income, you can put the entire £15k into a pension and get basic rate tax relief on the lot.

I am sure you are right because of the way that basic rate tax relief is handled. However on the HMRC website I have only seen reference to the relief on non-existent taxes in relation to £2800 and non-tax payers. Do you know of any definitive statement on the matter?

zagfles

Linton wrote: »

I am sure you are right because of the way that basic rate tax relief is handled. However on the HMRC website I have only seen reference to the relief on non-existent taxes in relation to £2800 and non-tax payers. Do you know of any definitive statement on the matter?

RAS schemes can claim basic rate relief whether or not the member pays tax, see http://www.hmrc.gov.uk/pensionschemes/relief-source.htm

Tax relief is limited to relevant UK earnings or £3,600 if greater (plus all the annual/lifetime allowance stuff).

http://www.hmrc.gov.uk/pensionschemes/tax-basics.htm

So if a member earns £15,000 and puts £15,000 into a RAS scheme, the scheme can claim basic rate relief on the whole amount. And unlike with other reliefs like gift aid, there is no mechanism to reclaim tax relief given above the tax paid.

cjno1

RebTech wrote: »

My SIPP provider says they may insist I get formal advice before accepting the transfer, and they'd charge something like £1k for such advice!

Just as an aside, I think this sort of thing is absolutely ridiculous, my dad was recently told the same thing on trying to switch product.

You should be allowed to sign a waiver or something which says "I understand that you have recommended financial advice, but I don't want it and I'm happy with the risk that this product cocks up or isn't right for me". After all, it's your money, why should they force you to pay for a service you might not want or need?

dunstonh

Just as an aside, I think this sort of thing is absolutely ridiculous, my dad was recently told the same thing on trying to switch product.

I think it is common sense seeing as around 99% of times it is better to stay where it is.

You should be allowed to sign a waiver or something which says "I understand that you have recommended financial advice, but I don't want it and I'm happy with the risk that this product cocks up or isn't right for me". After all, it's your money, why should they force you to pay for a service you might not want or need?

The regulator feels that some people need protecting from themselves. Also, a signature can be abused as most people dont actually read what they are signing and someone transferring out of defined benefit scheme probably hasnt actually got a clue what they are doing.

cjno1

dunstonh wrote: »

I think it is common sense seeing as around 99% of times it is better to stay where it is.

The regulator feels that some people need protecting from themselves. Also, a signature can be abused as most people dont actually read what they are signing and someone transferring out of defined benefit scheme probably hasnt actually got a clue what they are doing.

I don't see why, for instance, I should be forced to pay £1000 when I'm comfortable with the risks in a given situation. It's my decision as to whether I take advice or not, it shouldn't be forced upon me as a condition of sale.

I agree that there are people out there who may need protecting from themselves, but to me that doesn't warrant increasing the costs for everyone who doesn't.

dunstonh

cjno1 wrote: »

I don't see why, for instance, I should be forced to pay £1000 when I'm comfortable with the risks in a given situation. It's my decision as to whether I take advice or not, it shouldn't be forced upon me as a condition of sale.

I agree that there are people out there who may need protecting from themselves, but to me that doesn't warrant increasing the costs for everyone who doesn't.

I do partly agree with your views in concept. There is too much consumer protection and bias nowadays and firms spend a lot of money and time covering their backsides. That has to be reflected in product costs/terms. I am not saying that consumer protection is bad but it can and often does go too far.

Just like the couple that gambled on shares on a DIY basis but now it appears the trading platform they used is going to get the blame for allowing them to do it. (see thread in investment section).

But where it is near 99% mis-sale to transfer and that the receiving company has the liability for that mis-sale, there has to be some mechanism to protect the 99%.

Linton

cjno1 wrote: »

Just as an aside, I think this sort of thing is absolutely ridiculous, my dad was recently told the same thing on trying to switch product.

You should be allowed to sign a waiver or something which says "I understand that you have recommended financial advice, but I don't want it and I'm happy with the risk that this product cocks up or isn't right for me". After all, it's your money, why should they force you to pay for a service you might not want or need?

Strictly speaking it isnt your money, it is money held by the trustees to provide retirement income for you. So, it could be argued there is a duty of care involved.

cjno1

Linton wrote: »

Strictly speaking it isnt your money, it is money held by the trustees to provide retirement income for you. So, it could be argued there is a duty of care involved.

These are requirements by regulators, borne out by the product provider which you are looking to transfer to. The trustees aren't involved.