Should I defer pension until 2015 ?

Savvy_amateur

dunstonh wrote: »

The old £100k after tax free cash rule could still be used by them.

http://citywire.co.uk/new-model-adviser/how-drawdown-questionnaire-reveals-the-mind-of-the-fsa/a561276

Financial services is fast moving. Regulator is slow and inconsistent and the ombudsman is liberal and does not believe in personal responsibility. Advisers have to pick up the bill when things like this

http://www.thisismoney.co.uk/money/pensions/article-2064926/Horror-tens-thousands-middle-income-savers-drawdown-pension-plans-plunge.html

Personally, I would probably have put it better to one of my clients than just saying that they did not qualify for DD as that is technically not true (unless it is a tied agent in which case it may be true for them). However, I would aim to put the person off unless I was really satisfied that it was the right thing to do. A compliance check on someone saying risk averse and having a pot under 100k is just screaming out compensation payout.

With small pots (sub 100k) I am more inclined to say that its not worth the risk, put my case and say if they want to do it then go DIY with HL or someone like that. Hopefully, these new rules from next year will put an end to the compliance and nanny state approach.

It is becoming clearer after reading the links you kindly posted, that the IFA is probably just covering her back, as she considers me risk averse.

When I say I am risk averse, as far as investing money in a volitile fund over which I have no control, then I am, but feel happy to have my pension pot fully under my control, even though there is a potential risk of it running out at some point. As I said previously, with current savings, state pension, wifes earnings and subsequent state pension and private pension, I am confident we could manage even without this private pension, as we do not have an extravagant lifestyle and no debts. So the full amount would be my choice if only to leave for the children. I dont really understand DD. How does that differ from defering til 2015 and then taking 25% tax free sum and the balance at 20%,? (for me to invest as I wish ). Btw, I really appreciate you taking time to read and reply to my questions.

Savvy_amateur

sandsy wrote: »

Just another thought...


Is your adviser's fee conditional on your purchasing the product or do the terms of the adviser agreement mean you have to pay whether you proceed or not? If conditional, that could explain your adviser's encouragement that you proceed and I'd be particularly wary in that case.

Thanks for replying.
I really dont know. All I have signed is for her company to be servicing agent for the future in respect of the pension policies.

atush

Savvy_amateur wrote: »

It is becoming clearer after reading the links you kindly posted, that the IFA is probably just covering her back, as she considers me risk averse.

When I say I am risk averse, as far as investing money in a volitile fund over which I have no control, then I am, but feel happy to have my pension pot fully under my control, even though there is a potential risk of it running out at some point. As I said previously, with current savings, state pension, wifes earnings and subsequent state pension and private pension, I am confident we could manage even without this private pension, as we do not have an extravagant lifestyle and no debts. So the full amount would be my choice if only to leave for the children. I dont really understand DD. How does that differ from defering til 2015 and then taking 25% tax free sum and the balance at 20%,? (for me to invest as I wish ). Btw, I really appreciate you taking time to read and reply to my questions.

DD is basically, taking 25% and leaving the rest invested in a DD pot. Either the same way it is invested now (if that is in yur risk profile) or maybe in lower risk funds, maybe income funds or investment trusts.

AS this money is surplus to requirements, perhaps she has gotten your risk profile (for this pot at least) wrong?

How the new system works I am not sure, but it will be mroe or less like DD but instead of taking an income of abt 5-6% a year, you could take enough to use your PA, or enough to take you up to (but not over) the HRT band.

If you want this money inherited, it is quite clear that an annuity is wrong for you. as it stands, a DD pot would be inheritable by your spouse at 100%. She could gift some to the children when she is 55, if you have not exhausted it at death?

Savvy_amateur

Thanks for that. DD may be an option then. I am now wondering if this is what IFA was referring to when I spoke to her just after the news broke yesterday and I mentioned taking whole amount. She said her fee would increase to £2.5k as it would involve moving the fund to another provider and it was quite complicated. (I think this quote was including her work so far on annuity ). Surely it would be a better option to defer until 2015 when I can choose what I take from the fund with FREE advice thrown in. Or am I missing something ?

Savvy_amateur

Savvy_amateur wrote: »

Thanks for that. DD may be an option then. I am now wondering if this is what IFA was referring to when I spoke to her just after the news broke yesterday and I mentioned taking whole amount. She said her fee would increase to £2.5k as it would involve moving the fund to another provider and it was quite complicated. (I think this quote was including her work so far on annuity ). Surely it would be a better option to defer until 2015 when I can choose what I take from the fund with FREE advice thrown in. Or am I missing something ?

Can anyone enlighten me please ?

sandsy

My thoughts:
- I suspect your adviser is pushing you because the contract says she will only get paid if you buy a product
- you could leave the funds in the personal pension to accumulate for another year or you could transfer to a drawdown and get your hands on the tax free cash but the latter option is definitely going to incur an advisory fee of 2.5% of your fund
- the government are talking about free guidance, not free advice: this is likely to be high level information about the risks of taking your fund in one go, the tax implications of taking it all in one go etc, it will not be a specific recommendation on what you should do, based on your personal circumstances, taking into account other retirement income for your household etc.

bigadaj

Savvy_amateur wrote: »

Thanks for that. DD may be an option then. I am now wondering if this is what IFA was referring to when I spoke to her just after the news broke yesterday and I mentioned taking whole amount. She said her fee would increase to £2.5k as it would involve moving the fund to another provider and it was quite complicated. (I think this quote was including her work so far on annuity ). Surely it would be a better option to defer until 2015 when I can choose what I take from the fund with FREE advice thrown in. Or am I missing something ?

Deferring may be better for you but probably not for the ifa.

The reason for moving the pot is probably that your current provider or fund doesn't allow drawdown, so there's a need for a move to take account of this. There's no reason why you couldn't do this yourself, though you'd have to manage the asset allocation, funds and risk and accept the balance between income and maintaining growth to allay inflation. Alternatively then use the ifa to do this the budget announcement don't make a fundamental difference, they would just allow some more flexibility which you might not take full advantage of if you were relatively risk averse.

Yorksport

Savvy_amateur wrote: »

Can anyone enlighten me please ?

The natural inclination is to let the dust settle and see what emerges. I'd be looking carefully at the return from the fund - an annuity might well give a better return and it's guaranteed. I hope too that people realise that deferring the date one takes the state pension adds c10% for each year. Anyone in good health and planning to keep working will probably benefit.

Savvy_amateur

Yorksport wrote: »

The natural inclination is to let the dust settle and see what emerges. I'd be looking carefully at the return from the fund - an annuity might well give a better return and it's guaranteed. I hope too that people realise that deferring the date one takes the state pension adds c10% for each year. Anyone in good health and planning to keep working will probably benefit.

Thanks. I would take my state pension and defer my private one I think. I plan to continue working for another year anyway, so maybe thats the way to go.

atush

If you don't need your state pension, defer that too. It increases over 10% for each year of deferment. It can be prorated so doesn't have to be full years.