Using an advisor for drawdown

zagfles

tjh64 wrote: »

I am 64 (and threequarters) and looking to retire soon. I have a deferred Final Salary scheme and a Money Purchase pot. As the FS meets the rules of adequacy, it seems to me to be a slam dunk to take the MP as drawdown, however the scheme provider (Aviva) says that I need to use an advisor to do this. Is it really necessary to pay someone to borrow my watch and tell me the time? - or should I hang on until next April and hope that the rules are simplified?

Are the schemes linked? If so you might be able to take the entire MP pot as a tax free lump sum if it's less than 25% of the total value of the combined schemes (usually means if it's less than 6.67 times your FS annual pension).

If not you should be able to transfer to one of the many providers who allow drawdown without advice. Snowman and I did a spreadsheet comparing drawdown providers - see https://forums.moneysavingexpert.com/discussion/4922919

However expect the charges to change with the new rules...

zagfles

bmm78 wrote: »

I think people also need to consider why many firms refuse to allow drawdown without advice. Things can and do go wrong, the potential liability for the regulated firms involved is greater, and as there are more considerations it is more difficult to demonstrate that the client was put in a fully informed position.

This isn't the same as saying that everyone "needs" advice, as there are plenty of people more than capable of making sound financial decisions. However, DIY should be done for the right reasons ("I know what I'm doing and I'm happy to take responsibility for my own decisions") rather than the wrong reasons ("I don't know what I'm doing but I'm not willing to pay anyone for help").

The OP already has a FS pension, the MP pension is on top. So why should he need any more advice than if he'd saved the extra in an ISA instead of a MP pension?

The idea that the majority are too stupid to understand drawdown is patronising rubbish. And even if they are, so what, it's their money to waste if they want to waste it. Imagine if people were told the same about other savings, eg ISAs. Providers not letting them have their own money back unless they get someone else to approve how they spend it. It would put people off saving. That's why the govt have changed the rules for pensions, it should encourage people to save more in pensions if they know they aren't going to be told how they're allowed to spend it.

atush

While that is fine in theory (and I don't disagree in the main) we are talking about the OP here.

And until they answer the questions above (such as if they had an advisor who helped choose the investments in their pensions and ISas) then we cannot think if DIY is in the OPs interest or not? If they used one before, they may still need one?

You may be excited by the new rules (everyone is) but I don't think it is in everyone's interest who has a pension now that they DIY. As they may not either want to or be capable of. They can certainly Become capable if they have the desire to learn. And the time to do so. but telling those who don't to DIY is not MSE.

zagfles

atush wrote: »

While that is fine in theory (and I don't disagree in the main) we are talking about the OP here.

And until they answer the questions above (such as if they had an advisor who helped choose the investments in their pensions and ISas) then we cannot think if DIY is in the OPs interest or not? If they used one before, they may still need one?

You may be excited by the new rules (everyone is) but I don't think it is in everyone's interest who has a pension now that they DIY. As they may not either want to or be capable of. They can certainly Become capable if they have the desire to learn. And the time to do so. but telling those who don't to DIY is not MSE.

Who's telling anyone to DIY? The OP clearly doesn't want to pay for advice, his question was how to get hold of his money without doing so.

If he'd saved the extra in an ISA or an unwrapped investment, instead of a pension, no provider would patronise him by telling he can't have his own money back unless he gets advice. So what's the difference?

The OP may or may not benefit from advice. But that wasn't his question.

grey_gym_sock

it can be helpful to raise an question that the OP wasn't asking. it can also be patronizing. it depends.

this whole line of "it's my money, so i should be able to do what i want with it", and "it's my question, so don't answer a different 1" ... is getting a bit 1-dimensional.

bmm78

mgdavid wrote: »

er, it'll be next tax year when the OP retires.

Sorry, meant the coming tax year (2014/15)

bmm78

zagfles wrote: »

The idea that the majority are too stupid to understand drawdown is patronising rubbish. And even if they are, so what, it's their money to waste if they want to waste it.

Haven't suggested anything along those lines. I think some people are far too sensitive about being patronised.

The point is that compliance departments are wary of drawdown for a reason. It's because time has shown that there is a greater risk that drawdown will result in a complaint and redress payout for the regulated firm.

It's about a regulated firm managing that risk, not a judgement on whether people are too stupid to understand the products.

Personally I would prefer a system with greater personal responsibility and caveat emptor. However, that isn't the reality of the current regulatory environment, and as long as the FCA maintain their current stance there will be similar "blocks" on transactions.

zagfles

bmm78 wrote: »

Haven't suggested anything along those lines. I think some people are far too sensitive about being patronised.

The point is that compliance departments are wary of drawdown for a reason. It's because time has shown that there is a greater risk that drawdown will result in a complaint and redress payout for the regulated firm.

It's about a regulated firm managing that risk, not a judgement on whether people are too stupid to understand the products.

Personally I would prefer a system with greater personal responsibility and caveat emptor. However, that isn't the reality of the current regulatory environment, and as long as the FCA maintain their current stance there will be similar "blocks" on transactions.

Sorry - I know I replied to your post but the comment wasn't aimed at you - more at the general attitude in the financial services industry including the regulator. Hopefully the recent changes to pension rules will turn the tide.

bigadaj

It's an interesting dilemma for the industry and the regulators. More compliance and perceived liability means more time, more costs and presumably pushes costs higher, meaning that DIY becomes more attractive for many.

People should have the choice to pay for advice or DIY but as costs increase this becomes practical for fewer people. It also becomes more of a lifestyle choice or a luxury in terms of those that consider their own time to be worth £150+ an hour, as whilst not a linear relationship those with more investments are proportionately going to be more capable of understanding the investment process and learning how to achieve this. Those with a few thousand, or even tens of thousands, won't be practically or economically able to access advice but that's the nature of the world.

bmm78

zagfles wrote: »

Sorry - I know I replied to your post but the comment wasn't aimed at you - more at the general attitude in the financial services industry including the regulator. Hopefully the recent changes to pension rules will turn the tide.

No worries - I think the significant changes have got to come from the regulator, but also there has to be an acceptance from top to bottom that greater freedom carries with it greater personal responsibility. From my experience a lot of people in the industry don't agree with many of the regulator's views, but accept that they have to work within the regulatory framework for the good of their businesses.

The media have a big role to play in this, as their agenda has included calling for greater choice for pension options as people can be trusted with their own money, while at the same time calling for mis-selling reviews of products that were often sold without advice.

It should be an interesting few months, as the discrepancies between the stance of the government and the regulator will be brought into focus.