Pension withdrawal cooling off period?

JustaGuy

My mum decided -I suspect induced by some mailshot or something- to remove 25% of her small pot pension for some house renovations.

As I explained that I thought this was a bad idea she informed me she had already begun the process using a very shady looking -to me at least from a quick google- financial advisor who is charging 10% of the withdrawn funds!

I told her to cancel the transfer but she phoned back later saying she'd tried but, it was 'too late'.

I'm going to try and get my hands on the paperwork tonight but:

Is there a cooling-off period for transfers off this type?

What is a reasonable financial advisor's fee for this service?

What would a l pension company (Aviva) have charged -if anything- doing it direct?

If anyone has advice on how to undo this I'd very-much appreciate it.

bmm78

Is the adviser on the FCA Register? (http://www.fca.org.uk/register/)

Do you know any other details of where the funds were transferred? What was it about the adviser that appeared "shady"?

Sorry to answer your questions with questions, but it's information that can help to get a better idea of what the situation is.

dunstonh

Is there a cooling-off period for transfers off this type?

14 days from the date of application if an annuity is involved.
if its capped drawdown then its 30 days from the date the fund was received by the new provider. Any money paid out must be returned. Risks to that is that charges may still apply (including the adviser charge as that covers the advice, not the transaction). Plus, the original pension provider may not take the pension back.

Is it capped drawdown payment or an annuity?

financial advisor who is charging 10% of the withdrawn funds!

Which actually may not be that much but without knowing the figures to place some context on it, it is hard to say. e.g. a fund of £100,000 would pay £25,000 tax free cash. That fee is £2500. So, its 2.5% of the pension fund. In monetary terms, for income drawdown, that is not an unreasonable figure. If its an annuity, then a DIY annuity purchase can pay more than that.

What would a l pension company (Aviva) have charged -if anything- doing it direct?

If drawdown, The same as an adviser doing it. The only difference would be the advice charge which would not exist with DIY. Although if its an annuity, the commission is often more than the fee on all but the smallest fund values. Aviva probably would not have done it direct either if its drawdown.

Can you clarify whether this is an annuity purchase or a capped drawdown purchase? (the cancellation rights vary).

JustaGuy

Thanks for the quick response!

The -amateur-looking- website lists another companies fca number but states they are an 'appointed representative' of that company. The other company has no functioning web-site and -if google is right- was fined in 2012 for giving bad investment advice.

She never used the word capped drawdown and I haven't seen the paperwork yet so don't know the exact 'mechanism'; some sort of early withdrawal (25% / 5k) from the pension pot (20k) with the funds -I believe- going to her bank account rather than another product.

When I asked about fees she said 10%, I assumed of the withdrawn amount but...

dunstonh

some sort of early withdrawal (25% / 5k) from the pension pot (20k)

The advice charge is very low then at just £500. Indeed, I am surprised they did it.

The -amateur-looking- website lists another companies fsa number but states they are an 'appointed representative' of that company. The other company has no functioning web-site and -if google is right- was fined in 2012 for giving bad investment advice.

Around half of advisers are appointed representatives. This will either by an insurance company or a compliance company. The principal company being fined doesn't mean the member firms of that principle are doing anything wrong. For example, if they have 500 member firms and one of those does something wrong that was missed by the systems and controls of the principal company then the principle company gets fined. The 499 other companies had nothing to do with that.

So, you cannot measure the quality of an adviser based on a fine to the principal .

JustaGuy

Thanks, that's reassuring-ish

The combination of badly designed, name-free website and how -uncharacteristically- secretive my mum's been about this, she described the deal in pure sales-pitch, had me worried she'd been groomed by some trickster.

500 still seems steep to me -compared to conveyancing and such. I'll have a read through tonight. Thanks for your help.

dunstonh

500 still seems steep to me -compared to conveyancing and such.

£500 sounds expensive compared to paying my daughter 50p to run down the shops to get something. That is about how relevant conveyancing is to income drawdown.

This is a high risk transaction made even higher risk due to the small fund value. it is not a mainstream transaction. When pricing income drawdown you would expect figures in the £1500-£2500 range.

Personally, I would have expected most decent advisers to not even consider it seeing as the pot is just £20k. I'm surprised triviality wasnt considered or a delay until April 2015 with the new rules.