Pension am I getting fobbed off?

fugglestick

I had a 35K pension mature Oct. 2014, but left it untouched as I didn't need it nor want an annuity in light of the previous budget announcement on pensions availability.

I discussed it all at length with my accountant, that as I was retiring next month, I would draw it all out and invest it elsewhere. I do have a large SIPP which is doing fine with no plans to draw on it. I also have a large directors loan account that will see me finically independent for some years to come. Structuring it this way without an earned income, my tax liability will be minimal. I shall also be entitled to my OAP.

However, when I rang the Prudential today, they informed me I couldn't draw it all out and had to do it through a FA. They cited new rules 11 March 2015 specifying that.

The Pru has done its annoyingly utmost to persuade me to take out an annuity but at the paltry rates being offered, no thanks.

Am I being lied to by the Pru? Why do I have to pay an FA just to complete and submit a application?
Thank you

thenudeone

Companies are not obliged to offer the new "pension freedoms". They are simply allowed to. There is a big difference.

What they are obliged to do is offer the terms agreed when you took out the plan, plus any other statutory requirements such as allowing you to buy an annuity from any provider you want, or to transfer it to a provider who will give you the freedom to "cash it in" or other flexibilities such as drawdown.

dunstonh

However, when I rang the Prudential today, they informed me I couldn't draw it all out and had to do it through a FA. They cited new rules 11 March 2015 specifying that.

What type of pension is it? This may be the issue.

Am I being lied to by the Pru?

Depends on the type of pension.

Why do I have to pay an FA just to complete and submit a application?

its not just submitting an application. Warnings have gone out over the last few weeks about doing this on insistent client basis. The advice side is really backing away from people insisting on doing it against advice.

sandsy

That's about the date the government agreed its new legislation on safeguarded benefits which basically prevents scheme members with any sort of guarantees attaching their benefits (whether defined benefit or defined contribution) from accessing their benefits flexibly without advice. Advice isn't needed for an annuity purchase.


What sort of contract was it? Are you sure it hasn't got guaranteed annuity rates?

SeniorSam

If your pension is doing well and still growing, why move it at all. It may be a fantastic scheme and you do need to evaluate it before taking action. However, if it needs acting upon, you could move to a Sipp and maintain the growth in the Trust to draw later as you wish. Good advice is important and I found the people at Hargreaves Lansdown particularly helpful when I moved my pensions to them some time ago. You could give them a call and ask what they think about it?

Sam

fugglestick

Thanks for all the replies. It does have a guaranteed annuity option, but it is a rubbish rate, and I would much prefer to use it in my business where I could turn a much greater return in a relatively short time. By using that way would save me borrowing rates, which in turn are much higher than the annuity rate being offered. I have discussed this with my accountant, who is a witched on guy and he agrees it would be one of several much better options than an annuity.
It just seems to me, they really dont want to let the money go.

Linton

fugglestick wrote: »

........
It just seems to me, they really dont want to let the money go.

I think its more for practical reasons than any desire to keep your money. Old pension schemes may well be managed by old computer systems and it isnt economically justifiable to implement major software changes to cope with extra options that were never envisaged when the software was first developed.

bmm78

fugglestick wrote: »

Thanks for all the replies. It does have a guaranteed annuity option, but it is a rubbish rate, and I would much prefer to use it in my business where I could turn a much greater return in a relatively short time. By using that way would save me borrowing rates, which in turn are much higher than the annuity rate being offered. I have discussed this with my accountant, who is a witched on guy and he agrees it would be one of several much better options than an annuity.
It just seems to me, they really dont want to let the money go.

If you have safeguarded pension benefits (including Guaranteed Annuity Rates) valued greater than £30k, legally you cannot transfer these away unless you have taken impartial financial advice.

It's not a Prudential policy - these provisions are contained in the Pension Schemes Act 2015.

In my experience, accountants often give poor (unregulated) advice on pensions, and extreme caution to what they tell you.

jem16

fugglestick wrote: »

Structuring it this way without an earned income, my tax liability will be minimal.

Remember it's not just earned income that's going to count - it's any taxable income.

I shall also be entitled to my OAP.

Which is also taxable income and would be taken into account.

fugglestick wrote: »

Thanks for all the replies. It does have a guaranteed annuity option, but it is a rubbish rate,

What is the rate?

I have discussed this with my accountant, who is a witched on guy and he agrees it would be one of several much better options than an annuity.

Accountants are great at what they are qualified to do but financial advice on pensions is not one of them.

You already have options other than an annuity which does not involve cashing in the whole pot and subjecting 75% of it to tax which could amount to quite a bit.

sandsy

It sounds like you will have to take financial advice from a regulated adviser (not your accountant!) to access these funds if you don't intend to take an annuity. The Pru are just following the new law.


What exactly are the terms of the guaranteed annuity option anyway?

dunstonh

I have discussed this with my accountant, who is a witched on guy and he agrees it would be one of several much better options than an annuity.

Accountants are not allowed to give advice like that. I tend to find that those that do, are stuck on old legislation (like the one last year that told a client he should have an EPP but the reasons he gave were abolished in 2006) and give incorrect or even biased information. Accountants are good at what they do and advice on pensions is not what they do. Just as advisers are not accountants.

I dont recall ever seeing a pru pension with a GAR lower than 7%. Most closer to 10%. What are your GARs?