Why the new Pension Rules are a Scam.

monkey_shoulder

When that nice Mr Osborne told us that we could access our pensions "flexibly" thanks to new pension rules, I thought this was a good idea and looked forward to "drawing down" my pension, effectively taking early retirement.


However, it is not so simple, and is a huge scam to create tax revenue for the government and profits for the pension providers.


When I asked my pension provider, ReAssure, how I could get at my money they stated, and I quote: " You will not be able to take your benefits flexibly from your current ReAssure pension unless you take the whole pot as a lump sum."


What they are saying is that I must cash-in my pension and re-invest in what they call a Retirement Account. This is a new financial product that they charge to set up and take a percentage in fees to manage. On top of that, although I am entitled to a 25% cash free sum, the other 75% will be taxed, at the highest rate!


I thought that I could take, say, £10,000 a year out of it without tax, since my personal allowance is £10,600, but oh no, the remainder of the capital ( after a Tax Free lump sum ) must be moved within six months or face a blistering 55% tax.


This is a most misleading and invidious scheme to turn our pension funds into tax income!

EDIT -Ok, it is not as bad as I thought, they don't take the tax straight away.

MS

PeacefulWaters

Have you asked them about whether or not you can transfer to another provider?

Perhaps one of the many that will let you draw down flexibly?

nearlyrich

How big is the pot?

kidmugsy

What a silly rant. If you don't like what's on offer go to another shop.

monkey_shoulder

PeacefulWaters wrote: »

Have you asked them about whether or not you can transfer to another provider?

Perhaps one of the many that will let you draw down flexibly?

I think you missed the point. They will let me draw down flexibly, but only if the pension pot is transferred to a "Retirement Account". This means that the whole pot is liable for tax.


If I transferred to another provider, the same would apply. It is the "Crystallizing" of the fund which make it eligible for tax. They make a big deal about the 25% tax free bit but they don't draw attention to the 75% taxed at highest rate bit.


MS

monkey_shoulder

kidmugsy wrote: »

What a silly rant. If you don't like what's on offer go to another shop.

You obviously don't understand the problem.


It seems to me that the same will be true for other "shops". If you try to access your pension they will require that you re-invest the fund in a new financial product.

nearlyrich

If the provider doesn't have a suitable product you should be able to transfer the pot to a provider that does without paying top rate tax on the balance. If you have other income that uses up your tax free allowance you may pay some tax depending on what you draw but your rant is factually incorrect.

monkey_shoulder

nearlyrich wrote: »

If the provider doesn't have a suitable product you should be able to transfer the pot to a provider that does without paying top rate tax on the balance. If you have other income that uses up your tax free allowance you may pay some tax depending on what you draw but your rant is factually incorrect.

What I have quoted comes directly from ReAssure's literature, and the Money Advice Service "Your Pension: it's time to choose" booklet. See page 14 in that booklet.


I don't see what is incorrect.


Furthermore I am finding it very difficult to "shop around" as they say because very few providers tell you how much they charge for set-up and management of the retirement account.


Scottish Widows charge 0.7% up to 30k and 0.3% above that. I am yet to discover how much Reassure charge. Can't find it on their website. I am assuming 0.7% is probably industry standard.


MS

atush

What a numpty!

Stop with the Reassure stuff. Plenty of providers will do what you want, so just MOVE your pension.

We understand perfectly your problem, but you dont.

magpiecottage

You could always go with the old arrangement and buy an annuity - a guaranteed income for life. That too will be taxable and the insurance company will build a profit into running it for you.

However, unless you have always been willing to work for nothing, I do not think you can expect the insurance company or its staff to do so.

And if you have always worked for nothing I cannot see how you could possibly have built up a pension fund.

redux

Osborne says he has brought in more flexibility.

I don't see how you can blame him for your provider apparently not having done so.

If they insist on you removing the funds from the pension wrapper and having it all taxed in one year, then either complain and get them to review this requirement, or move to somewhere that gives more choice.

However, I can't help wondering if you've misunderstood some of their material. I just found a page where their description includes " Make flexible withdrawals as and when it suits you"