Pensionwise - what is the point?

andygb

I have been in a total state of confusion over my private pension.
We are unemployed (hopefully that will change soon), and because we get no help to pay our mortgage, I want to cash in a private pension plan to fund that.
As the money will be going straight to the mortgage company, I assume that the DWP will not count it as savings?
The second point, is that the Pension company asked if I had spoken to Pensionwise or sought advice from an Independent Financial Advisor, so I said yes to Pensionwise but no to an IFA.
I phoned Pensionwise, and they basically told me that they couldn't give me any advice and that I should arrange to see an IFA. I told them that I didn't have the money to spend on that, and I assumed that Pensionwise could give me advice.

So, what is the point of Pensionwise, and how can they help anyone with a private pension query?
I ask this, because the Which guide to pensions, tell s folks who have questions about their private pension to contact Pensionwise.:(

mgdavid

they are only allowed by law to give Guidance, not Advice (which has a strict technical meaning).
Success depends on asking the right questions!

Back to your situation - are you over 55?

bigadaj

You have to be over 55 as David says, but there might be other issues.

If it's a private personal pension then you shouldn't need to get advice to cash it in, but you will pay tax on 75% of it, so the value will be important. With no earnings in this year you have the annual personal allowance to use up so wouldn't pay tax on a pension sum of around £13000.

If it's an older pension then it may have valuable guarantees that mean you would need advice to cash it in which might make it uneconomic to do so.

Also the dwp might view it as deprivation of capital if you pay a large lump sum off in one go. Which would affect benefits, might be best to use the pension or lump sum to pay the mortgage on a continuing basis until you at Keats get back into employment.

This presumes you've examined all available benefits and payments as you would normally be eligible for help with mortgage payments whilst unemployed.

SnowMan

What Pension Wise can do is give anybody over age 50 tailored guidance about what their options are to access their (defined contribution) pension from age 55 to enable them to make an informed decision on whether to cash in their pension or choose another option.

What Pension Wise can't do is give regulated advice. So they can't tell you what is your 'best' option is or what product to buy.

People who have been using the Pension Wise service have generally been finding it very useful. Did you have a full guidance session either face to face or by telephone?

Some people go on to take advice from an IFA (and Pension Wise promotes the value of advice) whereas some are able to handle things themselves.

In some cases legislation is that regulated financial advice is required, for example to transfer pension pots over 30K where the pension has important guarantees, such as a guaranteed annuity rate. Is that what you have been told?

If you cash in your pension then it will count as savings for means tested benefit purposes. However if some of the cashed in pension is used to make your regular mortgage payments then your capital will reduce by the amount of each mortgage payment and the regular mortgage payment won't be treated as 'deprivation of capital' to use the jargon.

Often people using Pension Wise are referred onto benefits advice outside of Pension Wise (for example through Citizens Advice services) because the decision they take on their pension is interlinked with the affect on benefits. It will depend on specific circumstances, including what benefits you are receiving, who is in your household, whether you are getting income based or contributions based benefits, whether you are both below SPA etc etc how your pension decision will affect your benefits. The rules on getting help with your mortgage payments are complicated; you haven't indicated why you don't qualify, or whether you are in a waiting period to qualify, but again that could be looked at.

dunstonh

I ask this, because the Which guide to pensions, tell s folks who have questions about their private pension to contact Pensionwise.

Pensionwise is generic guidance about most of the options available. Not advice. The minute you start asking advice questions or specific product related questions then they have to tell you to go to an IFA. It was created to take away some of the marketing the providers may do without the need to go to an IFA on simple matters. However, it is not a replacement for an IFA.

You dont need to use an IFA unless your pension has safeguarded benefits that would cost more than £30,000 to arrange on the open market. You can DIY otherwise.

For most people not at retirement, paying off the mortgage with a pension is not a good idea. Pension returns are typically greater than the interest paid and paying extra tax to get the pension out early as a lump sum negates most of the benefit.

cjking

As the money will be going straight to the mortgage company, I assume that the DWP will not count it as savings

I'd guess that the money withdrawn will count against you as far as benefits entitlement is concerned. It might be worse than counting it as savings, they might count it as income.

https://www.pensionwise.gov.uk/benefits

https://www.citizensadvice.org.uk/debt-and-money/pensions/nearing-retirement/what-you-can-do-with-your-pension-pot/

If you're under Pension Credit age

Only the money you actually take out of your pension is counted as income or capital, not the full amount that you're entitled to take. The rules are the same otherwise. This means:

money you take out of your pension will be considered as income or capital when working out your eligibility for benefits - the more you take the more it will affect your entitlement
if you already get means tested benefits they could be reduced or stopped if you take a lump sum from your pension pot
if you already get benefits, any money you take out and spend quickly could mean your entitlement gets reassessed
if the benefit decision maker decides a your motivation for spending the money was to make sure it didn’t affect your means tested benefits, you could be seen to still have the money and have your benefits reduced or lose benefits