Pension drawdown & IFA

evojack

I have a couple of pensions from employers many years ago,

I turned 55 in January and requested my pension options packs

Phoenix Life of £61k that will provide £3,211 per year now

Fidelity for £71k that will provide £1,770 per year at 65 but cannot be taken earlier.

I have calculated that I can get a better return by taking as cash using the 25% tax free option and further staggered amounts over the next 2 x tax years to ensure I stay within the standard tax rate and simply adding the cash towards a residential rental property investment

The £135k from these funds will provide £10,00 per year now plus will have the equity growth

The Phoenix life policy can be cashed in but has certain guaranteed benefits so they are insisting a have a letter from an IFA supporting my decision

The Fidelity policy does not offer the cash in option so I will need to transfer to a SIPP that would provide me with the flexibility I want, they are also insisting on IFA review supporting my choice

Whilst I accept the need for IFA due to value and the guaranteed benefits I am struggling to find an IFA at reasonable cost

I contacted an IFA and we discussed an option for him to review my investment figures to see that I will not be worse off and support this in writing

He has now provided a quote of £360 for the review that refers to my wish to invest in property

The letter of engagement states they will make a recommendation on what I should do which I hadn't asked for, I just wanted review and opinion on my choice in writing

Includes a condition that if I they implement the recommendation they will charge 1% of the value

Paying an IFA for his time in reviewing my choice is one thing, but is it legal for them to to then take 1% if I implement it, given that it was my own investment strategy ?

jamesd

The law does not require them to get from you a letter supporting your choice. It requires them to get from you a letter saying that you have received advice if the pension has protected benefits like a guaranteed annuity rate or being a defined benefit pension. You do not need to follow that advice.

Taking the 25% tax free lump sum doesn't have the legal requirement for advice. You'd have a few months to move the rest to another plan or buy an annuity if you took it and no drawdown option is offered by an existing provider.

If you choose to use the IFA to implement their solution it's legal for them to agree with you a charge for that service. You are not required to use their services to implement it if you do not want to.

It's puzzling that the Fidelity policy doesn't offer a cash in option because their particular brand is not one I associate with the restrictions that would require independent financial advice. Can you say more about why they want the advice? It may just be a company policy and if it is, you normally have a legal right to transfer without advice. Alternatively there might be some Guaranteed Minimum Pension if it contains money from contracting out. It might be their own SIPP that may have a signup requirement for advice and just transferring to any other SIPP may eliminate their request for it.

The IFA appears to be offering you an excellent deal. Take it, just don't use the extra 1% service unless you want to. We've seen charges of over a thousand Pounds for similar service.

Annisele

I think the IFA's quote is so cheap that he might not understand what the OP wants - like jamesd, I'd be expecting a much higher charge.

LXdaddy

It sounds like about 2 hours work is being quoted for. From other threads about this subject it sounds low.


The 1% to implement is optional and you don't have to pay that unless you engage the IFA to do that. You would be free to ignore the recommendation or you could even implement the recommendation yourself without paying the 1%. The implementation fee is what you would pay if you asked the IFA to do the work of implementation.

greenglide

The 1% to implement is optional

Maybe it isnt optional and that is why the offer is so cheap?

Need to read the small print to make sure?

dunstonh

The price seems very low for an insistent client in a high risk advice area if its just £360 (plus VAT if there is no intention of implementation via the adviser)

The way I read it is that the £360 is for the review and the 1% is to put the drawdown plan in place. Personally, if I was staging a fee for a transaction like this, I would have the amounts the other way around. The riskiest part is the advice. Not the implementation. However, each is free to decide their own pricing.

Ask the adviser for confirmation.

Paying an IFA for his time in reviewing my choice is one thing, but is it legal for them to to then take 1% if I implement it, given that it was my own investment strategy ?

Yes it is legal. Your transaction requires the purchase of a product.

Is the Fidelity pension an occupational one or their platform?

bigadaj

OP - are those figures flat rate or index linked.

The Phoenix product looks pretty good value to em and I'd be tempted to take their offer, the fidelity one I would, agree looks poor and may find a better home elsewhere though whether this is rental property is another matter.

Linton

The Fidelity annuity looks so poor that I would question whether its right. Are both offers inflation matching rather than fixed rate? Do they include or exclude 25% tax free cash?

westv

£3,211 from £61,000 at age 55 looks incredible value at the moment.

dunstonh

westv wrote: »

£3,211 from £61,000 at age 55 looks incredible value at the moment.

Makes you wonder what the GAR looks like at 60 or 65.

jamesd

westv wrote: »

£3,211 from £61,000 at age 55 looks incredible value at the moment.

5.26% possibly plus inflation. Seems likely that the rental plan can beat this once leverage is allowed for.