GAR Not wanted

Amolad

I have a Personal Pension fund that I need to transfer to my main pension funds held in a SIPP. However there is a Guaranteed Annuity attached to the fund so unfortunately it comes under 2015 pension regulations which say that I must have an IFA sign a "Safeguarded benefits - confirmation of advice given" before I can complete the transfer. So far the IFA's I have contacted have all said they can only sign the form on a "Full Advice" basis and consequently charge me over £2,000 for the privilege. I have good reasons to not take up the GAR (not least of which is that the annuity would be on my life only with no guarantee period). I suspect many others will be facing this problem in the next few years (some may even WANT full advice).
I feel that the powers that be should have made provision for a simple service, priced in hundreds not thousands, that enables an IFA to approve reasons and sign the form rather than carry out a "full advice" service.


Any opinions or suggestions would be welcome
Regards .... Amolad

dunstonh

I have a Personal Pension fund that I need to transfer to my main pension funds held in a SIPP.

What is the "need" to do this?

However there is a Guaranteed Annuity attached to the fund so unfortunately it comes under 2015 pension regulations which say that I must have an IFA sign a "Safeguarded benefits - confirmation of advice given" before I can complete the transfer. So far the IFA's I have contacted have all said they can only sign the form on a "Full Advice" basis and consequently charge me over £2,000 for the privilege.

It is a high risk transaction that comes under pension transfer specialist rules and requirements.

I have good reasons to not take up the GAR (not least of which is that the annuity would be on my life only with no guarantee period).

What is the rate for the GAR?
is your health poor?
Could the increased amount be used to cover life assurance?
A number of providers will alter the terms to match your desired option and cost the equivalent based on the GAR as the starting point. They often they dont tell you they can do this but do it upon request/
With the increased amount paid under the GAR, you could take less from the SIPP. So, in the medium to long term, you could be better off.
Do you have to take the pension on a given age?

I feel that the powers that be should have made provision for a simple service, priced in hundreds not thousands, that enables an IFA to approve reasons and sign the form rather than carry out a "full advice" service.

You can have limited advice but it still has to be full advice in that area. Retirement income options take an adviser far more work nowadays. I spent two whole days on one recently on top of the meeting time. It is not really possible to reduce it to a simple service as the advice would only be as good as what simple information is available. Advice is meant to be correct 100% of the time. Simplifying it so it is only right 75% of the time is too much of a business risk for the adviser and almost certainly unacceptable for the regulator. It has fined firms for failure rates just in excess of 10%.

Linton

Have you asked the pension company whether you can change the conditions of the GAR pension? I had no problem with mine getting the guarantee period extended for a small reduction in payment.

The cost of the "service" arises because the IFA carries full liability for the advice he gives. At some time in the future you could sue him for bad advice should you come to the conclusion that you had made a mistake giving up your GAR. If the IFA doesnt carry the liability getting his approval becomes a pointless box ticking exercise.

Amolad

DunstonH - Thank you for your reply

What is the "need" to do this?
I am consolidating my pensions into my SIPP in order that I can commence income drawdown. I have planned for some time to use 2 other non-sip funds as cash for the 25% tax free (about £150,000). This is also earmarked to pay off our mortgage. I have already transferred a pension pot from VIRGIN also for this purpose.
It is a high risk transaction that comes under pension transfer specialist rules and requirements.
Not sure why you say it is high risk to transfer. I regard annuities as high risk, even at 11%, because you are "betting" against dying too soon.
What is the rate for the GAR?
is your health poor?
Could the increased amount be used to cover life assurance?
The rate is 11%. As mentioned it's on my life only. I've previously had a heart attack. I rang AEGON to enquire about options, was told as per contract GAR rate or transfer. Life insurance rates too high.
With the increased amount paid under the GAR, you could take less from the SIPP. So, in the medium to long term, you could be better off.
Do you have to take the pension on a given age?
If I take the annuity I would need to sell significant investments from my SIPP to raise the 25%. These investments have been performing at significantly more than 11% for over 6 years and about 9% for 30+years. There is also the point that annuities make income tax planning (liability) less flexible than the options now available under income drawdown where it is possible to take income in amounts and tax-years more fully under the owner's control.

I have been managing my own portfolios both inside and outside SIPPs for about 35 years and am active in the markets. In putting these regulations in place in 2015 they are saying none of us are capable of making our own pension/investment decisions. I see no reason why, for something as simple as a transfer, an investor/pension owner can not simply sign a form which gives his/her reasons not taking up a GAR with the form also signed by an IFA and this could also then be used as a waiver against any claim against the IFA arising.


regards Amolad

dunstonh

Not sure why you say it is high risk to transfer. I regard annuities as high risk, even at 11%, because you are "betting" against dying too soon.

It is high risk from a regulatory point of view.

All it takes is for there to be a 25% or so crash that the markets take 20-30 years to recover from and you get an influx of complaints that the FOS typically uphold.

The rate is 11%. As mentioned it's on my life only. I've previously had a heart attack. I rang AEGON to enquire about options, was told as per contract GAR rate or transfer. Life insurance rates too high.

11% is a very good rate. Its around 3 times higher a sustainable rate under drawdown. So, taking the 11% and reducing your drawdown could see a breakeven point within your life expectancy.

Dont always believe what you are told on the phone. Many many times I have been told one thing on the phone only to be told different in writing. Always rely on the written response.

If I take the annuity I would need to sell significant investments from my SIPP to raise the 25%. These investments have been performing at significantly more than 11% for over 6 years and about 9% for 30+years.

Forget the last 6 years and largely forget the last 30 years. Things are different going forward.

If I take the annuity I would need to sell significant investments from my SIPP to raise the 25%.

Why would it make any difference? You can take the 25% from the Aegon plan and your drawdown.

I see no reason why, for something as simple as a transfer, an investor/pension owner can not simply sign a form which gives his/her reasons not taking up a GAR with the form also signed by an IFA and this could also then be used as a waiver against any claim against the IFA arising.

The FOS does not recognise such disclaimers in high risk areas. It takes the view that people who dont understand the subject are not in a position to know what they are signing away.

The FOS also get a significant number of complaints from experienced investors who suddenly play dumb when it suits them.

I do agree that consumer protection has gone too far. I also believe that those who put in place the safeguard protections did so without realising the hoops that advisers have to go through and the risks advisers have to suffer .

Amolad

All it takes is for there to be a 25% or so crash that the markets take 20-30 years to recover from and you get an influx of complaints that the FOS typically uphold.

I don't remember a crash in the UK that took 20-30 years to recover from.


11% is a very good rate. Its around 3 times higher a sustainable rate under drawdown. So, taking the 11% and reducing your drawdown could see a breakeven point within your life expectancy.


I expect to drawdown at least 11% and maintain the capital ... I'm an optimist (and even bet on Spurs tonight). If the market falls badly I'll draw down dividends only and maybe become an IFA.


Forget the last 6 years and largely forget the last 30 years. Things are different going forward.

Playing the stock market is always a risk and I've accepted this for many years, but I must say I've made more because of wild fluctuations in the market than I have lost.


Why would it make any difference? You can take the 25% from the Aegon plan and your drawdown.


The transfer would come over as cash (there is insufficient cash in the SIPP)


I do agree that consumer protection has gone too far. I also believe that those who put in place the safeguard protections did so without realising the hoops that advisers have to go through and the risks advisers have to suffer .


Yes we consumers are suffering too and I am still trying to jump through the hoops ... & that's what I'm complaining about.

atush

What is the "need" to do this?
I am consolidating my pensions into my SIPP in order that I can commence income drawdown. I have planned for some time to use 2 other non-sip funds as cash for the 25% tax free (about £150,000). This is also earmarked to pay off our mortgage. I have already transferred a pension pot from VIRGIN also for this purpose.

If you have other substantial funds in a Sipp- use this fund to be inherited tax free by your spouse if you die early. An 11 % GAR is very desirable. See if you can spend a little getting it guaranteed for 5-10 years?

you had a heart attack so agree that if you havent changed your lifestyle and risk factors it could be a good idea if you cant buy a guarantee period. but if this fund is only a small art of your total pension, 11% GAR could be worth the risk.

There is no reason you need to put all your pension funds in one place.

atush

I expect to drawdown at least 11% and maintain the capital ... I'm an optimist (and even bet on Spurs tonight). If the market falls badly I'll draw down dividends only and maybe become an IFA.

Expecting to DD 11% and maintain capital is a pipe dream.

dunstonh

I don't remember a crash in the UK that took 20-30 years to recover from.

yet. A japan event is a possibility.

I expect to drawdown at least 11% and maintain the capital

madness.

The transfer would come over as cash (there is insufficient cash in the SIPP)

Either way, investments are being sold to pay out the 25%.

Amolad

Hi Atush ...

Expecting to DD 11% and maintain capital is a pipe dream.


I hold 100% company shares (i.e. no funds) in my SIPP ... these yield average 4.9%, the FTSE has risen by an average 5% over past 30-35 years (capital gain) ... I've beaten the FTSE in 5 out of the past 6 years by over 8% ... as I've said before, with investing, I'm an optimist ... and even Spurs have won tonight against the "unbeatable" Chelsea .... Crikey!


All the Best .... Amolad

Amolad

Madness

See reply to Utush


Either way, investments are being sold to pay out the 25%

But the AEGON fund has grown 60% in 5 years, my SIPP 100% in 5 years ... so I still prefer to hang on in with my SIPP.