GAR Not wanted

Amolad

What's the big deal about a sum of money you'll have made back in share growth within a few months?

I guess I’m kind of old-fashioned in that I don’t like paying for something I don’t need. I tried the unbiased.co.uk web site for locating IFAs, specifying that I did not require “Full Advice” but just pay a fee for a specific service. Oddly I did not get any responses.

If I was a cynical person I might think that IFA’s are trying to acquire new “Full advice” and ongoing clients (& presumably lucrative) on the back of this badly thought out 2015 pension regulation to have GAR-based fund transfer signed off by an IFA.

I rang the original fund provider this morning and asked if I had any other options. In conversation he told be that there have been many other pension fund holders ringing on the same subject and experiencing the same frustrations. It seems my only options with them are to accept the GAR (so take an annuity I don’t want) or leave the fund in place.

The tax free cash is neither here nor there as you can take the tax free cash from the pension and a GAR annuity on the rest.

It's not a vast SIPP fund (without the transfer it's £500K) but I have built it up over 30years of self-employment since I've never held any DB pensions. Re your point:

There is about £50K cash from an earlier non-GAR fund transfer. If I took the GAR I would get around £19K cash tax free from the £76K fund. So £69K in total. If I transferred the GAR fund to the SIPP I would the full £76K in cash making £126,000 in total. The difference between £126K and £69K of £57K would need to be raised by selling shares within the SIPP if I don't carry out the transfer. In both cases I would also need to raise a further £18K to make up the full £144K tax-free amount (=576*25%).

Amolad

It does sound that way doesn't it Jamesd. My telephone mortgage interviewer was clearly reading a script and could only understand the concept of "proper" earned income. When I said I barely earn £10K p.a. these days she said "Oh dear" and even with dividend income I apparently couldn't get near to qualifying for a £60K mortgage even though the one I have is £180K (Originally £330K & since reduced to £150K and falling). At the end of the interview I said "So what it comes down to is that, despite the fact that I have assets of nearly £2½Million, I can't afford a £60,000 mortgage." Her reply was "errrr yes I'm afraid so" ... I gave up there feeling a bit fed up because I thought I'd done OK in my life and this young lady seemed to be telling me otherwise. They did send me an online questionnaire to complete ... you can imagine I wasn't too complimentary about their rules for approving mortgages nor the knowledge of the interviewer.


I thought it would be reasonably straightforward to raise the funds required from my pension. However there are a few obstacles being put in my way by both HMG and the financial community.

jamesd

Maybe it's worth finding out what they will consider to be income and seeing whether that is a better route.

Clearly the mortgage is easily affordable so asking them to escalate it internally to see whether that produces a resolution before complaint may be the way to go. They are supposed to have ways to deal with non-standard situations, not that yours should really be thought of as non-standard these days.

Income drawdown exists so presumably by now they have some credible way to work out what level of income they will think is reasonable for some level of assets that can be drawn upon. Even the overly conservative 4% guideline means a drawable income level of £100,000 a year so you should easily pass any even slightly reasonable affordability test.

One approach might be to start taking income into a dedicated income account then reinvest what you don't spend. This way they can see the cash flow.

Amolad

Thanks Jamesd ... prompted by your comments I called the "Maturities" section of Barclays to see what options I have, if any. Unfortunately after waiting some time listening to music my phone battery expired .... so I'll try again tomorrow.


I confess the figure of £2½Million includes our house ... my(our) total Pension Assets are much less so £100,000 p.a. isn't practical unless I sell the house!

jamesd

Another potential option is equity release. Seems odd at your age but they have radically different repayment method expectations, normally on death, and no requirement to pay interest. Some of them give the flexibility to repay or pay interest whenever desired. The high property value means that even the very low percentages of property value that would be used at your age should work.

Back on the income side, taking the tax free lump sum from what you don't want to sell and putting the rest into flexible drawdown means you've started to draw on it and might suffice to meet their requirement. Then you could reinvest the 25% somewhat less efficiently outside the pension but in the same things.

If they are even slightly reasonable a sensible resolution should be easy enough given the resources you have available.

Amolad

Another potential option is equity release

I wouldn't touch equity release with the proverbial barge pole. It's just borrowing money at fairly high rates and historically has been subject to questionable conditions (not sure about now). I think some get sucked into this because of the "attractiveness" of paying no interest until you pop your clogs. In reality the interest rolls up quickly, with of course the equity in the house reducing just as fast. OK some might say I should be able to make more than 6% on the markets but, as has been pointed out, there are no guarantees, so I still wouldn't pay more than 3% for cash (in today's market) except in an absolute emergency.


On your 2nd point I agree, starting the drawdown and taking the tax-free lump sum on just a proportion of the fund. I will probably begin that process in a few weeks.


I got through to the "Maturities Team" at Barclays ... very few options, basically the mortgage has to be repaid (especially after I made the mistake of informing the guy I had pension investments to cover it). I did ask why they wouldn't take these investments and the potential income from them when it came to the decision NOT to extend the loan. He simply said it was because the income wasn't guaranteed and that they are governed by these rules and those rules etc. My opinion is that such pension fund income is probably more reliable than employment income. So basically I have to pay off by May a loan that is 3 times higher than a loan they said I couldn't service!!


Anyway I'm determined not to pay the ransom to IFA's re the pension transfer, and will be making formal complaints and representations to the appropriate bodies including HMG regarding their crazy requirement to have a straightforward transfer decision "authorised" by an IFA.

atush

Amolad wrote: »

Thanks Jamesd ... prompted by your comments I called the "Maturities" section of Barclays to see what options I have, if any. Unfortunately after waiting some time listening to music my phone battery expired .... so I'll try again tomorrow.


I confess the figure of £2½Million includes our house ... my(our) total Pension Assets are much less so £100,000 p.a. isn't practical unless I sell the house!

Try going old school. use a land line

jamesd

There's no need to roll up the interest with some of the current equity release products.

It appears that Barclays just choose to disregard some types of income since I'm not aware of any requirement that it be guaranteed. I suggest that you start down the formal complaint that you are not being treated fairly track, potentially going so far as to force the to take the matter to court and explain to a judge why they are disregarding your income and trying to take possession instead.

Amolad

Thanks James, but in all honesty I can’t be doing with going through all that process, after all I really only wanted the mortgage for another year or so.

I have started the process of raising funds to pay the mortgage. It would help greatly of course if I could have access to the £76,000 AEGON fund (and NOT take an annuity that I don’t want, and which is not a good financial bet). I am still very disappointed that what I regard as a “no brainer” decision to refuse the GAR is prevented by HMG regulations and compounded by IFA’s “inflexibility on service” but will pursue that route as well. It will be great if I achieve the transfer ... but at least at the latest I’ll get it when I’m 75 (or pegged out!)

Meantime I’ve so far borrowed £20,000 on my credit cards (and should get that up to about £30,000) and am analysing my portfolios to see which are “fully valued” and/or providing a low yield with a view to selling, this from both SIPP and non-SIPP investments.

So, as they say, there is more than one way to skin a cat!!

atush

What % are your CC's? How long will you carry any debt?

I'd be keeping the mtg over using CCs.