'Unlikely' to be able to access my £33k pension pot

DHHHH

I really hope you guys can help...

I have gone round and round in circles, speaking to various people including the Pension Advisory Service, Money Advisory Service and my Local MP.

When the government changed their policy on pension release I contacted my pension provider - Electricity Supply Pension Scheme (ESPS). They advised me that my pension had a transfer value of around £33k which I was planning on transferring and then releasing. So In order to do that, I set up a Vantage SIPP.

To complete the transfer, I contacted Hargreaves and Lansdown who after setting up the SIPP told me that because my pension was over £30,000 I would have to seek independent financial advice to get it signed off ... (to quote their letter) 'Defined Benefits or Financial Salary Benefits which means the pension is based on my salary and length of service with SSE rather than building up an investment fund - and has value promises or guarantees.! Due to these guarantees Hargreaves and Lansdown would only be able to proceed with the transfer if advice was taken from a qualified person.'

My husband then did some research and spoke to a financial adviser off the record so to speak and he thought it was likely that it would get signed off and also it would cost around £1,400 to get accredited financial advice on the matter.! I am obviously hesitant to pay this much if it is likely to not get signed off.

As I am only slightly over the threshold for an automatic transfer upon request, not requiring accredited sign off (by £3,000) I am really perplexed and frustrated that this is proving to be so difficult and have so far have come to a dead end. The alternative offered to me by my pension provider was a £3,000 payout with £20 a week pension for the rest of my life which means I would have to live until 85 to recoup the £33,000 I have built up and am owed.! As you can imagine, this is a real kick in the teeth! I just want the lump sum out!

Any advice would be gratefully received!

Thanks.

dunstonh

When the government changed their policy on pension release I contacted my pension provider

It wasnt so much a change of policy but an adjustment to things you could already do since the early 2000s.

To complete the transfer, I contacted Hargreaves and Lansdown who after setting up the SIPP told me that because my pension was over £30,000 I would have to seek independent financial advice to get it signed off ... (to quote their letter) 'Defined Benefits or Financial Salary Benefits which means the pension is based on my salary and length of service with SSE rather than building up an investment fund - and has value promises or guarantees.! Due to these guarantees Hargreaves and Lansdown would only be able to proceed with the transfer if advice was taken from a qualified person.'

That is correct. That is what legislation demands. And for good reason. Historically, 9 out 10 people doing the transaction you want to do would be classed as mis-sales and not be in their best interests. Currently, things are a bit better than that in terms of suitability due to low gilt yields pushing transfer values up.

My husband then did some research and spoke to a financial adviser off the record so to speak and he thought it was likely that it would get signed off and also it would cost around £1,400 to get accredited financial advice on the matter.! I am obviously hesitant to pay this much if it is likely to not get signed off.

£1400 is a very low price. You are not required to get a positive outcome in the advice. The requirement is for you to seek advice and be given it.

As I am only slightly over the threshold for an automatic transfer upon request,

You are not only slightly over. You would be way over the threshold. It is not based on the transfer value. It is based on the market value of the alternative to meet the same benefits.

The alternative offered to me by my pension provider was a £3,000 payout with £20 a week pension for the rest of my life which means I would have to live until 85 to recoup the £33,000 I have built up and am owed.!

You have forgotten indexation on the works scheme. Plus, tax could well come into play and make the breakeven point on staying in the scheme much lower.

As you can imagine, this is a real kick in the teeth! I just want the lump sum out!

Nothing is stopping you apart from your reluctance.

Linton

Some points....

The £20/week pension you have been offered would almost certainly be inflation linked and so you would reach the simplistic break-even point earlier than 85. You dont say your current age, but if it's around 60-65 and you are in average health you can expect to live until you are around 87.

I cant think of any alternative than getting an off the record view, and if positive pay the money and take the risk that the IFA doesnt find something in your circumstances that makes a transfer a bad idea. (PS even if he does the SIPP company may still accept the transfer)

The reason why this is so difficult is that certainly in the past transferring out of a DB pension was generally a seriously bad idea from a financial point of view. The government was afraid that a large number of naive pensioners would nevertheless do it and live the latter part of their lives in poverty and so instituted procedures to protect them.

A final point - you havent built up £33K and you arent owed it. You were promised a specific lump sum and steady income in retirement, your employer was committed to provide it no matter what happened. You were never promised anything else. The £33K is the assessment by the scheme actuaries of what it would cost the scheme to meet that promise, with account being taken of the promises made to everyoneelse. This value may be very different to what you contributed. At the moment, because of very low bond returns, transfer values are often unusually high.

Number75

I don't understand why this needed your MP.
You want to transfer.
You are allowed to transfer.
But to do so you must take advice from an IFA (for good reasons)
So, you know what to do.
What else was your MP going to do?
How would you feel if in 10 years time it turned out you'd made a very bad decision - bet you'd be asking your MP to support a compo claim then!
That you don't understand that it is not based on transfer value - and that's not a criticism - illustrates perfectly why the IFA check is required.

DHHHH

Thanks for the info so far.... so do you know, if I go ahead and get the assessment and if for some reason it is not deemed in my best interest to take the money can I still go ahead and take it?

dunstonh

DHHHH wrote: »

Thanks for the info so far.... so do you know, if I go ahead and get the assessment and if for some reason it is not deemed in my best interest to take the money can I still go ahead and take it?

Some providers will only accept with a positive outcome but others will not.

Remember, they are all scared of complaints a decade or so later when hindsight opinions are available. Just as what happened following the 1988-1994 period which is known as the pension mis-selling period.

DHHHH

Thank you for your replies so far, they are very helpful. So if there is a negative outcome (although I own my own house with no mortgage so am financially secure), is there a way I can find people who would accept that outcome without having to pay the fees for each before finding out?

Linton

DHHHH wrote: »

Thank you for your replies so far, they are very helpful. So if there is a negative outcome (although I own my own house with no mortgage so am financially secure), is there a way I can find people who would accept that outcome without having to pay the fees for each before finding out?

You only need one IFA report - it will apply to all providers. Once you have it you can try to find aomeone who will accept the transfer.

NordicNoir

DHHHH wrote: »

Thanks for the info so far.... so do you know, if I go ahead and get the assessment and if for some reason it is not deemed in my best interest to take the money can I still go ahead and take it?

I contacted some platforms recently asking if they would accept a transfer, even if an IFA did not recommend it. Hargreaves Lansdown and Charles Stanley Direct both said that they would only accept the transfer if the IFA recommended it. A J Bell said that they would accept the transfer regardless of the IFA's recommendation.

DHHHH

Thanks MichelleUK, do you happen to know if there is a pension transferral fee involved ie would AJ Bell take a significant chunk in order me to release it through them?

dunstonh

DHHHH wrote: »

Thanks MichelleUK, do you happen to know if there is a pension transferral fee involved ie would AJ Bell take a significant chunk in order me to release it through them?

Dont jump the gun. Let the adviser give the advice. If it is a positive recommendation then they will facilitate the transaction. It doesnt need a SIPP. Indeed, a SIPP is probably the most expensive option.