Pension Robbery. You can't Have Your Money

Alexland

Your plan is wasteful and bonkers and the system has protected you. You have not been robbed but saved.

We all have crazy ideas sometimes but try to keep them focused on less important things.

EdSwippet

bostonerimus wrote: »

While the OP's plan might be irresponsible, given the government's pension liberalization they should be able to do what they want with their pension money.

The OP can certainly do what they want. The requirement is to obtain advice from an IFA, but there is no compusion to follow it. The difficulty may be finding a receiving pension that will not turn you away if an IFA has advised against transferring.

I think the post is trolling.

ProDave

There is LOT of negativity here. WHY?

First question, is this a defined contribution or defined benefit pot you are talking about?

I can understand the OP being a bit miffed. He is told the pot is worth £90K and been told it would pay a pension of £1.3K Are those figures really correct? If so at age 60, he would have to live to 129 to just get the pot value out in pension.

It seems the best "goal" here is to get that fund into a flexible drawdown SIPP where you can take the 25% tax free ans then decide when to draw any more, paying tax on what you choose to draw.

Go back to the IFA. Just give him those figures and state you will not live long enough to manage to draw the fund value at the pension rate they are offering, so you instead want it in a SIPP so you can draw it at a higher rate of your choosing. That is all you need. A simple plan to enable you to get the full pot value, nothing more, nothing less. Don't waffle on about property, that is irrelevant to the discussion with the IFA, if you choose to spend it later on property that is your business.

I must be missing something, or the figures are wrong because everyone else thinks this is a mad idea. Please explain why?

Alexland

ProDave wrote: »

There is LOT of negativity here. WHY?

Because not all ideas are equal and some are really poor. I don't think encouraging the OP to mislead an IFA about their life expectancy or the intended purpose of the pot is helpful.

Given the liability the IFA would be carrying they might wish to take a copy of the medical evidence for their records. Next we will be taking about why doctors refuse to issue bogus medical evidence on life expectancy despite us all paying our taxes.

Alex

Linton

bostonerimus wrote: »

While the OP's plan might be irresponsible, given the government's pension liberalization they should be able to do what they want with their pension money.

If it is a DB pension it isnt their own money, it is money held by the trustees for the benefit of all the pensioners. Most of the money will have been contributed by the employer and the government has given tax allowances on the same basis. The employee will have joined the scheme on the understanding that they were going to receive guaranteed life-long retirement income. There isnt and never was a pot allocated to them as individuals.

With that background it seems to me that everyone in the system owes a duty of care to the pensioner. That is what the goverment has tried to legislate to provide.

One could argue that everyone should be able to get lump sums for their pension without hindrance. But in that case there shoould be no requirement for consumer protection other than the criminal law.

ProDave

Alexland wrote: »

Because not all ideas are equal and some are really poor. I don't think encouraging the OP to mislead an IFA about their life expectancy or the intended purpose of the pot is helpful.

Given the liability the IFA would be carrying they might wish to take a copy of the medical evidence for their records. Next we will be taking about why doctors refuse to issue bogus medical evidence on life expectancy despite us all paying our taxes.

Alex

But unless the figures are wrong, there are 2 choices:

1) Take the 1.3K pension, live to say 100 and get £52K out (less tax as it will be taxed as income)

2) pay the IFA'a fee to recommend a transfer to a drawdown SIPP and get a total of £90K out less the IFA fee and less tax on what you draw beyond the 25%.

Option 2 seems a no brainer that any IFA would recommend.

I MUST be missing something here, please explain why option 2 is so bad?

hyubh

Saxonomous wrote: »

Last year I turned 60 and started to get letters from Pension funds saying my pensions were now maturing. It seems after a divorce I am now left with 3 Pensions with a total fund of around £150k - £200k.

What sorts of pension actually are they? Sometimes your wording implies pure DC ('money purchase'), at other times DB/final salary, and at others still DC with some sort of guaranteed element. It's important to understand what exactly they are. E.g., it doesn't usually make sense to talk of a pure DC pension 'maturing', whereas the normal pension (retirement) age of a DB pension can be very important, both with respect to drawing an income from it as originally intended or if you are looking to transfer out.

I decided it would be good to take one of my pensions which suggests on a £90k pot will pay me now the magnificent sum of c£1300 p.a. and put it to much better use [...] Now I understand enough to know that if I transfer, the value will be lower (although I understand values are quite high). In this case about £76k.

I agree with Brynsam, this is slightly perplexing, though knowing the type of pension would make things much clearer. If DB, there isn't a pot in the first place, so the £90K quoted as the CETV (cash equivalent transfer value) would be exactly that. If the scheme is in distress the trustee can systematically reduce transfer values, but this option isn't typically taken up (better help crystallise the liability by not discouraging a transfer out than the opposite).

My simple logic is Even with tax etc I can add this to some inheritance and other capital I have and purchase 2 small houses which will yield a reasonable net rental income and probably increase in value with refurbishment. It is certainly better than any Pension investment.

What did you contribute back in the day that is £90K now...?

The IFA (and another separate IFA) have come back and told me that they are concerned about the taxation and a little known fact around allowances on future pensions which means I would reduce my tax free allowance on future contributions from £40k to £4k p.a.).

This is the 'money purchase annual allowance'. If you are a well-paid employee with a decent DC occupational pension, you should probably take account if this issue (if only to start negotiating a different mix of pay and pension). If you aren't, and don't invest in personal pensions, then not worrying about it is fine.

Linton

I agree that the figures look wrong. The pot to pension ratio of 69 is way beyond anything we have seen before on this forum and out of step with current annuity rates.

We dont know if it is a DB pension. It could be DC with a very generous GAR and guaranteed value at maturity which would be lost on early transfer, the £1300 value being before the guarantees are applied.

dmelife

ProDave Because he wants to take it as a lump sum and use it to buy property.

I highly doubt any of the figures are accurate given the op!!!8217;s level of understanding.

davieg11

If your so keen to get your hands on the money and pay loads of tax then just get a new IFA and ask them to transfer your DB pension into a SIPP or personal pension under the !!!8216;insistent client transfer!!!8217; rule, which some providers accept. Then withdraw it all!