Pension Robbery. You can't Have Your Money

marlot

Saxonomous wrote: »

...I have never really understood Pensions...I am a reasonably senior executive these days....purchase 2 small houses ...certainly better than any Pension investment...Frankly speaking at my salary I am not bothered about some extra taxation...I don't want approaches from Pension Scammers etc...

You give rather conflicting signals! You say you earn so much that paying the tax is of little consequence, yet the pension pot is very small by senior exec standards.

If you're earning that much then just get a mortgage on either your main home or the properties you want to buy. It seems strange to cash your pension in and put it into an illiquid investment.

I'm not a pension expert either, but i've found the advice on here to be extremely valuable. I understand that you don't like being told what to do with your money - but a better response would be to cashflow the alternatives. I doubt that simply cashing the pension in gives the best return.

If I took a proposal to my board which showed me losing 40% of one of their investments I'd expect a very rough ride. You should put your own proposal to the level of rigour you'd expect from your FD.

Terron

dunstonh wrote: »

There are DC schemes with a final salary underpin. Hybrid is a good way to consider those.

I have one such scheme and had just got an illustration. It gave me 4 options

1. Take every thing as a pension
2. Take a tax free lump sum and a pension
3. Transfer to a new pension
4. Defer the pension

The illustration is rather confusing. The pot is £210k and the pension from it is shown as £8,400pa, but the underpin guarantees £9,200 and the transfer value is £280k. The transfer option might require an IFA to be involved.

Terron

ProDave wrote: »

It is the OP insisting on wanting to draw it in one lump, pay a lot of tax, and gamble it on property (at or close to the top of a bubble) that seems to have put a block on it.

Given that he seems to under stand property better than pensions it doesn't seem to be a big gamble.
Also given the sums involved he is not likely to be investing in part of the country that is near the top of the bubble.

I wouldn't pay the amount of tax he is considering but I do plan to take money out of my pensions to invest in property/ Specifically when I take my DB pension next year I plan to sell my former home (no CGT) and use the proceeds and some of the tax free lump sum from my pension to pay off the mortgages on the other rental properties in my own name.

kinger101

Something doesn't add up. Where you get £1.3K on £90K from is a mystery (actually, I think you made it up).

https://www.hl.co.uk/pensions/annuities/annuity-best-buy-rates

Take 25% out tax free, and then decide on drawdown, annuity or a combination thereof.

Brynsam

Malthusian wrote: »

If he does that the IFA is still liable. Who else do you think the OP is going to blame when he realises how much money he's p-ed up the wall?

He can blame the IFA all he likes, but if the IFA's only role is to confirm that OP received advice, it's hardly likely to succeed - particularly as that advice clearly indicates that the IFA thinks it's a lousy idea.

dunstonh

Brynsam wrote: »

He can blame the IFA all he likes, but if the IFA's only role is to confirm that OP received advice, it's hardly likely to succeed - particularly as that advice clearly indicates that the IFA thinks it's a lousy idea.

Problem is that there are FOS complaints upheld where complaints have come in later telling all sorts of lies saying the adviser told them they had to document it that way.

I saw a FOS outcome recently where the customer lied in the complaint and got an employee at the company he used to work for to create a letter saying he could join the company scheme. Whereas the IFA was rejecting the complaint saying that they had evidence from the trustees saying he couldnt join the scheme. The FOS looked into it more and the customer and staff member of the employer were telling lies to get compensation. That person was caught. Not everyone is.

Perhaps a slightly more relevant example is where a someone self-invested into property. The IFA recommended over multiple dates that he should reduce the property holdings and diversify more. Each time it was documented that the customer overruled the adviser. The property went on to suffer large losses. A complaint was made. The FOS ruled against the adviser as they felt the IFA was not strong enough in their wording. This is despite the adviser not being the one that arranged it in the first place. Indeed, there wasn't a single document advising it be held and only documents saying it should not be invested like that and should be changed with responses from the customer saying that he doesn't want to change it.

People lie and the FOS is very liberal in its approach.

kidmugsy

Brynsam wrote: »

He can blame the IFA all he likes, but if the IFA's only role is to confirm that OP received advice, it's hardly likely to succeed - particularly as that advice clearly indicates that the IFA thinks it's a lousy idea.

You take a sunnily optimistic view of the courts - and, indeed, of the chances of retrospective legislation, and of various other forms of potential trouble. If I were an IFA and a chap like the OP presented himself as a would-be client I'd run a mile.

AnotherJoe

Brynsam wrote: »

He can blame the IFA all he likes, but if the IFA's only role is to confirm that OP received advice, it's hardly likely to succeed - particularly as that advice clearly indicates that the IFA thinks it's a lousy idea.

There are cases where exactly this happened, the adviser specifically said "dont do X", the client did X, and the adviser had to pay compensation on the grounds that by saying "dont do X' they had enabled the client to say they had taken advice and then do X !! Mad.

You couldn't make this stuff up and this is why so many advisers are not even wishing to look at these type of cases now.

Malthusian

Brynsam wrote: »

He can blame the IFA all he likes, but if the IFA's only role is to confirm that OP received advice

The IFA's role is that they let him do it. That is all that matters.

The IFA would have provided the OP with a letter saying "I confirm you took advice", if the IFA hadn't given them that letter they wouldn't have been able to do it. In exchange for enabling them to do it the IFA took money off them. The IFA is liable.

As others have covered in the last few posts, this is the view the Ombudsman has repeatedly taken. The direction of regulation over the past 10 years has been consistently away from "caveat emptor" and towards "caveat the regulated professional who takes money off someone for helping them hang themselves".

Terron wrote: »

Given that he seems to under stand property better than pensions it doesn't seem to be a big gamble.

If he knows which end of a house should be pointy he understands property better than pensions. It doesn't mean that he's likely to get better returns from investing in property, net of tax, than leaving it in the pension.

It is not a gamble in the sense that a gamble should have a balanced chance of winning and losing, like red or black, whereas this is a virtually guaranteed loser. It's not a gamble to chuck money into a drain.

Also given the sums involved he is not likely to be investing in part of the country that is near the top of the bubble.

Could be borrowing involved, could be other money involved, could be pooling money with two or three siblings or people down the pub egging each other on to cash in their pensions so they can be property tycoons. This happens a lot. In any case, if he is investing in a part of the country with low property prices, this does not make the decision to pay a massive chunk of tax and then invest what's left in property any less of a loser. Prices are often low in these parts of the country for a good reason.

I wouldn't pay the amount of tax he is considering but I do plan to take money out of my pensions to invest in property/ Specifically when I take my DB pension next year I plan to sell my former home (no CGT) and use the proceeds and some of the tax free lump sum from my pension to pay off the mortgages on the other rental properties in my own name.

As we're talking about existing mortgages, this is paying off debt and obtaining a risk-free and tax-free return, not investing in property. Your return is based on the interest rate on the debt, not the rental yield of the property. If I buy wine on my credit card or a car on PCP and then pay it off, I'm not investing in wine or cars.

cloud_dog

I'll apologise in advance but....

Malthusian wrote: »

If he knows which end of a house should be pointy he understands property better than pensions.

Funniest line I've read in a long time.