No choice other than to purchase Annuity

kantblue

Hi - can anyone advise me.
I have a pension pot with Royal London - its unusual as it has a 50% tax free allowance with it.

I was considering moving the pot from this policy into another fund a few years ago, purely so I didn't end up with a lot of different pots. However my broker then realised that I would lose the 50% tax free allowance and was also told by Royal London that there was no requirement to purchase an annuity and it could be used for drawdown etc so the advice was to leave it where it was.

I have now decided to take this lump sum, but have now been told I have to purchase an annuity with the remaining 50% even with the open market option.

In view of the fact my broker was told differently two years ago I've asked Royal London to show me where in says in the policy that an annuity is mandatory but I have not received any reply.

Is it correct that some pension policies can enforce this rule?

Kantblue

AnotherJoe

No idea but can you move it elsewhere to escape that clause?

xylophone

https://www.retirementline.co.uk/news/could-you-be-entitled-to-more-than-25-tax-free-cash/

The above may be relevant.

Presumably you have written to RL and requested full details/explanation of your options?

https://www.pensionsadvisoryservice.org.uk/ may be able to assist.

kantblue

Hi AnotherJoe

The trouble is if I move the pot to somewhere else I will lose the 50% tax free amount - it will go back to 25%

kantblue

atush

Write to RL again and ask for an explanation.

Then make a complaint if necessary.

Dox

Sounds like a Retirement Annuity Plan, in which case the requirement to purchase an annuity is legislative, rather than being imposed by the terms of your policy. If that's the case, you might ask why your broker didn't know that?

kantblue

Hi all thanks for the replies - I had a different broker then - my new broker is the one who pointed out the need to purchase the annuity - he has gone out to the open market, but as you know even with recent improvements annuity rates are not great.

I asked my previous broker two years ago to look into transferring my 4 pots into a single one - and that's when he advised me not to because of the 50% tax free allowance. He had spoken to RL at the time and was also advised that there was no requirement to purchase an annuity - he did say that this was unusual but a big plus for this policy. He can recollect the conversation but has nothing in writing and I only have the email from him.

How can I tell if the policy is a Retirement Annuity Plan - will it say so somewhere on my documents?

kantblue

Dox

One would hope your broker could help, but possibly not! If you look at the documents, there should be some sort of heading or description - Retirement Annuity Plan/Contract? S266 policy? Any of those anywhere on the paperwork?

dunstonh

I asked my previous broker two years ago to look into transferring my 4 pots into a single one - and that's when he advised me not to because of the 50% tax free allowance.

That is understandable. I have made similar recommendations on that basis.

He had spoken to RL at the time and was also advised that there was no requirement to purchase an annuity - he did say that this was unusual but a big plus for this policy.

I wonder if an interpretation is an issue. There is no requirement to buy an annuity with them.

How can I tell if the policy is a Retirement Annuity Plan - will it say so somewhere on my documents?

You generally find transitional relief is given on executive pension plans, section 32 buy out bonds and hybrid plans.

Alibert

If you had known two years ago that the annuity was mandatory, it would have made no difference to the decision to transfer out ... You still would have stayed where you were, to keep the guarantee

bostonerimus

I sympathize with the OP having to deal with unresponsive pension companies and baroque structures. However, I think the situation highlights that leaving your finances in the control of an middle mad adviser can lead to unexpected surprises. Personal agency when it comes to your own money is vitally important so you know exactly what you have and can plan accordingly. Use an adviser to advise, don't let them become a controller.