I want to access pension freedom but stuck

cosmo123

Thanks - I appreciate your honesty and straight talking advice.

I wonder though, pension freedoms meant people could do whatever they choose to do with the money. One persons logic may not fit with another's but that surely is the point of freedom.

dunstonh

I wonder though, pension freedoms meant people could do whatever they choose to do with the money.

Pension freedoms expanded upon options that already existed for decades. It turned a transaction that historically was nearly always done under advice only into a mainstream once that was open to non-advised cases as well.

The Government decided that to avoid risks of future missale allegations, that certain types of pensions required consumer protection. Plans with guaranteed annuity rates were one of these. At the same time, they decided that small pots should be exempt as the guarantee wouldn't amount to much on a small pot anyway. Hence the £30k figure for needing advice.

Statistically, the majority of cases with GAR should not see the fund cashed in as it would be, financially, the worst thing to do.

A lot of people cashing in pensions are paying unnecessary tax. They are doing bad things like just putting money in the savings account or using it to repay their mortgage. There may be scenarios where things could be sensible but they are statistically unlikely. Hence the need for advice if you want to do that sort of thing.

I have had a number of people approach our firm saying they want to cash it in but have been told to have advice. I would say that most of them didnt know the actual value of the guarantee and hadnt considered the tax and consequences fully, or the alternative options available and those we did look at have seen every person do something different to what they originally wanted. So, I would argue that the advice requirement is working. Even though advisers themselves don't really want to be doing this sort of advice transaction.

Linton

cosmo123 wrote: »

Thanks - I appreciate your honesty and straight talking advice.

I wonder though, pension freedoms meant people could do whatever they choose to do with the money. One persons logic may not fit with another's but that surely is the point of freedom.

The government's and the regulator's intent is to help ensure that people dont do silly things because they dont appreciate the consequences or the alternatives - pensions can be a complex area and the vast majority of the population do not fully understand them. And of course The Great British Public wants compensation if things go wrong.

Brynsam

cosmo123 wrote: »

Thanks - I appreciate your honesty and straight talking advice.

I wonder though, pension freedoms meant people could do whatever they choose to do with the money. One persons logic may not fit with another's but that surely is the point of freedom.

The word 'freedom' is a vote winner, which is of course why these so-called freedoms were ever introduced. They served their purpose: look who won the next general election.

The problem with any sort of freedom is that it gives you terrific scope to do the wrong thing - although one person's definition of 'wrong' may not agree with the next person's.

Do you have any other defined contribution pension savings (without a GAR) you could access instead?

cosmo123

I appreciate all the wisdom evident in previous comments and seriously 'I get it'.

I do have a military and NHS pension to fall back on and don't plan to retire until 67.

Accessing this FSAVC was simply to make life slightly more comfortable in the 'here and now' and I know 'once its gone, its gone'. I think my original thought was 'accessing it would be slightly more straight forward' - I will find a IFA and they will provide very professional advice - I can see that one choice in the face of advice is the lump sum option.

badmemory

Do not let us forget that it was also a big tax winner. So the gov had none of the risk & all of the tax. Let us just wait for the deprivation of assets problems when pension credit or housing benefit etc gets refused or reduced.

Malthusian

Are you sure £830pa is the GAR and not the non-guaranteed annuity you would get if you bought one now?

As Zagfles says, 2% is rubbish for a GAR - unless it's on an incredibly generous basis like escalation at 8.5% per year (yes, I've seen it happen). If not, it would make no sense to even put it in the FSAVC terms in the first place.

I am wondering if they are quoting you the annuity rate at your current age of 55, when GAR terms won't apply. GAR terms usually apply at 60 or 65 or another age which was selected when the policy was originally set up.

What is the actual GAR?

You can do whatever you want with the money. The Government says that you have to take advice first - it does not say that the adviser has to approve of it, the advice can be positive or negative. If you are willing to pay the high cost of throwing away the GAR, then the cost of advice is trivial.