Section 32 pension about to close - what to do?

jamesd

Aegon seem committed to not acting well so you're going to need to switch to written communication to make a complain then ombudsman referral easier.

Blackavar wrote: »

This apparently will still be called section 32 plan and not a SIPP. If I move the pot to Retireready, then I lose the potential tax free element. This is not was I was previously led to believe

The new answer seems right, see https://adviser.royallondon.com/technical-central/pensions/pension-protection/tax-free-cash-protection-on-transfer/ and https://adviser.royallondon.com/technical-central/pensions/transfers/tax-free-cash-protection-on-transfer/ .

Blackavar wrote: »

They were also adamant that they would need to see positive FA sign off before I could get the tax free element.

Ask them:

1. what is their legal or regulatory basis for this requirement

2. if their basis is that it is a scheme with a safeguarded benefit:
2a. why they believe it is not a money purchase benefit that is not included in those requirements
2b. why, when the legal requirement is to provide proof of having received advice they go beyond that to require advice to take a PCLS
2c. why, when taking a PCLS is specifically excepted from the advice requirements for safeguarded benefits they are imposing the requirement

3. what will they permit you to do to take the protected PCLS without advice and how this satisfies the requirement that they treat you fairly

To the best of my knowledge you have a right to take a PCLS and they do not have a right to block it. Which is why I'm suggesting asking them to explain their basis for doing so. FYI:

"The following do not constitute transfers or conversions to which the advice requirement applies:
• payment of a pension commencement lump sum in respect of safeguarded benefits (that is, taking one-off tax free cash at the same time as starting to receive a pension)"

"Scheme specific protected tax-free lump sums
Members who had a right to more than 25% tax-free cash on 6 April 2006 may still have their tax free cash entitlement protected. However, as this relates to a lump sum rather than a secure retirement income, it does not constitute a safeguarded benefit, provided that there are no other safeguarded benefits attached to the policy."

Blackavar wrote: »

It is extremely annoying that I will probably have to pay a few thousand pounds for the FA to say he is happy so that I can access my cash which will be used to top up ISAs

Blackavar wrote: »

My plan was to withdraw the tax free cash and put into our S&S Isas and use the rest as top up cash and maybe move the remainder to a SIPP. ... if I do nothing, it is converted to a cash account until I decide what to do with it

Blackavar wrote: »

Yes, that was Plan A. But the IFA would not sign off on this as we already have cash in premium bonds. Also Aegon say that if TFC is withdrawn, the remainder goes to to another Aegon product, and at this point they will only act on instruction from a FA. This is a major problem for me as this pension concludes in 7 days time.

So, for the IFA end:

a. how is having cash in premium bonds relevant when:
a1. your plan is S&S ISA?
a2. if you thought that it was appropriate for your risk tolerance you could hold cash inside the pension, and already will if you don't act because that's where Aegon puts it at maturity

b. if you did want to use cash based on your own understanding of your risk tolerance why override that?

But there's a probably better thing to try before that because it's free: tell Hargraves Lansdown that you want to take the protected PCLS and use it to fund S&S ISAs for you and your wife with the remainder going to their SIPP. You can count on them to want to get it done. They also offer an advice service.

Say advice is unavoidable. Compare the knowledge of wjr4 shown in this discussion to the IFA you're using now. Also notice that wjr4 thanked a post of mine that was partially disagreeing, something I normally view as a positive character trait? Advisers aren't allowed to approach consumers for business here but it's fine the other way around for you to ask wjr4 by PM f they are interested in considering the business.

Blackavar

Thank you for your detailed reply. It’s really appreciated and has given me a lot of food for thought.

Malthusian

Blackavar wrote: »

If I move the pot to Retireready, then I lose the potential tax free element. This is not was I was previously led to believe. They were also adamant that they would need to see positive FA sign off before I could get the tax free element.

Well this helps illustrate why they were so keen on you getting advice. Section 32 plans with enhanced tax free cash are complicated, and they have already talked total Boswellox once. With the potential for a massive amount of redress payable if you transferred without advice on the basis of duff information from them.

An IFA would be more likely to challenge duff information like this and would give them a human shield against any complaint.

However, I agree with Jamesd. I do not know of any legal basis on which they can prevent you from taking your tax free cash within the existing plan without a positive recommendation from an adviser. They can force you to take advice from an adviser if you wanted to transfer the pension (which would be a silly thing to do because you would forfeit the enhanced tax free cash), [STRIKE]as it holds safeguarded rights and is valued at more than £30k. Advice on transfer would therefore be a legal requirement. [/STRIKE] *edit* Wrong, thanks xylophone and jamesd.

(But not for a positive recommendation. Some providers require a positive recommendation for a transfer in. This is their right as they can't be forced to do business with you. However providers who already hold the money cannot insist on a positive recommendation for a transfer out. The legal requirement is only that you take advice and if you do they cannot obstruct your statutory right to transfer.)

However, there is no such legal requirement for crystallising an existing fund within the existing pension.

[STRIKE]And once it has been crystallised it will no longer have safeguarded rights so you can transfer it wherever you want without advice.[/STRIKE]

It is extremely annoying that I will probably have to pay a few thousand pounds for the FA to say he is happy so that I can access my cash which will be used to top up ISAs, not go on a cruise.

Are there no better uses of your ISA allowance than to move money which is already in a tax free environment into another tax free wrapper? Do you have any unwrapped investments you could bed & ISA or cash you could move into a cash ISA?

Blackavar

Thanks very much for your input. Very interesting. A driver for moving the pension money into ISAs is that my SP kicks in next tax year so I want to maximise the amount I can access tax free in the future while remaining invested.

xylophone

as it holds safeguarded rights and is valued at more than £30k. Advice on transfer would therefore be a legal requirement.

But as far as I can see it doesn't appear to hold "safeguarded rights" as defined here

https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/495377/pension-benefits-with-a-guarantee-factsheet-jan-2016.pdf

This is a S32 without a GMP.

It is, in effect, a DC pension with the right to a higher than 25% tax free PCLS?

This policy has matured.

It appears to be the OP's right to bring his pension into payment under the terms of the policy.

Why does he need advice to take his lump sum if that is what he wishes to do?

Since it appears to be a pension without safeguarded benefits as defined in link above, he didn't ever need advice to exercise his right to transfer the pension elsewhere at any time (although this would have been an unwise move because of the high tax free PCLS).

With regard to advice from an IFA, he doesn't appear to have been able to give precise advice regarding moving the pension to another product within Aegon which would protect the PCLS?

And the information from Aegon (as you say), hasn't been correct either.

It seems to me that (as James suggests), the OP should be checking the precise terms shown on his policy document and then writing to Aegon to clarify his exact position both in regard to taking benefits under this policy and the need for advice.

Blackavar

Thank you Xylophone and I agree with the course of action I need to take which now needs to be written correspondence. I’ve been worried/anxious/helpless/angry in equal measures over the past few days but now need to relax as I’m going away for a few days (Birthday) and can’t do anything about it for the moment. I have been assured by Aegon that on the date, the pension will revert to cash but still be within the wrapper that allows the tax free element. I will have to resume the battle when I get home. It is annoying that the money will not be invested for a while but I’ve run out of time to influence this. I’m just looking forward to the break.

xylophone

Good luck and enjoy your holiday.

jamesd

Malthusian wrote: »

They can force you to take advice from an adviser if you wanted to transfer the pension (which would be a silly thing to do because you would forfeit the enhanced tax free cash), as it holds safeguarded rights and is valued at more than £30k.

So far we haven't seen a mention of anything that's a safeguarded right, higher PCLS isn't.

Just being section 32 isn't enough. Some years ago a scheme I was in was transferring to section 32. I had nothing special that needed s32 so I declined and moved elsewhere specifically to avoid the chance of needing to take advice in the future.

Malthusian

jamesd wrote: »

So far we haven't seen a mention of anything that's a safeguarded right, higher PCLS isn't.

I stand corrected, thanks.

What they can do is require advice for anything that involves transferring into a new Aegon product, like the Retirerereready direct-to-consumer pension, because that's new business and Aegon can't be forced to do business with anyone. That may be the source of any confusion from Aegon's end about the OP requiring advice.

They cannot however prevent the OP crystallising the existing pension, taking the tax free cash out and transferring the remaining fund to another provider. Or from transferring the whole lot to another provider (as I was wrong and enhanced TFC isn't a safeguarded right) although that would be a silly thing to do because it would forfeit the enhanced TFC.

Any new provider would also have the same right to insist on advice but there will be providers who don't.

Blackavar wrote: »

Thanks very much for your input. Very interesting. A driver for moving the pension money into ISAs is that my SP kicks in next tax year so I want to maximise the amount I can access tax free in the future while remaining invested.

Which taking out the tax free cash and putting it into ISAs doesn't achieve as this is already money you can access tax free. If you take the tax free cash and put it in an ISA the amount you can access tax free in the future will remain exactly the same. If the tax free cash is more than your available ISA allowance(s) it achieves the opposite (as it will have to go into a taxable environment).

If you can get taxable income out of the fund without paying tax on it (e.g. using personal allowance) and reinvest in ISAs, that would increase the amount you can access tax free.

Blackavar

Last post pre holiday.
Another conversation with Aegon - actually a helpful ( and apologetic) guy.
There is no GMP oranything protected on this policy and it will revert to a cash fund at end of month.
I can access the TFLS no problem but must move the remainder to another policy.
I advised wanted remainder moved to Aegon drawdown but told that they must see positive sign off from FA as stipulated by ‘the regulator’ due to the complexity of the product. This will just be a cash fund?
I suggested taking TFLS and moving remainder to another provider but has to be moved to another Aegon fund first which must be sanctioned by FA
He agreed that having to pay a few thousand to a FA in order do what I want with my own pension was stupid but ‘those are the rules’. He is sending written details of my options with this policy. So much for Pension Freedoms. I will fire off a quick letter to keep the ball rolling.