Small Pension Pot

Sea_Shell

So it would appear that the onus is on the customer to be proactive (which we are) and know their options (which we do), rather than them have to spoon feed the customer with their options, which is what usually institutions are having to do of late it would seem, especially within financial services!!

Seems odd that, potentially, customers could be left in the dark.

dunstonh

Sea_Shell said:

Brynsam said:

Sea_Shell said:

Thanks for that.

Would they write, with options, say within 3-6 months of 55?

You'd have to ask them - they wouldn't do so spontaneously (partly because they wouldn't know you what you were planning and partly because DC values fluctuate the whole time).

So are they not required to write to customers as they approach their 55th birthday, explaining that they do have options under the pension freedom rules?

No they are not.

That is last thing you want to do.   It would encourage many to access their pension far too early to spend during their working life.

The countdown steps take place before the scheme retirement age.   The scheme retirement age can be amended by most providers on non-workplace pensions and some workplace pensions. 

So it would appear that the onus is on the customer to be proactive (which we are) and know their options (which we do), rather than them have to spoon feed the customer with their options, which is what usually institutions are having to do of late it would seem, especially within financial services!!

Not really.  The countdown steps are required under regulation.    The start date is sensibly attached to the scheme retirement age and in most personal pensions, it is the individual that tells the provider what their retirement age is going to be.

Seems odd that, potentially, customers could be left in the dark.

And for many people, it is best that they are left in the dark.  Tell a child there is a load of sweets in the cupboard and they may go and eat them.  If they don't know they are there, then they are none the wiser and the child can have the sweets when it is best for them.

zagfles

I doubt any providers will tell you or even advertise it, it's a bit of a dodge and if they started broadcasting it and encouraging customers to do it it's likely the loophole will be closed - there's no real need for it anymore. I wouldn't be surprised to see it go soon.

It would be a bit like them encouraging you to contribute to a pension to increase child benefit, tax credits or uni loans.

I believe most SIPP providers will facilitate it if asked though - HL certainly will from what I've read.

Sea_Shell

zagfles said:

I doubt any providers will tell you or even advertise it, it's a bit of a dodge and if they started broadcasting it and encouraging customers to do it it's likely the loophole will be closed - there's no real need for it anymore. I wouldn't be surprised to see it go soon.

It would be a bit like them encouraging you to contribute to a pension to increase child benefit, tax credits or uni loans.

I believe most SIPP providers will facilitate it if asked though - HL certainly will from what I've read.

I'm not sure what you mean by there's no need anymore?

Surely being able to take small pots, or start drawdown on a larger pension, from 55, is part of many people's overall retirement strategy...not just to blow it.

Why is that a "dodge" or a "loophole"?

zagfles

Sea_Shell said:

zagfles said:

I doubt any providers will tell you or even advertise it, it's a bit of a dodge and if they started broadcasting it and encouraging customers to do it it's likely the loophole will be closed - there's no real need for it anymore. I wouldn't be surprised to see it go soon.

It would be a bit like them encouraging you to contribute to a pension to increase child benefit, tax credits or uni loans.

I believe most SIPP providers will facilitate it if asked though - HL certainly will from what I've read.

I'm not sure what you mean by there's no need anymore?

Surely being able to take small pots, or start drawdown on a larger pension, from 55, is part of many people's overall retirement strategy...not just to blow it.

Why is that a "dodge" or a "loophole"?

The reason for it was in the old days when nearly everyone bought an annuity, an annuity bought with a small (under £10k) pot would only give a trivial annual income so the rules allow you to just take it with minimal hassle. Now you can do that anyway, take an entire pot as a UFPLS. So no real need for it (for DC anyway).

It wasn't really intended as an LTA dodge for people with big pots to artifically create small pots, otherwise they'd just let everyone take £30k out of their pot with no LTA/MPAA implications.