Who can confirm the max contribution to DB pension without tax penalty? Accountant? IFA?

Malthusian

SouthLondonUser wrote: »

By the way, tax accountants won't touch this with a bargepole, but getting advice from an IFA is difficult and expensive. I have contacted a couple, and they have both said that current regulation makes it very difficult, if not impossible, to provide narrow advice on just the tax implications of my decision - they would have to look at the entire financial situation of their client and also provide advice on whether that decision is appropriate. To be honest it wasn't entirely clear to me if the regulators are explicitly forcing this, or if it's most IFAs who feel this way because they are afraid of complaints and litigation, but the final result is the same.

I would expect them to say that. You said "expensive" which suggests it wasn't an outright refusal - how much were they proposing to charge?

I think the TPAS would probably just fall back on "see an adviser", they certainly won't run the calculation for you and give you a figure. (That said, it's free to ask.)

SouthLondonUser

One said £2k, another said £3k, and another one said "approximately a few thousand pounds, but it will depend on the exact assets of the client, because the cost is driven by the potential liability more than by the complexity of the advice".

I have asked the person to look into whether unions provide any kind of advice, or to be more precise, if the unions are aware of any IFA who could provide advice to members of the TPS at a reasonable rate.

Asking other colleagues who may have done this in the past is not feasible, because it turns out that most people are totally clueless.

The vast majority of TPS members are teachers on relatively low salaries; realistically, none of them will ever get any advice...

I do wonder if the regulators ever thought of the unintended consequences of more people getting no advice at all in the end!?

I appreciate that some people will go to great lengths to claim compensation undeservedly, and this made me think of interest-only mortgages and of all the people who try to claim they were missold one; however, interest-only mortgages haven't been made illegal - there are simply more stringent criteria and the borrowers must sign specific paperwork to confirm they understand what they're getting into.

Anyway, rant over, no rant is going to change the situation.

Blackbeard_of_Perranporth

No IFA will give you advice free and hence, they refuse your custom. Unfortunately this is due to far too many taking their pot and squandering it!

The benefit rate will be set by your DB scheme. Any additional amount you pay will be invested separate to this and is an Additional Voluntary Contribution. The maximum you can put in your total pension is £40,000 per annum, or your salary if less than this. This is the amount you get tax relief on.

A quick calculator here

https://www.moneyadviceservice.org.uk/en/pensions-and-retirement

MarkCarnage

I do wonder if the regulators ever thought of the unintended consequences of more people getting no advice at all in the end!?

I appreciate that some people will go to great lengths to claim compensation undeservedly

A quick look at some of the Ombudsman judgements will show you why IFAs are chary about doing anything, no matter how narrowly bounded, without doing a full assessment of the client's financial position. There are a number of cases where a complaint has been upheld because of failure to take account of wider circumstances. In some cases these appear justifiable, in other cases they are just jaw droppingly silly in my view.

When you see some of the posts on here about things that are so obviously a scam, it is clear that a large part of the population are greedy, financially illiterate or both.

SouthLondonUser

Blackbeard_of_Perranporth wrote: »

No IFA will give you advice free and hence, they refuse your custom.

??? I am not asking for free advice. I just think that paying thousands and thousands of pounds for something like this is, quite simply, not worth it.

To be fair, two IFAs were very transparent about this, and clearly said that, unfortunately, due to regulations, the cost of liability insurance etc, it is probably not worth for someone like my relative to pay these kinds of fees to get advice. If he were a vice-chancellor on a £400k salary it would be different, of course.

Also, to be clear, I am not saying these IFAs are being dishonest: I do get it that, for the reasons we discussed, the cost of their professional liability insurance is likely to be high, and that will be a big factor affecting the cost of their advice.

Blackbeard_of_Perranporth wrote: »

Unfortunately this is due to far too many taking their pot and squandering it!

? Not sure what you are talking about here. If you are referring to people who cash out of valuable pension then fritter the money away, well, here it is the exact opposite: we are talking about contributing MORE to a pension!

SonOf

I do wonder if the regulators ever thought of the unintended consequences of more people getting no advice at all in the end!?

They know about advice gaps. However, they caused many of them despite predictions and expectation they would occur.

I appreciate that some people will go to great lengths to claim compensation undeservedly, and this made me think of interest-only mortgages and of all the people who try to claim they were missold one; however, interest-only mortgages haven't been made illegal - there are simply more stringent criteria and the borrowers must sign specific paperwork to confirm they understand what they're getting into.

Most interest-only mortgage complaints fail but there has been a deluge of complaints from CMCs (so much so that the FSCS hit back due to the poor quality of the complaint). Pension complaints are also increasing as CMCs look for ways to find alternative income now that PPI has dried up.

One said £2k, another said £3k, and another one said "approximately a few thousand pounds, but it will depend on the exact assets of the client, because the cost is driven by the potential liability more than by the complexity of the advice".

Those figures suggest they were not really interested in offering services. Rather than refuse, they have a price that is set as a passive blocker.

The vast majority of TPS members are teachers on relatively low salaries; realistically, none of them will ever get any advice...

I disagree. We have plenty of teachers on our books and most are not on relatively low salaries. I believe all are over the national average. Indeed, a quick google search indicates that the minimum pay in England for qualified teachers is £24,373 and the average is closer to £40k (although different sites give figures above and below that - so probably based on year of data)

sandsy

Some IFAs should be able to do this. While it is financial advice, I'm not sure it's regulated advice as advice to consumers on DB pensions generally isn't regulated by the FCA (unless it's about giving them up). And you are specifically asking about increasing your benefits in a DB pension.

zagfles

Malthusian wrote: »

I would expect them to say that. You said "expensive" which suggests it wasn't an outright refusal - how much were they proposing to charge?

I think the TPAS would probably just fall back on "see an adviser", they certainly won't run the calculation for you and give you a figure. (That said, it's free to ask.)

No but they should be able to explain the rules and what to look out for.

zagfles

SouthLondonUser wrote: »

I have asked the person to look into whether unions provide any kind of advice, or to be more precise, if the unions are aware of any IFA who could provide advice to members of the TPS at a reasonable rate.

Good idea, unions often have a pension expert you can talk to, and likely one who understands the scheme.

SouthLondonUser

SonOf wrote: »

Those figures suggest they were not really interested in offering services. Rather than refuse, they have a price that is set as a passive blocker.

Maybe. Or maybe there is also some kind of London-bias, whereby IFAs in London want to deal only with the wealthier clients, and don't find it's worth their time to speak to poorer clients. Maybe we might have better luck with IFAs in other parts of the country?

SonOf wrote: »

I disagree. We have plenty of teachers on our books and most are not on relatively low salaries. I believe all are over the national average. Indeed, a quick google search indicates that the minimum pay in England for qualified teachers is £24,373 and the average is closer to £40k (although different sites give figures above and below that - so probably based on year of data)

I meant low relative to the income of the other clients these London-based IFAs must have.


Anyway, what you say is interesting: are you an IFA? Can you recommend your firm / another firm that would advice on something like this without charging thousands and thousands of pounds? Maybe in a private message if advertising a firm is against the forum rules?


As for the cost my relative is willing to pay, to put things in perspective, it can cost between £150-400 to get a tax accountant to sort out your self assessment; that would include this kind of calculations, plus many others.


My relative is willing to pay up to approximately £ 600 -800, which, compared to the cost of a tax return, would seem more than fair to me. Of course I also appreciate that the cost of professional liability insurance can be significant for an IFA.
But, to put things in perspective, what we are talking about here is putting more money into a pension, not less, not cashing out, but quite the opposite.


So what would be the risks?


That the tax calculation is wrong and the client contributes too much / too little? It doesn't take a genius to get the calculations right.


That the investment turns out to be too risky? The TPS is an unfunded scheme, it's a direct liability of HM Treasury. Unless the UK becomes a banana republic with double-digit inflation, the TPS seems to me one of the safest pensions around.
That other investments perform better? Sure, it's possible that some will, but the risk profile won't be comparable - not even close.