Pension - Advice Please

Fit_Like

In a bit of a quandary, we took out portable pension plans in 2013, the advisor combined a few existing policies into one, which we agreed to pay £240.00 each into every month, with tax relief providing a further £60.00.  The advisor knew we were moving abroad and advised we would get the tax relief for the tax year in which we left UK and for a further 5 years, at which time we could still pay into the policy but not receive the tax relief.  Forward 7 years, we receive a letter advising that as we are no longer eligible for the tax relief we can no longer pay into the policy as the investment company do not accept payments from non eligible members and they are going to refund the last 18 months we have paid.  Is this correct?  How can they take the money for 18 months without realising, who should have checked this earlier, the investment company or the financial advisor?  We were told we could still pay into, so we thought the tax relief would end and We would carry on paying the $240.  So we are now stuck with a policies that we cannot move, cannot pay into, which are going to get admin charges applied for the next 15 years till we are retirement age.  (There will be nothing left)  We have a meeting with our financial advisors successor (the original one retired earlier this year) tomorrow.  Is there anything I should be asking other than the obvious?  The investment company have offered £100 compensation per policy over the weekend, without us asking, this made me wary.  Feeling despair tbh.  Is there anything that would cover me in this situation?  Any advice appreciated - thanks.

dunstonh

Forward 7 years, we receive a letter advising that as we are no longer eligible for the tax relief we can no longer pay into the policy as the investment company do not accept payments from non eligible members and they are going to refund the last 18 months we have paid.  Is this correct?  

If they are saying that then yes it will be correct for them.

How can they take the money for 18 months without realising, who should have checked this earlier, the investment company or the financial advisor?

It is your responsibility to check or that of your financial adviser if you are paying them to provide ongoing advice.

We were told we could still pay into, so we thought the tax relief would end and We would carry on paying the $240.  

Generically, you can but it is always subject to the provider willing to do so.   Brexit has also changed things where the individual moves to an EU country.  

So we are now stuck with a policies that we cannot move, cannot pay into, which are going to get admin charges applied for the next 15 years till we are retirement age  (There will be nothing left)

You are neither stuck with a policy. Although choices will be limited.   You cannot pay into it but it almost certainly wouldn't be in your best interests to do so. So, that is not an issue.  And admin charges would always be charged. So, again not an issue.

Why will there be nothing left?   That seems a very strange thing to say.

We have a meeting with our financial advisors successor (the original one retired earlier this year) tomorrow. 

If you are no longer resident in the UK,  a UK financial adviser is unlikely to be of much help.  Especially if you are resident in the EU.

 The investment company have offered £100 compensation per policy over the weekend, without us asking, this made me wary.

It seems strange to offer that straight away but if it's a national firm then they often offer a goodwill gesture as a cheaper option than a drawn out complaint.  Even where there is no case to answer.

 Is there anything that would cover me in this situation?

You have given us the scenario but you haven't actually said what is wrong.    What situation are you referring to and what do you mean by cover?

Marcon

Fit_Like said:

In a bit of a quandary, we took out portable pension plans in 2013, the advisor combined a few existing policies into one, which we agreed to pay £240.00 each into every month, with tax relief providing a further £60.00.  The advisor knew we were moving abroad and advised we would get the tax relief for the tax year in which we left UK and for a further 5 years, at which time we could still pay into the policy but not receive the tax relief.  Forward 7 years, we receive a letter advising that as we are no longer eligible for the tax relief we can no longer pay into the policy as the investment company do not accept payments from non eligible members and they are going to refund the last 18 months we have paid.  Is this correct?  How can they take the money for 18 months without realising, who should have checked this earlier, the investment company or the financial advisor?  We were told we could still pay into, so we thought the tax relief would end and We would carry on paying the $240.  So we are now stuck with a policies that we cannot move, cannot pay into, which are going to get admin charges applied for the next 15 years till we are retirement age.  (There will be nothing left)  We have a meeting with our financial advisors successor (the original one retired earlier this year) tomorrow.  Is there anything I should be asking other than the obvious?  The investment company have offered £100 compensation per policy over the weekend, without us asking, this made me wary.  Feeling despair tbh.  Is there anything that would cover me in this situation?  Any advice appreciated - thanks.

Please don't despair. If you've been paying £3,600 a year for 6 or so years, that's well over £20,000 each, without allowing for any investment growth.    

You'd have to be paying extremely high fees to whittle the 'pot' to nothing in just 15 years. Charges for pensions set up when yours were set up are almost exclusively based on a %age of the current pot value, so are you sure there will be 'nothing left'? If so, have you looked at switching to different funds offered by the pension provider? Or transferring it to another provider? Both are options normally open to non-UK residents.

Alternatively, as you are now resident in Australia, you could transfer your UK pension to something called a QROPS, as explained in this helpful recent article: https://www.unbiased.co.uk/life/pensions-retirement/can-i-transfer-my-uk-pension-to-australia

Albermarle

Perhaps a bigger question is why were you still contributing to a pension when there was no tax relief available ? and why do you still want to?
As you get no tax relief on the way in but you will pay tax on the way out , you would have been much better investing outside a pension once the five years were up . So in reality the pension provider has done you a favour by refunding your contributions and refusing to accept anymore .
 which are going to get admin charges applied for the next 15 years till we are retirement age.  (There will be nothing left)
The growth in the investments in the pension would normally be expected to cover any charges and some growth on top ( over the long term )

Fit_Like

Thank you for your comments, I feel calmer after your advice that I have in the last 6 months trying to get answers on this.
dunstonh 
Our financial advisor, who we meet with annually and pay them for ongoing advice did not advise us we were no longer eligible until I contacted him, we are trying to ascertain why this is the case.  We were advised that we were able to continue paying into the account when the tax relief portion ended. I live in Australia, not an EU country.  We have been advised that we cannot move to an alternative policy nor deposit into the policy, so I do feel "stuck with it".  Ideally I want to move it somewhere where I can continue to deposit.  The "Nothing Left" I appreciate might be dramatic, just a bit disappointed that the long term plan has been stopped with no real way to re-route.  We retained the UK advisor and pension as when we do retire we plan to spend 6 months in UK and 6 months in Australia each year drawing on the relevant pensions whilst residing in each country, rather than transferring $ to £ and vice versa.  We have been trying to get to the bottom of this for the last 6 months, in that time our original financial advisor has retired and I guess I am feeling a bit twitchy and the straight off offer of compensation left me feeling even more vulnerable.  This will be my main pension in the UK and what I live on and was planning to pay into for the next 15 years, however, that has now been stopped, and I feel through no fault of ours, and we are left in this situation of trying to plan for the future, but with no way of doing so.

Marcon
Thank you for your link to QROPS, although we are not quite 55 yet, its closer than the retirement age by 9 years.  We have asked to move the policy to one where we can continue to deposit into, but been told that the investment company do not deal with non tax relief eligible people.  I am not going to name them but they are a large national UK company.  We are paying admin fees of £500 per policy per year, over the next 15 years that will take a bite out of what we have paid in, I'll just have to hope the policy does grow in investment.  I have also asked the question to move it to an alternative company, but so far that request has not provided any possible details from our independent financial advisor.  Hopefully our meeting today will bear some fruit in this regard.

Albermarle
Thank you, you have made me think about it differently, I guess I was always of the opinion to invest in my pension, but perhaps it is time to look at an alternative, as you say, we have been given that opportunity.

dunstonh

Our financial advisor, who we meet with annually and pay them for ongoing advice did not advise us we were no longer eligible until I contacted him, we are trying to ascertain why this is the case. 

Its possible they didn't know.  Its not the sort of thing providers tell you about.

We were advised that we were able to continue paying into the account when the tax relief portion ended.

As I said, generically you can.  However, providers are not required to do so.

 I live in Australia, not an EU country.  

That makes things a lot easier as Aus doesn't close its market down like the EU.

We have been advised that we cannot move to an alternative policy nor deposit into the policy, so I do feel "stuck with it".  

You cannot deposit into it because the provider says no.   However, that doesn't mean you are stuck with it.   Choice will be more limited with alternatives but transferring should still be possible.   Is your adviser an FA or an IFA?   An FA may well be tied to just one company and it could be the adviser is the one that cannot do it.

 Ideally I want to move it somewhere where I can continue to deposit. 

Why?   What benefit are you getting by paying into a pension compared to conventional investing within Aus or a general investment account in the UK.  You will be taxed on the UK pension when you draw on it.    So, paying tax on the way out and getting no tax relief on the way in is not efficient compared to alternative options.

when we do retire we plan to spend 6 months in UK and 6 months in Australia each year drawing on the relevant pensions whilst residing in each country, rather than transferring $ to £ and vice versa.

Which country will you be resident in for tax purposes?  Your worldwide income will be considered for tax in the country you are resident in for tax purposes.  

xylophone

A quick Google came up with

http://www.cbfp.co.uk/australia-uk-cross-border-financial-planning

Presumably there are other such consultancies.

In your situation would this not be the way to obtain appropriate advice?

Fit_Like

@dunstonh
Thank you again for replying.  We have just had the meeting with our Independent Financial Advisor.  He has confirmed that the payments we have made will be refunded (which I now see as a good thing) and we cannot pay any further into the policy or transfer it to Australia until we are 55.  He is confident the growth will be more than the admin fees, obviously cannot guarantee it.  He is convinced that there are no investment companies who will take any pension polices out for non resident people, I said I thought there were and said he was happy to investigate any companies further that I could provide him with, if you could advise on any that would be much appreciated.  We are taxed in Australia on the income we receive in the UK from rental property, if we pay this into a pension its tax deductible, if we pay it into anything that is not pension related we get taxed on it, which is why we set it up like this, didn't anticipate there would be a time that we could not pay into it. We have Super accounts in Australia and pay the relevant amounts into them.  If we then transfer the UK monies over here, have transfer and currency fluctuations which was another reason for keeping it in the UK, for when we retire.  Probably UK for tax purposes.

Fit_Like

xylophone said:

A quick Google came up with

http://www.cbfp.co.uk/australia-uk-cross-border-financial-planning

Presumably there are other such consultancies.

In your situation would this not be the way to obtain appropriate advice?

Thanks, we get lots of cold calls about UK/AUS pensions and super, Id rather go with someone who has been recommended, rather than cold call and Im not just fully upto how the Australian financial systems work, so I see myself as really green in this area.  Im not confident to plan my future on a quick google search, so I need to get out and network a few recommendations for people in a similar situation to me.  

xylophone

Im not just fully upto how the Australian financial systems work, so I see myself as really green in this area. 

Are you a member of an ex pat forum? You might get some personal experiences from other members.

If you can't get personal recommendations, then you are going to have to do your own research - the internet will enable you to do this and then explore the options?

Do you expect to claim a UK state pension?

https://www.gov.uk/state-pension-if-you-retire-abroad

Fit_Like

@xylophone
I was a member of a few of the ex pat forums, need to get reacquainted with some of them and seek out others in a similar situ and research a bit more.  Our NIC contributions are fully paid up so hopefully when the time comes a UK state pension should be payable.