Pension transfer woes

Nic60

Hi all, I’m trying to transfer a pension I have with Aviva (worth around £50k) to another existing pension with Standard Life, with the aim of having a flexible drawdown option to use as I ease into retirement.  My problem is that the Aviva pension has a Guaranteed Annuity Rate attached to it. This means I can’t transfer it unless I have had financial advice, at a cost of £1500-£2000, either directly to an IFA or as a transfer charge. As I have absolutely no intention of ever wanting an annuity, the GAR is meaningless and results in totally unnecessary charges. 

Aviva and Standard Life say they can’t offer advice, due to a conflict of interests. 

Can anyone think of any way to avoid or reduce the charges?
Thanks in advance. 

dunstonh

Aviva and Standard Life say they can’t offer advice, due to a conflict of interests. 

I'm surprised they are both saying that.   Neither SL or Aviva have the regulatory permissions to give advice where there is a GAR.    So, its not to do with conflict of interest but not being able to do so within the law.

Can anyone think of any way to avoid or reduce the charges?

Take the annuity.      A higher annuity paid on a chunk means you can take less on the flexible side which will make your flexible benefits last longer.  Most GARs have a very early breakeven point.

To be honest, I think you would be lucky enough to find an adviser willing to do it at all when it's just £50k let alone for just £1500-£2000.

xylophone

A GAR is a "safeguarded benefit" - see 
https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/495377/pension-benefits-with-a-guarantee-factsheet-jan-2016.pdf
and
https://www.pruadviser.co.uk/knowledge-literature/knowledge-library/pension-transfers-conversions/

Guaranteed Annuity Rates

There is one significant exception to the requirement for a pension transfer specialist, and it is where the advice is on conversions or transfers in respect of pension policies with a guaranteed annuity rate (GAR).

Although GARs are safeguarded benefits, the FCA do not  require these cases to be checked by a pension transfer specialist and as such advice can be provided by an adviser with investment advice permission. This is because an adviser with the investment advice permission, but not the pension transfer and opt out permission, must still prominently highlight the value of the GAR to their client (the firm still needs to hold transfer permissions). The adviser should do this as part of the suitability assessment report for their client.

You might try

https://adviserbook.co.uk/

Tick "confirmed independent" and such other specialisms required.

Marcon

dunstonh said:

Can anyone think of any way to avoid or reduce the charges?

Take the annuity.      A higher annuity paid on a chunk means you can take less on the flexible side which will make your flexible benefits last longer.  Most GARs have a very early breakeven point.

Don't forget you can take 25% tax free (possibly more depending on the age/type of contract - you'd need to check with Aviva).

Nic60

dunstonh said:

Aviva and Standard Life say they can’t offer advice, due to a conflict of interests. 

I'm surprised they are both saying that.   Neither SL or Aviva have the regulatory permissions to give advice where there is a GAR.    So, its not to do with conflict of interest but not being able to do so within the law.

Can anyone think of any way to avoid or reduce the charges?

Take the annuity.      A higher annuity paid on a chunk means you can take less on the flexible side which will make your flexible benefits last longer.  Most GARs have a very early breakeven point.

To be honest, I think you would be lucky enough to find an adviser willing to do it at all when it's just £50k let alone for just £1500-£2000.

Hi and thanks for your reply. Both companies referred me to their specialist advisor teams, not just their standard customer service people who answer questions on their own products rather than offer advice. 

As I said, I don’t want an annuity, the amount being offered each month / year is so small as to be pretty pointless really. 

I’ve contacted three IFA’s and all offered a full review at around those prices, maybe I was just lucky!

Nic60

Marcon said:

dunstonh said:

Can anyone think of any way to avoid or reduce the charges?

Take the annuity.      A higher annuity paid on a chunk means you can take less on the flexible side which will make your flexible benefits last longer.  Most GARs have a very early breakeven point.

Don't forget you can take 25% tax free (possibly more depending on the age/type of contract - you'd need to check with Aviva).

That’s a good idea but it would reduce the small annuity even further and I’d be unable to access any cash in future. 

dunstonh

As I said, I don’t want an annuity, the amount being offered each month / year is so small as to be pretty pointless really. 

What is the annuity rate?        50k is never going to generate large sums but you have to look at the wider picture and the breakeven point.  It can actually be better financially to take the GAR, even if the amount is small and draw less on the flexible pension.

I’ve contacted three IFA’s and all offered a full review at around those prices, maybe I was just lucky!

I would say so.   three IFAs willing to do a high-risk transaction that is likely to result in you being classified as an insistent client on a fund value of just £50k.  That is very very lucky.   Or they could just be seeing if they can get a look at your wider finances and see if there is alternatives or other areas they can get involved in and will let you down once they realise there isnt.

JonathanBFS

GAR only jobs... the job I look forward too the least. Your going to have to suck up the cost, at those prices I would!

xylophone

You mention "easing into retirement".
Does this mean that you are still working and at or over the age when you can take the GAR pension?

Nic60

xylophone said:

You mention "easing into retirement".
Does this mean that you are still working and at or over the age when you can take the GAR pension?

Hi, thanks for the reply. Yes I’m 60 and currently still working so tax efficiency is still something to think about. 

TVAS

We still do not know what the GAR rate is.
Tax efficiency will taking the annuity mean you pay higher rate tax or not?