GAR Trap

progresstobe

I have a pension which has a pot over £30,000 and therefore have to receive financial advice from an FCA regulated IFA.  Unfortunately I had forgotten about this pension pot which may sound strange, but it was from a long time back and it was only when I was selling some Aviva shares that they asked me what I wanted to do with it.  There are 2 problems for me.  The first is that I am not a gambler and at 72 I'm not prepared to gamble on how long I will live.  Capital retention is my requirement.  I don't need or want the income at present or the tax liability that would come from taking the income from a GAR annuity.  My wife is 10 years younger than me and I need a flexible arrangement that will allow her to decide how to progress in the event of my death.  Unfortunately having spoken to 5 IFAs it has become clear that as they won't sign off on my wishes to not take the GAR annuity, as they are more concerned with their own compliance with the FCA rules than they are of my needs and requirements.  Aviva have said I should keep trying different IFAs until I find one who is prepared to agree to my wishes - a completely ridiculous suggestion.  The second problem is that I have lived in Spain for 22 years and since Brexit I am told that I cannot be advised by an IFA regulated by the FCA.  So catch 22!!  There must be other people with a similar problem and I would like to know how they resolved it.  As an aside, I was an IFA for 15 years myself many years ago, so I understand how things work although maybe not about the more recent developments.  Any help would be very much appreciated.  Thanks

dunstonh

Unfortunately having spoken to 5 IFAs it has become clear that as they won't sign off on my wishes to not take the GAR annuity, as they are more concerned with their own compliance with the FCA rules than they are of my needs and requirements. 

If it is justifiable then it is not a problem.     The issue is normally that the individual doesn't understand the value of the GAR and wants to do something that is unlikely to be suitable.  

It is certainly higher risk and not all firms hold the regulatory permissions required to offer this advice.  However, if it's justified it's not an issue (I did one last year - although in most cases I persuade the person to take the GAR as most have very short term breakeven points.  Most providers will allow alterations to the GAR default terms to include spouse or 10 year guarantee periods or even value protect.

How much is the GAR?    That will give an indication of whether you are likely to succeed or not with your objective (notwithstanding the other issue which is the main blockage)

The second problem is that I have lived in Spain for 22 years and since Brexit I am told that I cannot be advised by an IFA regulated by the FCA

Now that is likely to be the main blocker.   The EU has not granted the UK any permissions for UK based companies to provide financial services to EU residents.   So, you would need a firm with an office in Spain that holds permissions with the UK and Spain.     Your choice of firms is probably limited and could be counted on one hand. Maybe two at a push.

progresstobe

Thanks for your thoughts Dunstonh.  As I said, I was in the business and therefore understand the ins and outs of annuities as I sold many in my day both lifetime and temporary.  Just because most people want income and I don't at the present, surely I should not be denied the right to determine my own requirements for my wife and family.  Have you heard of anyone else who has had the same problems?  As you say, the major problem is being in Spain.  Also I can't see that the legislation controlling the FCA rules can block someone outside the UK from having what is rightly theirs.  So I don't believe that Aviva can withhold this money because I'm outside the UK, or is there part of the legislation which denies expats from taking their pension options.. 

progresstobe

Sorry, you asked how much is the GAR -it is 12+% and guaranteed for 5 years. If I die in the 6th year Aviva get to keep between 35% & 40%.  That's a potential guaranteed loss.  How that can be considered good advice is beyond me.  If I was 60 or 65 or my wife was the same age as me, then there could be an argument for taking the GAR which of course would be much lower, but not in my situation. 

Albermarle

There are numerous threads on this forum about the difficulties involved in transferring pensions with guaranteed benefits , even if you live in UK .
If you have a spare couple of hours you could read through these.
DB Pension Transfer Advice — MoneySavingExpert Forum
Final Salary Pension Transfer — MoneySavingExpert Forum
DB transfers — MoneySavingExpert Forum

progresstobe

By the way, I'm 72

xylophone

Have you done an internet search for an adviser with appropriate qualifications to advise a resident of Spain who has a UK pension with safeguarded benefits?

Examples

https://www.spanishsolutions.net/blog/pension/considerations-for-those-that-have-uk-pensions-schemes-and-are-or-wish-to-become-a-spanish-tax-resident/

https://www.harrisonbrook.co.uk/financial-advice-expats-spain/

https://www.specialityadvice.com/spain/

https://sjb-global.com/spain/

https://www.blevinsfranks.com/where-we-are/spain/

progresstobe

I see you say that you did one last year, what were the circumstances?

HappyHarry

Have you looked at taking out a whole of life insurance policy, to be paid for by the income from the pension with the GAR? 

This might provide an alternative way to fund your wife’s requirements in the event of your death, without taking any gamble on life expectancy.

progresstobe

I tried Blevins Franks because I used to work with one of the senior partners.  He was unable to help and explained why.  But I haven't tried the others.  Many thanks for your suggestions

dunstonh

 Just because most people want income and I don't at the present, surely I should not be denied the right to determine my own requirements for my wife and family.

You are and you are allowed to overrule the adviser recommendation.  However, the adviser themselves is unlikely to carry out the transaction in that in that scenario.  You would need to do that on a DIY basis with the adviser signing the form confirming advice is issued.

Sorry, you asked how much is the GAR -it is 12+% and guaranteed for 5 years. If I die in the 6th year Aviva get to keep between 35% & 40%.  That's a potential guaranteed loss.  How that can be considered good advice is beyond me

As the GAR is in double digits, that is going to make it harder to justify.     Especially if Aviva are able to offer alternative annuity shapes (such as 100% spouse and/or value protect or a 10 year guarantee).    If there are health issues then there could be.  

However, there is no point trying to resolve this minor frustration when you have the EU issue.

 Have you heard of anyone else who has had the same problems?  As you say, the major problem is being in Spain.  Also I can't see that the legislation controlling the FCA rules can block someone outside the UK from having what is rightly theirs.

Pretty much anyone in your scenario is hitting the same problem.   
The GAR issue is a side issue.  It's not the real blocker.    
It is not the FCA that is blocking you.  It is the EU.     They have removed the passporting permissions from the UK (the ability of UK based firms to offer financial services within the EU) and have refused equivalence to the UK despite having an identical rule book. Countries with very different rules have more rights to transact in the EU than the UK.  It is seen as one of the EU's punishments to the UK for leaving and you are caught up in that.

So I don't believe that Aviva can withhold this money because I'm outside the UK, or is there part of the legislation which denies expats from taking their pension options.. 

Aviva has to abide by the law and FCA regulations.   You may wish to take it up with your MEP, for as much good that will do.

You need to find an advice firm in Spain that deals with expats and holds UK and Spanish authorisations.

I see you say that you did one last year, what were the circumstances?

It was a UK resident with a GAR of 9.6% at 65.   The client paid his fee. I did the report saying not to transfer it (his reasons were not justifiable as he was in good health and he wanted to add it do his drawdown fund and just couldn't get the point that he could use the GAR to provide an income and draw less from the rest of his drawdown pot.  He was pessimistic about his health for no reason.  So, whilst he would lose 75% of the pot, his SIPP would not go down as much and there would be a breakeven point.     I didn't transact the transfer but I signed the advice declaration.   That is all the provider was after.  He went on to move it to his own SIPP.     No hassle for me. No hassle for him.   That is how it should work if we were still in the EU or if the EU granted equivalence in retail financial services.