Inadvertently triggered MPAA

Malthusian

The small pots rule can be used on crystallised funds so the option was still available if the OP had already drawn her PCLS, providing she didn't need a sum larger than £30,000 before tax. 

The fundamental question however is how the IFA got it into his head that the OP had stopped working. It is a very strange error to make because it is such a fundamental piece of fact-finding. If the OP is exploring the avenue of a complaint, it would be worthwhile if they could clarify why the IFA might have thought that.

The relevance of the small pot rule is that as long as the amount needed was under £30,000 before tax, the OP didn't have to trigger the MPAA to get it.

Helenadviceplease

Thank you very much to all of you for your highly appreciated advice. 

I do understand there are 2 sides and I will tread very carefully going forward. 

Just to clarify, when I emailed the IFA to request taking £14,000 of a total £17,000, I was asked only, by return email, 
“The £14,000 will be taxed as you only have taxable money left - you do know that?”  

I certainly did not get any forms to complete. 

Not remembering the MPAA rule from 2 brief conversations over a year previously is clearly my fault but I did not actually appreciate it was for every year going forward. 

I really need to ensure I take good advice going forward to fully understand what I will gain/lose with the various options now available to me but do not know where to go for this- and quite frankly am frightened I will not get good advice as I am of little value and get limited time/information. 

Please can someone possibly kindly guide me as to where I can possibly go to pay for someone’s time as I literally have no idea. 

jamesd

Malthusian said:

The small pots rule can be used on crystallised funds so the option was still available if the OP had already drawn her PCLS, providing she didn't need a sum larger than £30,000 before tax. 

The whole pot must be taken, the maximum value of that pot is 10k and no providers currently offer the ability to split an existing crystallised pot, even though the law permits it. They key decision point for this aspect was not creating a too large crystallised pot or using small pots rule initially instead of solely PCLS.

Malthusian

Helenadviceplease said:

Thank you very much to all of you for your highly appreciated advice. 

I do understand there are 2 sides and I will tread very carefully going forward. 

Just to clarify, when I emailed the IFA to request taking £14,000 of a total £17,000, I was asked only, by return email, 
“The £14,000 will be taxed as you only have taxable money left - you do know that?”  

I certainly did not get any forms to complete.

He should have warned you in very strong terms that you would breach the MPAA and would be taxed on your future pension contributions going forward.

If he didn't know you were still working and about your future pension contributions, then this was a basic failure of fact-finding.

If he was transacting the withdrawal you would not necessarily need any forms. Your instruction to the IFA would have been sufficient which he would then have submitted to the pension provider.

I really need to ensure I take good advice going forward to fully understand what I will gain/lose with the various options now available to me but do not know where to go for this- and quite frankly am frightened I will not get good advice as I am of little value and get limited time/information.

If you want to pursue the option of complaining you do not need to pay anyone for advice. The process is simple and making a case to the Ombudsman is not like making a case in court. Do not use a Claims Management Company; they have a lower rate of success than direct complaints and would take a huge chunk of any compensation.

You could ring round some other Independent Financial Advisers and ask whether they will provide transactional advice on whether to continue paying the maximum into your employer's pension scheme and swallow the AA charge, but I think they would say much the same things than I did in my first post, only with a definitive recommendation at the end. I would expect to pay around £500 for a one-off formal recommendation of that kind.

jamesd said:

The whole pot must be taken, the maximum value of that pot is 10k and no providers currently offer the ability to split an existing crystallised pot, even though the law permits it.

I'm surprised that no providers offer the option, but I don't have direct experience of trying to do this for crystallised funds so will defer to you.

I do know that there are providers who offer the option for uncrystallised funds, and that it's legally possible to do the same for crystallised funds, so I put 2 + 2 together. If I made 5 then I stand corrected.

I withdraw my statement that "there is a strong possibility that the FOS will view not advising you to use the small pots rule as failing to exercise due care and skill". As PCLS had already been taken, and the need for further taxable income seems to have only been raised a year later, it was not as obvious an option as I initially thought.

They key decision point for this aspect was not creating a too large crystallised pot or using small pots rule initially instead of solely PCLS.

If the adviser didn't know at the time that the OP would want further taxable income while still working - and this could have been the case even without the confusion over her employment status - it may be that the need to keep funds eligible for the small pots rule could not be reasonably foreseen at the time.

Although this raises another question: if the adviser thought that the OP wasn't working, a natural suggestion would be to take some taxable income from the pots, not just PCLS, to make use of her unused personal allowance. (To which the response would have been "Where did you get the idea that I'm not working" and the OP wouldn't now be in this pickle.)

dunstonh

I'm surprised that no providers offer the option, but I don't have direct experience of trying to do this for crystallised funds so will defer to you.

just jumping in on that point, I am not aware of any providers that offer splitting up of crystallised funds.  It's not an issue that has come up often but I have checked with several providers in the past and it was not offered.    Usually, the response is that they will allow a split with uncrystallised funds but not crystallised.     However, that is not a whole of market response as I just haven't had the need to check with sufficient numbers of providers/platforms to ask the question.

xylophone

when I emailed the IFA to request taking £14,000 of a total £17,000, I was asked only, by return email, 
“The £14,000 will be taxed as you only have taxable money left - you do know that?”  

You did mention in your first post

Both advised me about the MPAA but I assumed that that was for that financial year as I took my maximum 25% tax free allowance. 

so perhaps your IFA assumed that you didn't need warning again?

As I asked in my  first post post above, do you have anything in writing from your IFA which  indicates that he  assumed  that you would be retiring from paid employment?

And (for planning purposes), have you obtained a state pension forecast?

dunstonh

If the transaction was an advised event, then a report should have been issued.
if the transaction was a non-advised event then the adviser would just act on the instructions given to them.

We are still in the dark as to why the adviser thought you were retired when you were not.  Can you shed any more light on this?

xylophone

We are still in the dark as to why the adviser thought you were retired when you were not.

Yes indeed.

The OP said

I emailed the IFA but when he didn’t call back the next working day, I called him at 4pm. He said he was about to call. He said that he thought I had stopped working a year earlier when I first set up my account with him. In reality, I had gone down to a 4 day working week instead of 5 for two months but then reverted to a full working week. When I said this he sounded nervous and worried and said he’d find out what the financial implications would be to me but needless to say I have not heard back from him. 

I don't understand how the IFA ended up with the impression that the OP had given up work.

And if he thought that she would no longer have relevant earnings, why give the warning about MPAA rather than an explanation of the basic amount for non - earners?

https://www.gov.uk/hmrc-internal-manuals/pensions-tax-manual/ptm044100

dunstonh

And if he thought that she would no longer have relevant earnings, why give the warning about MPAA rather than an explanation of the basic amount for non - earners?

The risk warnings about MPAA should still be given if the person is retired.  It's automatic in our report generator (and I use one of the big two report writing software providers).   You give the warning as it is a statement of fact and you cannot rule out that someone may decide to return to work again.  Or it could be when a person reduces their hours, the pension contributions would be below the MPAA but if they decide to increase them again in the future then they should need to be aware of the consequences.   Some people get bored in retirement and return to work again. Or a new opportunity comes in that they were not expecting.   

jamesd

Malthusian said:

I'm surprised that no providers offer the option, but I don't have direct experience of trying to do this for crystallised funds so will defer to you.

I do know that there are providers who offer the option for uncrystallised funds, and that it's legally possible to do the same for crystallised funds, so I put 2 + 2 together. If I made 5 then I stand corrected.

They key decision point for this aspect was not creating a too large crystallised pot or using small pots rule initially instead of solely PCLS.

If the adviser didn't know at the time that the OP would want further taxable income while still working - and this could have been the case even without the confusion over her employment status - it may be that the need to keep funds eligible for the small pots rule could not be reasonably foreseen at the time.

Although this raises another question: if the adviser thought that the OP wasn't working, a natural suggestion would be to take some taxable income from the pots, not just PCLS, to make use of her unused personal allowance. (To which the response would have been "Where did you get the idea that I'm not working" and the OP wouldn't now be in this pickle.)

I was relying on past description by dunstonh and the caveats in his post about this not being after a whole of market search apply.

Agreed about using personal allowance.