Death Benefit advice, Defined Contribution Scheme

Albermarle

Some pension providers will not act on instructions directly from a consumer/member of the public and insist you go through a financial advisor , so this is maybe the issue . If you name the provider then it may help to clarify this point .

The way out of this is to transfer the pension to a provider that is happy to deal directly and let you DIY.
Transferring a pension is easy nowadays and usually is cost free. However as said probably best not to rush into anything too quickly.

Thinking about this some more, I think my partner's idea was to take £18,000 per year (i.e. £1500 per month), which I appreciate you say is quite high, but only until she reached state pension age. She would then reduce the amount she took so that this reduced amount, plus the full state pension, would amount to £18,000 per year. This amount would of course have been adjusted according to inflation and cost of living, if required. She would have been 67 in September 2027. Does that sound like a reasonable plan?

Yes and this means that lower risk investments are more suitable . However as the plan is still to take money from the pot long term , it is better not to go too low risk . There is a saying ' taking no risks is the riskiest strategy of them all ' 

Aristotle67

wjr4 said:

You shouldn’t be charged again for advice if using the same FA. What have they actually recommended you do? I think you really do need to take some time to grieve, and not rush into things. 

The FA was one assigned to my partner by the provider, which was Prudential. He left his position a few years ago and another FA took over in that advisory role. My partner decided not to continue with the ongoing advice service offered by the "new" FA.

Because I have inherited the retirement account, Prudential have a requirement that to take a nominee drawdown I must have a FA. I have contacted the "new" FA. He is happy to act but will charge 2-3% of the £300000 pot in fees. He emphasises that Prudential insist I receive formal financial advice on the suitability of any new arrangement. I do not want such advice. As far as I am concerned it is a waste of time and money. The FA says he would take into account my preference for the pension to be invested in the same way as it was before, when considering any advice. I don't him to take it into account. I would like him to do as I instruct; and that is to invest the pot in exactly the same way as it was before.

Aristotle67

Albermarle said:

Some pension providers will not act on instructions directly from a consumer/member of the public and insist you go through a financial advisor , so this is maybe the issue . If you name the provider then it may help to clarify this point . 

The provider is Prudential and my understanding is that they are insistent on this.

Albermarle said:

The way out of this is to transfer the pension to a provider that is happy to deal directly and let you DIY.
Transferring a pension is easy nowadays and usually is cost free. However as said probably best not to rush into anything too quickly.

Thanks, Albermarle. Perhaps this is something I will look into.

dunstonh

I have had a financial adviser allocated to me, which is required by the pension provider if I wish to choose a drawdown (which ideally I would like to do) but I am not happy with the procedures that I have to go through with the FA or the fees required for these services. I know precisely what it is that I would like and I can see no value in doing it the way the FA wants to do things. 

1 - you dont need a financial adviser if you want to do drawdown.   You only need to if you want to use a product that requires it.   If you don't want that product and want a DIY provider then you are free to do it without advice.
2 - an FA will only cover that product.   If you want advice, you should use an IFA who has access to the wider market.

What gets me is that my partner had to pay between 2-3% of the pot in fees to the original FA in order to set the drawdown and investments up. I have been advised that this now becomes a new retirement account, because it will be in my name, which means another 2-3% of the pot must go to pay a FA. I don't see it that way. I see this as the same point being charged twice when just the name on the retirement account is being changed. 

If you were paying for ongoing servicing then you would not expect to be charged initial each time.   However, if you are not on an ongoing servicing arrangement then you would expect to pay each time.         Whilst modern pensions usually offer drawdown functionality, many providers require a transfer from their legacy plan to their modern plan to allow drawdown with them.   This is a new product purchase and not just a name change.

 I would like the investments my partner set up to continue. I don't want a discussion about my attitude to risk or about alternative products. I just want the drawdown set up exactly as before and I will happily pay an hourly rate for this to be done. But I do not want a new, full-blown, advisory package.

you are not going to get that with an adviser.   The adviser has to check the suitability of drawdown and carry out due diligence on the investments.   If its an FA rather than an IFA then they will probably not have the regulatory permissions to consider investments outside of their remit.   Without a discussion on attitude to risk an adviser is not going to recommend drawdown,

The FA was one assigned to my partner by the provider, which was Prudential. He left his position a few years ago and another FA took over in that advisory role. My partner decided not to continue with the ongoing advice service offered by the "new" FA.

As it's an FA and not an IFA, that would suggest it is pru rep. Pru's legacy products do not support drawdown and need to be transferred to their latest product.  (which I do not like and would not use as its expensive and restricted in choice but an FA with them would have to as they have no choice).

Also, with beneficiary drawdown, it is a new product and the regulatory process for new products is required to be followed.

The fact your partner decided not to have ongoing service means that the second initial charge is correct.  You cannot expect to get ongoing servicing without paying for it (either by the ongoing service charge or a transactional charge each time).

Because I have inherited the retirement account, Prudential have a requirement that to take a nominee drawdown I must have a FA. I have contacted the "new" FA. He is happy to act but will charge 2-3% of the £300000 pot in fees. 

Prudential do not have that requirement as you have worded it.  Prudential products are retailed via their own FAs or via IFAs.  If you want a prudential product then you need an adviser.  if you dont want a prudential product and want the pension transferred to a DIY provider then you dont need an adviser.  The fee is high but that is to expected with an FA.   1% would be more reasonable.

Aristotle67

Thanks, dunstonh.

What you have written has made up my mind. I should take the entire pot in one lump sum. That way it will stay safe and cannot be diminished unless I draw from it.

I cannot bear the thought of the following happening:

1. I accept advice from the FA and pay around £6000 for it.

2. The product does not perform as hoped but underperforms. My pension pot loses value as a result.

3. I have paid £6000 in order to lose money. The FA gets paid no matter what happens; I lose out in both the value of the pot and
    in what I have paid top the FA.

Should that happen I will scream blue murder.

I am willing to accept the risk that the product may underperform, so long as I make the decision to go with the the product. In that scenario, the fault lies entirely with me for choosing the product. I would be comfortable with that.

If I lose money following someone else's advice, I would not be comfortable. 

If I take the lump sum, I remain in control of the funds. If they are invested unwisely, or if they do not grow because I leave them where they are, I know the fault lies with me. I can live with that. 

To be honest, I think the FA is saying to me that unless he gets paid a lot of money he is not going to talk to me; in which case, so be it. 

Albermarle

You would solve the issues you are concerned about and not bring new problems, by transferring it to another more flexible pension. 
No FA fee . Full control of the investments . No issues with Capital Gains or dividend tax ( which you will have when investing such a large sum of money outside a pensions ( apart from paying more tax it is a lot of admin ) . Pension pot remains outside your estate for inheritance tax purposes but can still be left to chosen beneficiaries.

Aristotle67

Albermarle said:

You would solve the issues you are concerned about and not bring new problems, by transferring it to another more flexible pension. 
No FA fee . Full control of the investments . No issues with Capital Gains or dividend tax ( which you will have when investing such a large sum of money outside a pensions ( apart from paying more tax it is a lot of admin ) . Pension pot remains outside your estate for inheritance tax purposes but can still be left to chosen beneficiaries.

Thanks, Albemarle. I have been thinking about that last part and, despite what I wrote initially about always wanting to pass whatever remains on to beneficiaries, that is now not a consideration; and this as a result of a discussion with those who would have been the beneficiaries. They want me to do what is best for me, as that is what my partner would have wanted. I am also not worried about inheritance tax if the funds were passed within the estate, e.g. if I took a lump sum.

Does that change anything in terms of options? 

dunstonh

To me, the best option would be to take beneficiary drawdown with another provider that caters for the DIY market and pick the investments you want.   Not to take it out as a lump sum.  It meets all your objectives and keeps the pension out of tax.

cashing it in to then do it in exactly the same way but in a taxable environment doesn't make sense.

At the moment, you are focusing too much on the Pru option and not the wider marketplace.

FIREmenow

I am so sorry for your loss and can't imagine how hard it is to try to deal with this at the moment. I can understand your wish to not waste your partner's hard-earned pension but you could accidentally make quite a costly decision if you act quickly whilst grief has a tight grip.

Forumites, am I right in thinking there will be a huge tax bill if the OP were to completely empty the pension in one go? If so, could someone please quantify this for the OP as I don't want to miscalculate it myself.  It might help to see actual figures.

NannaH

Unless you have a high income and can feed a large amount like  that into a Sipp over a few years to gain the tax relief,  For goodness sake don’t take the cash lump sum and stick it into an investment account, you will be taxed on growth or dividends and then on any income! Plus the hassle of yearly self assessment. 
Transfer it into a Sipp,  there are several good ones , fees are from .25% to .5% plus fees for whichever funds you choose so you should be be paying 0.5 - 1.5% per year or less in total. 

Choose exactly the same funds your partner had or perhaps choose very similar but cheaper ones,  easy with a bit of research. 

I’d be so annoyed if I thought my husband would do something so silly if I were to die!