Taking my whole pension as lump sum

Rachelk13

I have two pension policies with one Company. Together they are just over £30k. I have been told because of this a financial advisor will have to sign a form (obviously they will charge me) to take it out. One advisor gave me an estimate of £4000 to do it. This is extortionate. Is this correct or can someone else give me suggestions on a cheaper alternative? Thanks

Dazed_and_C0nfused

In most situations there is no need to pay anything for advice to take a pension.

Is it a DC or DB scheme?

And if DC does it have safeguarded benefits?

Rachelk13

It’s an appropriate personal pension with GAR. 

Rachelk13

The Company it is with have given me a form that has to be signed by a financial advisor apparently to get my money out

MX5huggy

We need to know what sort of pension it is before offering an opinion on if this is a valid requirement and it’s likely cost.

xylophone

And if DC does it have safeguarded benefits?

The OP has stated

I have two pension policies with one Company. Together they are just over £30k. 

It’s an appropriate personal pension with GAR. 

Which being interpreted means "DC with safeguarded benefits"

https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/495377/pension-benefits-with-a-guarantee-factsheet-jan-2016.pdf

Circumstances in which advice is required

Section 48 of the Pension Schemes Act 2015 and regulations made under it require pension scheme members who have subsisting rights in respect of safeguarded benefits worth more than £30,000 under the scheme to take appropriate independent advice from an FCA authorised adviser before:

• converting safeguarded benefits into flexible benefits (or in the case of benefits which are both safeguarded and flexible, into different flexible benefits)

• using a transfer payment in respect of safeguarded benefits to acquire flexible benefits under another scheme

• being paid an “uncrystallised funds pension lump sum” (UFPLS) in respect of their safeguarded benefits. 

1. Guaranteed annuity rates

   Pension policies with GARs are the most common type of safeguarded benefit which is not a salary-related benefit under an occupational scheme. Guarantees of this nature typically exist as an option, with the member free to choose to purchase an annuity from another provider, to take benefits as a lump sum, or to transfer to a drawdown product from another provider, and there may be multiple different guaranteed annuity rates available to the member at different ages. However, the benefits are safeguarded because the member has a right to convert their pot into an income in accordance with conversion factor(s) which are known during the accumulation phase.

   The benefits are safeguarded even if the guaranteed annuity rate promised is below the rates currently being offered on the open market. This is because the open market rates may fall below the guaranteed annuity rate before the guarantee expires.

A pension plan with a GAR that expires at a specific point in the future (for example when the member turns 60) is a safeguarded benefit until the GAR expires. A pension plan with multiple GARs expiring at different specific points in the future is a safeguarded benefit until all the GARs have expired, at which point it ceases to be safeguarded, provided that there are no other safeguards attaching to the benefits.’

Marcon

Rachelk13 said:

I have two pension policies with one Company. Together they are just over £30k. I have been told because of this a financial advisor will have to sign a form (obviously they will charge me) to take it out. One advisor gave me an estimate of £4000 to do it. This is extortionate. Is this correct or can someone else give me suggestions on a cheaper alternative? Thanks

If these are really two different policies, why are they being treated as one?

Rachelk13 said:

It’s an appropriate personal pension with GAR. 

'It' or 'they' ?? You can have more than one appropriate personal pension, and your first post suggests you do indeed have two policies, albeit with the same company.

dunstonh

Rachelk13 said:

I have two pension policies with one Company. Together they are just over £30k. I have been told because of this a financial advisor will have to sign a form (obviously they will charge me) to take it out. One advisor gave me an estimate of £4000 to do it. This is extortionate. Is this correct or can someone else give me suggestions on a cheaper alternative? Thanks

It is not extortionate.   Overruling safeguarded benefits is one of the highest risk transactions an advice firm can take. It requires additional FCA permissions and comes at higher costs to an advice firm via their PI insurance costs.  Some safeguarded benefits need a pension transfer specialist qualification and those people charge more because of the extra study and qualifications they have obtained.

Every year, the firm will be asked how many GARs it has converted to flexible access and as that number goes up, so, does their costs.   Long after you have paid your IFA for doing this one off transaction, the IFA firm will still be paying the cost of it 

It’s an appropriate personal pension with GAR. 

GARs are safeguarded benefits.  hence the requirement where the value of the plan is over £30k or the value of linked plans is over £30k

Realistically, an adviser quoting around £4k for this really means they don't want to do it.   Passive blocking by pricing high exists in most industries.    Rather than saying they dont want to provide advice to you, they tell you a really high price knowing its unlikely you will return.    

And in all reality, not many advice firms are going to be that interested in overruling a GAR unless the GAR is very low and the alternative being done is justifiable.

Albermarle

So in summary, the OP would be better just to take the pension income as they are with the GAR, and not worry about trying to transfer them, or cash them in, as it is probably a fruitless exercise.

Linton

If the OP can tell us the value of the GAR perhaps  we can make more specific comments.

dunstonh

Albermarle said:

So in summary, the OP would be better just to take the pension income as they are with the GAR, and not worry about trying to transfer them, or cash them in, as it is probably a fruitless exercise.

If its a poor quality GAR that can be improved on by an annuity with another provider, then that would not require pension transfer permission requirements.   Any flexible option requires pension transfer permissions.