Getting financial advice from Pension Wise

ncfc1902

Drawdown will be mentioned in the Retirement Options Pack rather than in annual statements

gm0

Pensionwise would not be necessary if schemes had not been bullied out of the guidance space.  FCA solving problem A aggravates problem B.

This happens with occupational scheme guides who explain "what you can do here in this old scheme" which will pretty much always include both "annuity", full transfer out for a DC.  And may sometimes include other items.

Full transfer out is a legally required option for decades and means you *can* access all the other pension freedoms which the scheme doesn't support by going somewhere that does support them.  Easy. Once sure you want to.  Go to new provider and make the new account and a transfer pull request.
 
Unless you are then blocked and taxed by a legally mandated advice requirement over protected rights for your membership this should be a relatively easy and pain free process for DIY.  Can even attract cashback for deferred fees.  Or an adviser will do most of it for you as part of their setup if you go that way.

Occupational trust admins just don't describe in detail all the stuff their trustees' scheme currently does NOT do but which is allowed under legislation.  Because that would be a bit mad and likely confusing and also misleading to members.  And it changes and you would forever be at risk of either misleading people or constantly keeping material fresh about options you don't even offer. So they just don't do it at all.  Trustee doesn't ask for it.  Providers don't do it.

But it does leave some people under educated about their options or thinking they have less choice than is the case.

They do say - Consider going to get independent financial advice.  
And recommend you take a trip to PensionWise. 
And many other things the FCA tell them that they must say.

Drawdown pension feature complexity/flexibility from MOST to LEAST:

Legally allowed by pension freedoms and rules on what assets SIPPs can hold legally
Available in the UK regulated and registered provider market somewhere - at least one does it
Available at this particular chosen consumer or adviser platform
Available in a bolted on Master Trust scheme - adding a basic default drawdown to a legacy scheme
Available at a legacy occupational trust scheme which long predates drawdown

Move up the stack as far as you need based on the assets you want to hold, the method of drawdown and frequency you want to use - monthly UFPLS etc, costs - until you find one or more providers who do what you want. 

It's why the platform selection is almost last in the DIY planning process i.e. after access method and asset allocation - albeit with some iteration about trading imperfect choices off against one another.

Old scheme admin is unhelpful.  This is deliberate.  You are the product in the warehouse not the customer.  The scheme trustees are the customer.

Scheme admin playbook

We are not allowed to give advice tailored to you so we strenuously avoid it - due to penalties if we do or cross sell stuff to you while doing scheme admin
We stick to the rules of the scheme, member facts and the FAQ
We stick to the scope of our trustee outsource agreement
Persistent edge case customer queries go to specialists via workflow and take weeks
We signpost advice and other FCA mandated things
We aim never to be helpful, to offer guidance which could be misconstrued, we never engage with the members' individual situation.
We answer closed questions about the scheme factually but don't interpret what you meant or maybe should have known to ask instead.  Being helpful could be viewed as guidance. And guidance could become advice via complaints. So we don't do that.

Once you understand the incentives they are under - then their not very helpful behaviour makes more sense - or has a kind of mad logic anyway.  With that you can predict what they will do.  And that in turn helps you frame better *closed* questions if you need to interact with these outfits to find out key information.  Which unlike DIY transfer is often painful.

cfw1994

Outeast1000 said:

dunstonh said:

I have been asked do i intend to get financial advice from pension wise before i make a claim 

I doubt that is what you were asked as they do not give advice.   Its more likely they have asked if you have sought guidance from pensionwise (and they often ask if you have had advice from an IFA)

My question is what is the benefit of getting advice from pension wise on claiming my pension pot ?

Probably none as the guidance wont tell you what is best for you to do or if other options are better.   It may point out certain pitfalls which you may or may not be aware of.

It may point out certain pitfalls such as ?

Pensions are full of little things to trip people up!

I’m sure @dunstonh can add others, but here’s a few:

The TFLS part is reasonably easy to follow….although taking even £1 from the other 75% will trigger the MPAA, limiting any future pension contributions to £4K pa (as things currently stand - chances are a future government, maybe even this one, could change things 🤷‍♂️)

That for many, it may be worth taking that 25% as part of the monthly draw: if the “pot” increases, so those 25% portions increase.   

Conversely, if they are nudging the LTA, it may be worth taking the 25% ‘up front’.

To remember that pension pots are outside the IHT pot when measured (good for passing money down, if that is a concern)

That there is a final LTA check at age 75, & any growth in already-crystallised drawdown pots will be measured (along with non-crystallised amounts left).

Also: that although one might theoretically be allowed to do something, individual schemes might themselves not allow something to happen.  My Aviva would not allow a partial move to another company after any drawdown had started, for example.   Not that Pensionwise would have picked that up….

Malthusian

cfw1994 said:

Also: that although one might theoretically be allowed to do something, individual schemes might themselves not allow something to happen.  My Aviva would not allow a partial move to another company after any drawdown had started, for example.  

That one is actually HMRC rules, not individual schemes. Pensions in drawdown cannot be partially transferred, only uncrystallised funds. (A hangover from the pre-2015 era.)
I would say the major pitfall is the fact that if you cash an entire pension in, it will be taxed all in one go.
"If you draw money out of your pension it won't be there any more" has been derided as insultingly obvious, but it isn't. How many times have we seen widow/ers convinced that there is a "pot of money" or "widow's pension" due to them on their spouse's death, only to find that it doesn't exist because their spouse cashed the whole thing in years ago, or bought a single life annuity?

zagfles

Malthusian said:

cfw1994 said:

Also: that although one might theoretically be allowed to do something, individual schemes might themselves not allow something to happen.  My Aviva would not allow a partial move to another company after any drawdown had started, for example.  

That one is actually HMRC rules, not individual schemes. Pensions in drawdown cannot be partially transferred, only uncrystallised funds. (A hangover from the pre-2015 era.)

Why a hangover, probably more likely because it'd make the age 75 test on crystallised growth far too complicated if they allowed partial transfers of crystallised funds.

zagfles

cfw1994 said:

Pensions are full of little things to trip people up!

And lots of things which some people make a big deal about which are trivial, such as how to phase the TFLS. It'll make hardly any difference whether you take monthly UFPLS or crystallise a chunk every year or two, or for a small pension taking the whole TFLS up front. The main difference is potential tax on unwrapped growth and inheritance issues, which for many people will be nil.

Plus when you get to 75 it can be better to extract the TFLS rather than your beneficiaries potentially having to pay income tax on it, if there's unlikely to be IHT on it (eg spouse exemption, within IHT thresholds)

But the really big things that trip people up are stuff that probably wouldn't even occur to pensionwise or IFAs, such as the timing of taking a DB pension due to lumpy way they are usually revalued/indexed. People taking a DB pension around this time could be 10%+ better or worse off depending on timing.

Malthusian

zagfles said:

Why a hangover, probably more likely because it'd make the age 75 test on crystallised growth far too complicated if they allowed partial transfers of crystallised funds.

Can't see it. In the information that Pension Scheme A sends to Pension Scheme B on a full transfer of a crystallised fund, there is already a line saying "Amount originally designated to drawdown". If partial transfers were allowed, the only additional complication is that Pension Scheme A has to take that amount and multiply it by the percentage being transferred. After that, Scheme A and Scheme B's age 75 tests proceed in the same way as if the client had split up their fund before crystallising it.
The ban on partial transfers made a little bit more sense when you had all the pre-2015 rigmarole of annual income limits, review dates, etc. (Often multiple limits and dates for the same drawdown pension, if the provider crystallised each transfer as it came in.)
(Even back then, there is theoretically no reason to ban partial transfers - it was still possible to multiply by a percentage and proceed as for a full capped-drawdown-to-capped-drawdown transfer. But it was understandable that nobody who drew up the rules thought it was worth the bother. After all, any drawdown arrangement would only be in existence for maximum 10-15 years before they bought an annuity by age 75 lulz.)

zagfles

Malthusian said:

zagfles said:

Why a hangover, probably more likely because it'd make the age 75 test on crystallised growth far too complicated if they allowed partial transfers of crystallised funds.

Can't see it. In the information that Pension Scheme A sends to Pension Scheme B on a full transfer of a crystallised fund, there is already a line saying "Amount originally designated to drawdown". If partial transfers were allowed, the only additional complication is that Pension Scheme A has to take that amount and multiply it by the percentage being transferred. After that, Scheme A and Scheme B's age 75 tests proceed in the same way as if the client had split up their fund before crystallising it.

How is the legislation worded? If you, say, crystallise in scheme A and end up with £100k in drawdown after the TFLS, that's £100k crystallising for BCE1. It's one event.

Say that grows to £120k, and you then decide to transfer £60k into scheme B. You now have £60k in scheme A and £60k in scheme B.

Then if that £60k in scheme A stays static, and the £60k in scheme B falls to £40k between then and age 75, then how much crystallises for BCE5A? It should be zero, because the amount crystallising in total is the same as the amount originally designated.

It's different where you transfer uncrystallised and then crystallise. There you get two BCE1s for each crystallisation, so they can be treated independantly.

Pat38493

zagfles said:

But the really big things that trip people up are stuff that probably wouldn't even occur to pensionwise or IFAs, such as the timing of taking a DB pension due to lumpy way they are usually revalued/indexed. People taking a DB pension around this time could be 10%+ better or worse off depending on timing.

Can you elaborate a bit on that?  Do you mean for example taking the pension at a time when inflation is high and the statutory revalution in deferment is less capped or suchlike?

zagfles

Pat38493 said:

zagfles said:

But the really big things that trip people up are stuff that probably wouldn't even occur to pensionwise or IFAs, such as the timing of taking a DB pension due to lumpy way they are usually revalued/indexed. People taking a DB pension around this time could be 10%+ better or worse off depending on timing.

Can you elaborate a bit on that?  Do you mean for example taking the pension at a time when inflation is high and the statutory revalution in deferment is less capped or suchlike?

An occupational pension taken on 30 Dec 2022 could be worth 10% less than if taken on 2 Jan 2023.

Discussed here https://forums.moneysavingexpert.com/discussion/5962314/rules-on-using-occupational-pensions-revaluation-orders/p1