Compulsory Independent Financial Advisor Fee

lesbud

Hi 
In order to take out the pension pot I have to pay for a financial advisor. I know my options and I need the cash to put towards buying my first home. I will basically to paying for advice I do not need. I have spoken to Moneywise and read extensively but need to buy a home or I will be paying rent through all on my retirement years. Why can I not make my own decisions about my pension pot?

badmemory

The reason you are going through this is because of the very bad decisions others have made in the past & intends to stop you doing the same.  You do not actually have to take the advice, but you never know the advisor may come up with an alternative solution for you.

xylophone

In order to take out the pension pot I have to pay for a financial advisor. Do you mean that you have a defined benefit pension valued at more than £30,000 that you are seeking to transfer to a defined contribution arrangement?

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

Albermarle

As above what kind of pension is it  ( definitions are in the link) , and how old are you?

Pension basics | Help with pension basics | MoneyHelper

dunstonh

I know my options and I need the cash to put towards buying my first home.

How old are you?

I will basically to paying for advice I do not need. 

Mandatory finanical advice is only required on DB schemes or where there are safeguarded benefits and the value is above £30,000.     That means statistically, it's more likely that transferring out of those pensions is a bad move.

So, as you say you do not need advice, what is the safeguarded benefit you are giving up and what are the terms of that safeguarded benefit?   Or is it a DB scheme?

 Why can I not make my own decisions about my pension pot?

Its there to stop you making a foolish mistake that you cannot backtrack on.

Brie

You should be able to get a one hour session with an IFA for free to check out what they are like.  That may be sufficient unless you are trying to do something really against good advice.

eskbanker

Brie said:

You should be able to get a one hour session with an IFA for free to check out what they are like.  That may be sufficient unless you are trying to do something really against good advice.

Sufficient in what way?  An IFA isn't going to give any sort of meaningful indication in the initial free meeting - reaching a position of being able to give advice on pension transfers involves significantly more legwork than that!

gm0

Regardless of what kind of pension you have.  Pension providers will signpost you towards advice.  They are under instruction from the FCA to do so.  Recommending and prompting but not forcing. 
When you tranfer a pension - "pot type" (Defined Contribution DC) this is typically a "pull" (like transferring an ISA).  And the providers ask about advice and guidance (such as whether you have been to PensionWise the free guidance service)

Dunstonh has explained the circumstances (narrow) where a defined benefit or certain other pension schemes will not allow a transfer out - unless they receive evidence of advice being taken. They are not being difficult. Just following the law as it now is.

This law was brought in to clamp down after much scandalous bilking of consumers with defined benefit pensions. Transferred at great profit to unscrupulous advisers - they had perfectly good indexed DB pensions yet were tranferred to expensive and riskier DC ones, via high initial setup charges and onto high ongoing charges.  While giving them risks which they had not understood - being seduced by the CETV number being "big" and fuzzy on % over time.  British Steel (and others) pension scheme scandal are examples of why the often asleep at the wheel FCA in the end acted.

Only pension transfer specialist advisers who now carry lifetime liability (which they must insure) can do it.  Nobody is that wild about this type of business any more as now configured.  Thus achieving the result which the FCA wanted which is to effectively close this down without actually banning it.

Receiving schemes no longer want to accept clients who were told not to do it but insisted on doing it anwyway - lest they get hit with the misselling liability in 20 years time.  So most now don't.  The situation thus exists that if you pay the large advice fee and get a negative recommendation (highly likely) - nobody will then take you anyway.

So if it is defined benefit - it is a long hard expensive road if it is possible at all now.  The various attempted work arounds are much debated on other threads here. 

if you had so much retirement income and assets that the pension wasn't needed for core income needs you might be able to convince someone on the criteria for it being a suitable choice to obtain a positive recommendation. 
If not.  Then no. 

Unwelcome news as it may be.

tacpot12

This is more a question for your MP, who will probably just cite the reasons that have been so eloquently explained above.

It's probably not going to be practical to buy a property in retirement. The time to buy is when you are young and can get a mortage you can pay off over your working life. Rental shouldn't be a bad option  - it's a good way to get out of the repsonsibility of maintaining a property in later life - but due to mis-management of the rental market by successive Conservative governments, renting is currently unreasonably expensive and won't get cheap anytime soon, so while anyone can understand your desire to become a property owner, but I fear you may have left it too late. At least with your pension, you have a reliable (and hopefully index-linked) income that should allow you to rent somewhere. 

Your only other hopes are to inherit a property, or meet someone lovely that will let you share their home in return for money and/or cuddles. Although the latter of these only pushes the problem down the road if they have family they want to leave their home to.

Marcon

lesbud said:

Hi 
In order to take out the pension pot I have to pay for a financial advisor. I know my options and I need the cash to put towards buying my first home. I will basically to paying for advice I do not need. I have spoken to Moneywise and read extensively but need to buy a home or I will be paying rent through all on my retirement years. Why can I not make my own decisions about my pension pot?

You can. Whatever advice you receive, you can ignore it if you wish.

ukdw

gm0 said:

This law was brought in to clamp down after much scandalous bilking of consumers with defined benefit pensions. Transferred at great profit to unscrupulous advisers - they had perfectly good indexed DB pensions yet were tranferred to expensive and riskier DC ones, via high initial setup charges and onto high ongoing charges.  While giving them risks which they had not understood - being seduced by the CETV number being "big" and fuzzy on % over time.  British Steel (and others) pension scheme scandal are examples of why the often asleep at the wheel FCA in the end acted.

Bit ironic I suppose that the well meaning compulsory requirement for advice may have pushed some people into the hands of these sort of advisors.

I wonder whether some sort of compulsory education / knowledge testing would work as an alternative to compulsory advice.

Also an interesting question is - how much larger a pension do you need to have if you intend to rent throughout retirement?  For someone who is say 30 years old now - I'm guessing even a fairly basic rental is going to cost £30k+ per year by the time they retire - so that means they would probably need to plan to save at least another £750k in their pension to cover the rent.