Compulsory Independent Financial Advisor Fee

trust.no.1

Marcon said:

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.

The problem as pointed out by gm0 is that most if not all receiving schemes will not accept a client who has been advised not to transfer their DB pension.

I remember from past forum threads that there were a very small number of schemes willing to accept insistent clients, but they may well have changed their stance since then.

IMO these regulations are on balance for the greater good, protecting the vulnerable and less financial savvy from the sharks. They do however result in casualties such as the OP .  If these regulations weren't there then the taxpayer would ultimately be left to pick up the pieces when things go wrong.

marycanary

OP, I understand your worries about renting in retirement; high rent levels and the lack of security of tenure are sufficient to concern anyone. Have you considered contacting your local council? Many, although not all areas have an excess of older people's accommodation. Council and Housing Association rent increases are capped by the government and you have the security of being either a Secure (Council) or an Assured (HA) Tenant.  It might be worth a phone call to your council to check.

dunstonh

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.

In a way it did but many of these copy and paste firms were only doing what the person wanted them to do.    They were largely facilitating rather than advising.    The OP would have wanted one of those firms and we have seen many threads over the decade where people went to that type of firm by choice.

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

I don't see people willing to sit through around 1500 hours of education to do that.   The cost of that education and testing would likely be higher than the advice fee.

IMO these regulations are on balance for the greater good, protecting the vulnerable and less financial savvy from the sharks. They do however result in casualties such as the OP .

We don't know if the OP is a casualty or a beneficiary of the rules.   Nothing posted so far allows us to make that judgement as there is so little info given and the questions asked have yet to be answered.

Saying "Why can I not make my own decisions about my pension pot?" is not enough to say that they are casualties.  Advice could stop them from making a very silly mistake.  Hopefully the OP will supply further information and it won't just be another 1 post wonder.

Marcon

trust.no.1 said:

Marcon said:

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.

The problem as pointed out by gm0 is that most if not all receiving schemes will not accept a client who has been advised not to transfer their DB pension.

I remember from past forum threads that there were a very small number of schemes willing to accept insistent clients, but they may well have changed their stance since then.

IMO these regulations are on balance for the greater good, protecting the vulnerable and less financial savvy from the sharks. They do however result in casualties such as the OP .  If these regulations weren't there then the taxpayer would ultimately be left to pick up the pieces when things go wrong.

Someone with a transfer of £30K+ who has a DB pension, or a DC scheme with some sort of guarantee, is required to receive regulated advice before the ceding scheme (i.e. the one paying over the transfer) can pay to any arrangement which allows the member to 'flexibly access' their benefits.

There has been plenty of misinformation on this forum about DB transfers. Stakeholder pensions are required to accept transfers from any UK registered pension scheme, so even if you get advice to stay put, you can go ahead with the transfer - and then transfer from the stakeholder to a SIPP or other pension plan or your choice, without the need for further advice. 

Albermarle

 Stakeholder pensions are required to accept transfers from any UK registered pension scheme, so even if you get advice to stay put, you can go ahead with the transfer - and then transfer from the stakeholder to a SIPP or other pension plan or your choice, without the need for further advice. 

This is correct of course but @trust.no.1 was right to say I remember from past forum threads that there were a very small number of schemes willing to accept insistent clients, but they may well have changed their stance since then

IIRC A J Bell and Pension Bee ( and possibly others) used to accept insistent clients, but have since stopped.

I wonder how long before Aviva stop new applications to their stakeholder, which is effectively an out of date product anyway ?

Marcon

https://forums.moneysavingexpert.com/discussion/comment/80026438#Comment_80026438

AJ Bell were the last (mainstream and possibly the very last!) SIPP provider to shut the door to DB transfers where the advice was not to transfer. Unfortunately too many people on here were still leaping to tell others that 'there is no known provider which will accept a transfer against advice…' when the reality was quite otherwise: stakeholder providers had to accept such transfers. That position hasn't changed since they were introduced 20+ years ago.

Anyone who is worried that Aviva might stop accepting new applications in future, and may want the option of transferring from a scheme with safeguarded benefits, might want to send off their cheque for £16 now.

I'm not sure that stakeholders are quite as defunct as some posters here believe - just not fully understood/recently researched. They were specifically designed to be bought and sold without advice, in order to keep down costs, so it's not really surprising that financial advisers aren't going to be that enthusiastic or clued up on what a 'modern' stakeholder offers!

They are required to accept contributions as low as £20 gross (ie £16 paid in/£4 basic rate tax relief added), at irregular intervals, paid by employer or employee, and by various payment methods. They must have a default fund option and can't impose an exit charge. Fund choices are quite limited (Aviva has about 50), which is plenty for most people without drowning them in choice. Many offer drawdown and can be managed online.

Charges aren't, as I keep reading, 1% - the default option for Aviva's stakeholder (I've just checked with them) is 0.55%. Anyone with an existing stakeholder may have more fund options, and possibly better charges, but there's not much point dwelling on those where the provider is closed to new applications. Given the level of pensions knowledge in the general population and the high % opting for whatever option happens without their having to do anything, just how much choice do people actually want, never mind need.

It's a decent, simple product with certain features enshrined in legislation, which can't be said of SIPPs or non-stakeholder pensions, where things like exit charges and costs are a matter of the provider's commercial design preferences.

theoretica

Has OP confirmed that this is transfering out a DB pension? It does seem the most likely, but there is also the possibility they are talking about cashing in a DC pension pot before the minimum retirement age. Which I understand can be legally done, but involves much money going to the tax man.

dunstonh

I'm not sure that stakeholders are quite as defunct as some posters here believe - just not fully understood/recently researched. They were specifically designed to be bought and sold without advice, in order to keep down costs, so it's not really surprising that financial advisers aren't going to be that enthusiastic or clued up on what a 'modern' stakeholder offers!

Financial advisers are perfectly clued up on what a modern stakeholder offers because

a) the few stakeholder pensions remaining open for new business haven't changed in over a decade. There are no modern stakeholder pensions

b) Rule RU64 still exists

c) stakeholders still appear on adviser software for comparisons

d) stakeholder pensions are more expensive than modern alternatives. Aviva platform, for example, offers the same investment funds as the stakeholder (in addition to whole of market funds) at a lower overall cost.

Most stakeholder pensions were bought with advice. The stakeholder pension was designed to bring costs down but it quickly became recognised that consumers don't buy unless they are forced to or they have someone telling them to.