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Aviva pension limited options.

After months of trying to get advice on husband's pension he is back to square one. To cut a long story short it turns out the pension is a protected rights fund, also known as serps. He found somebody to look at it who wasn't an independent adviser but said they could help him fulfil his request which was to transfer it,take 25% plus a smaller amount then leave the rest in a drawdown, 5 weeks later he has been told that he can't go ahead with it as the IFA don't agree with cashing pensions in to pay a mortgage off, (probably worded it differently)

Also he would have been charged £1000 (is that the going rate) if it went ahead. The pot is just short of £40000, our mortgage balance is £33000, we have £15000 savings and was going to use this plus the 25% to try and clear the mortgage before we both get to 66, ( 2 years off) But I was reluctant to use our small savings. Mortgage payments are £613 a month. 

Husband rang Aviva again and can only offer him 2 options, take lump sum and buy annuity with rest, self invest (no idea what to do there) or transfer elsewhere so he contacted Pension Bee who replied and said because the pension has a protected element he would need independent advice and that the IFA would need to categorically recommend that he transfers out of the scheme before transferring to them. He has no other pensions as has always worked for family businesses but will get full state pension, I have enough pensions. We feel we need to pay our mortgage off then we can save that money towards our retirement.
Probably will try to find an independent adviser, £1000 is a lot of money though.

Comments

  • Marcon
    Marcon Posts: 12,963 Forumite
    Eighth Anniversary 10,000 Posts Name Dropper Combo Breaker
    wildz said:
    After months of trying to get advice on husband's pension he is back to square one. To cut a long story short it turns out the pension is a protected rights fund, also known as serps. He found somebody to look at it who wasn't an independent adviser but said they could help him fulfil his request which was to transfer it,take 25% plus a smaller amount then leave the rest in a drawdown, 5 weeks later he has been told that he can't go ahead with it as the IFA don't agree with cashing pensions in to pay a mortgage off, (probably worded it differently)

    Also he would have been charged £1000 (is that the going rate) if it went ahead. The pot is just short of £40000, our mortgage balance is £33000, we have £15000 savings and was going to use this plus the 25% to try and clear the mortgage before we both get to 66, ( 2 years off) But I was reluctant to use our small savings. Mortgage payments are £613 a month. 

    Husband rang Aviva again and can only offer him 2 options, take lump sum and buy annuity with rest, self invest (no idea what to do there) or transfer elsewhere so he contacted Pension Bee who replied and said because the pension has a protected element he would need independent advice and that the IFA would need to categorically recommend that he transfers out of the scheme before transferring to them. He has no other pensions as has always worked for family businesses but will get full state pension, I have enough pensions. We feel we need to pay our mortgage off then we can save that money towards our retirement.
    Probably will try to find an independent adviser, £1000 is a lot of money though.

    Protected rights as such no longer exist, so unless the pension has something known as 'safeguarded rights' (usually some sort of guarantee, such as a Guaranteed Annuity Rate) you don't need advice and a receiving scheme should be happy enough to accept the transfer.

    Aviva are still open to new direct stakeholder applications, and they offer drawdown, so possibly consider that route, or a basic Self Invested Personal Pension with any provider?
    Googling on your question might have been both quicker and easier, if you're only after simple facts rather than opinions!  
  • dunstonh
    dunstonh Posts: 118,562 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Combo Breaker
     To cut a long story short it turns out the pension is a protected rights fund, also known as serps
    Sorry, that is not correct.    Protected rights were abolished nearly a decade ago and reclassified as non-protected rights.    However, the software on legacy plans often refers to them as former protected rights as its too expensive to change old software.

    He found somebody to look at it who wasn't an independent adviser but said they could help him fulfil his request which was to transfer it,take 25% plus a smaller amount then leave the rest in a drawdown, 5 weeks later he has been told that he can't go ahead with it as the IFA don't agree with cashing pensions in to pay a mortgage off, (probably worded it differently)
    For clarity, do you mean the first person you spoke to wasnt independent but they referred it to an IFA who then said they couldnt justify using it to repay the mortgage?

    Also he would have been charged £1000 (is that the going rate) if it went ahead. The pot is just short of £40000, our mortgage balance is £33000, we have £15000 savings and was going to use this plus the 25% to try and clear the mortgage before we both get to 66, ( 2 years off) But I was reluctant to use our small savings. Mortgage payments are £613 a month. 
    £1000 is fairly cheap.   


    Husband rang Aviva again and can only offer him 2 options, take lump sum and buy annuity with rest, self invest (no idea what to do there) or transfer elsewhere so he contacted Pension Bee who replied and said because the pension has a protected element he would need independent advice and that the IFA would need to categorically recommend that he transfers out of the scheme before transferring to them.
    There is some misinformation going on somewhere as there are no protected rights and protected rights have never required an adviser to authorise a transfer.     Pensionbee are answering the question on the basis of there being safeguarded benefits.    So, are there any safeguarded benefits?   

    He has no other pensions as has always worked for family businesses but will get full state pension, I have enough pensions. We feel we need to pay our mortgage off then we can save that money towards our retirement.
    Your savings/investments description indicates you don't have a lot of money put aside for retirement.  So, blowing a big chunk of what there is on repaying a debt that should be serviced in your working life is rarely a good idea.   There are scenarios where it can be a good idea but not many.

    Probably will try to find an independent adviser, £1000 is a lot of money though.
    Its actually cheap considering the high risk on the transaction you want them to carry out.


    I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
  • xylophone
    xylophone Posts: 45,426 Forumite
    Part of the Furniture 10,000 Posts Name Dropper
    There appears to be a misunderstanding somewhere.

    Please can you clarify what type of pension this is?

    Is it "former protected rights"? If so, this does not require that advice should be taken before transfer to another scheme.

    Or is it a policy with a Guaranteed Annuity Rate?

    Or is it a S32 policy with Guaranteed Minimum Pension?

    Or is it a deferred defined benefit pension administered by Aviva?
  • wildz
    wildz Posts: 113 Forumite
    Part of the Furniture 10 Posts Combo Breaker
    Firstly thank you for the replies. The first person that got involved was not independent, and it wasn't their policy to advise people to cash pensions in to pay a mortgage. Yes, years ago it was classed as protected rights, it was a serps from what I understand, there are no more contributions being made.

    We have had a look at the documents on line and there is no mention of a GAR, no idea about the GMP,  I don't think it is a DB pension, could it be a DC?
    I found Series 2 av mixed 40.85% shares 2, on the statement,whatever that is.

    I have taken on board what was said about paying mortgage while I am still working, in 2 years another £13000 will have come off the debt. In April my husband is finishing his current job, he decided months ago, plan is to work part time for himself, so after April could he cash this pension in tax free?  He could then use £20000 of it to go towards mortgage, bank the rest, increasing the nest egg. I had planned to claim his tax allowance but not sure if I could if he claims this pot. Thank You
  • xylophone
    xylophone Posts: 45,426 Forumite
    Part of the Furniture 10,000 Posts Name Dropper
    Pension Bee who replied and said because the pension has a protected element

    What "protected element"?


     Currently, advice would be required if the the pension had "safeguarded benefits" valued at an amount exceeding £30,000.

    SEE

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


    Former Protected Rights are not safeguarded benefits as defined in the guidance above.


    Protected Rights pension policies used to be subject to certain restrictions - these are summarised here.

    http://www.alltrust.co.uk/wp-content/uploads/2014/06/GD3-Protected-Rights.pdf

    However, 

    From 6th April 2012 Protected Rights schemes were broadly abolished, and the additional restrictions that used to accompany funds accrued on that basis were removed. 


    The above means that these protected rights became ordinary rights, basically  the policy holder just had a standard DC pension.

    A standard DC pension can be transferred to another pension scheme without the requirement for advice.


    Your husband should ask Aviva to clarify whether the pension has "safeguarded benefits" as defined in the guidance above.


    If not, your husband could  approach another pension provider (example Hargreaves Lansdown) and ask them to organise the transfer of the pension to their SIPP.


    Once in the SIPP, your husband  (assuming that he is aged 55 or older) would be free to choose how to take benefits from his pension.


    He might wish to book an appointment with Pension Wise after reading the information here


    https://www.moneyhelper.org.uk/en/pensions-and-retirement/pension-wise


  • Marcon
    Marcon Posts: 12,963 Forumite
    Eighth Anniversary 10,000 Posts Name Dropper Combo Breaker
    wildz said:
    Firstly thank you for the replies. The first person that got involved was not independent, and it wasn't their policy to advise people to cash pensions in to pay a mortgage. Yes, years ago it was classed as protected rights, it was a serps from what I understand, there are no more contributions being made.

    We have had a look at the documents on line and there is no mention of a GAR, no idea about the GMP,  I don't think it is a DB pension, 1. could it be a DC?
    I found Series 2 av mixed 40.85% shares 2, on the statement,whatever that is.

    I have taken on board what was said about paying mortgage while I am still working, in 2 years another £13000 will have come off the debt. In April my husband is finishing his current job, he decided months ago, plan is to work part time for himself, 2. so after April could he cash this pension in tax free?  He could then use £20000 of it to go towards mortgage, bank the rest, increasing the nest egg. I had planned to claim his tax allowance but not sure if I could if he claims this pot. Thank You
    1. Yes, it's a DC pension.

    2. No. 25% of the pension would be tax free, the remaining 75% would be potentially taxable. If he has no other taxable income in the tax year he cashes in the pension, then a further £12,570 would be covered by his normal personal allowance, and anything over that would be taxed at basic rate.

    Googling on your question might have been both quicker and easier, if you're only after simple facts rather than opinions!  
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