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IFA fees for Pension transfer & and tax free cash for debts

I am 56 and am looking to release £17,500 tax free from  my DC workplace pension to put together a small emergency  fund and pay off a couple of credit cards. I am now focused and learning finance so very slim chance of me accruing more debt in future. My focus now is to reduce debt to zero and build wealth as much as I can to take care of retirement. I have been to see an IFA who seems to have put forward a very good proposal. He plans to take £70,000 from my current WP pension, transfer £50, 000 into a private pension scheme (based on my attitude to risk), and the rest will be for my debt and his fees. His fees total £2,100 (3%) . The WP pension will still remain active as I am still in employment.

I am in some sort of lifestyle  fund in my current workplace pension scheme and it is just left there - not being farmed - losing money, and they would not allow a tax free 25% cash withdrawal.

Am I doing this right and is all this worth an extra £1,600?
Note that I am already paying £500 for my IFA's work in preparing the report, Therefore £2,100 in total.

Comments

  • Marcon
    Marcon Posts: 12,963 Forumite
    Eighth Anniversary 10,000 Posts Name Dropper Combo Breaker
    Donpal said:
    I am 56 and am looking to release £17,500 tax free from  my DC workplace pension to put together a small emergency  fund and pay off a couple of credit cards. I am now focused and learning finance so very slim chance of me accruing more debt in future. My focus now is to reduce debt to zero and build wealth as much as I can to take care of retirement. I have been to see an IFA who seems to have put forward a very good proposal. He plans to take £70,000 from my current WP pension, transfer £50, 000 into a private pension scheme (based on my attitude to risk), and the rest will be for my debt and his fees. His fees total £2,100 (3%) . The WP pension will still remain active as I am still in employment.

    I am in some sort of lifestyle  fund in my current workplace pension scheme and it is just left there - not being farmed - losing money, and they would not allow a tax free 25% cash withdrawal.

    Am I doing this right and is all this worth an extra £1,600?
    Note that I am already paying £500 for my IFA's work in preparing the report, Therefore £2,100 in total.
    The pension isn't losing money. The funds in which you have chosen to invest (or possibly the default fund) are what generates growth or loss. Not sure what you mean by 'farmed' - what exactly are you expecting to happen? Given you are now of an age where you can access cash from your pension, why do you need to transfer any of it out into an emergency fund?

    Presumably the plan is to transfer £70,000 to a private pension and then withdraw the £17,500 to ensure you don't trigger the Money Purchase Annual Allowance, which I hope the IFA has explained to you, given that you intend to build your retirement pot as much as possible?


    Googling on your question might have been both quicker and easier, if you're only after simple facts rather than opinions!  
  • Thank you Marcon
    By 'farmed' I mean it was not being checked for growth - my fault as I assumed that was what we paid the pension providers to do and I was not checking it. I naively thought that I would automatically see growth year on year but I think they assumed  low risk and  moved a lot of  funds to cash.

    The emergency fund is just for household and car emergencies and other unplanned emergencies. I plan to put about £2,000 in an easy access and leave it there - then build it back up if necessary - I found theat emergencies and lack of planning and budgeting were the main causes of the credit card debt.

    Yes the Money Purchase was explained.  I am leaning on taking the IFA's recommendation  as I want clear off these credit cards once and for all - I was wandering whether there was a better way of doing this so I can save £1,600?

    Thanks agian.

  • dunstonh
    dunstonh Posts: 118,565 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Combo Breaker
    Am I doing this right and is all this worth an extra £1,600?
    What you are asking the IFA for advice on is a high risk area one of the FCA's current hot potatoes.   The fee seems reasonable given your additional risks to the average consumer (.e.g. small fund value, accessing pension whilst still working)

    I naively thought that I would automatically see growth year on year but I think they assumed  low risk and  moved a lot of  funds to cash.
    Investments zig zag and around 1 in 5 years is negative, 1 in 5 it barely moves (may be slight positive or slight negative) and 3 in 5 are growth.  You never know the order in advance.




    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.
  • If your long term goal is to build up your wealth to allow you to retire at a reasonable age then taking money from your pension to fund your short term goal of paying down your debts may not be the best solution (Having to replace the £17.5k from your retirement "pot", you will already be on the back foot.)  Personally, I would tighten my belt and concentrate on paying down my debts from my salary.  It means a few years of slogging away, but if it bought me my sweet, sweet freedom I would do it (In fact I kind of am! :  )

    Meanwhile, spend some time reading up about pensions, lifestyle funds, etc to make sure your pension money is working well for you and your goals.

    There is also a debt free wannabe board that may be of use to you here:
    Debt-free wannabe — MoneySavingExpert Forum
    Think first of your goal, then make it happen!
  • Albermarle
    Albermarle Posts: 25,956 Forumite
    10,000 Posts Sixth Anniversary Name Dropper
    Donpal said:
    I am 56 and am looking to release £17,500 tax free from  my DC workplace pension to put together a small emergency  fund and pay off a couple of credit cards. I am now focused and learning finance so very slim chance of me accruing more debt in future. My focus now is to reduce debt to zero and build wealth as much as I can to take care of retirement. I have been to see an IFA who seems to have put forward a very good proposal. He plans to take £70,000 from my current WP pension, transfer £50, 000 into a private pension scheme (based on my attitude to risk), and the rest will be for my debt and his fees. His fees total £2,100 (3%) . The WP pension will still remain active as I am still in employment.

    I am in some sort of lifestyle  fund in my current workplace pension scheme and it is just left there - not being farmed - losing money, and they would not allow a tax free 25% cash withdrawal.

    Am I doing this right and is all this worth an extra £1,600?
    Note that I am already paying £500 for my IFA's work in preparing the report, Therefore £2,100 in total.
    If you do pay an IFA, I would expect them to also advise you what to do with your workplace pension. 
    Such as maybe stop lifestyling, change the investment mix etc. You would have to make the changes yourself but I would expect any decent IFA who you were paying anyway, to at least give you some pointers in the right direction with your workplace pension.

    He plans to take £70,000 from my current WP pension, transfer £50, 000 into a private pension scheme (based on my attitude to risk), and the rest will be for my debt and his fees. His fees total £2,100 (3%) 
    Just be aware that it is usually simple to transfer money from one pension to another at zero cost. However you then have to decide how to invest the money in the pension.
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