Cannot get pension pot without IFA, cannot pay IFA without pension pot…help please?

dunstonh

teapotbot said:

cfw1994 said:

teapotbot said:

Slightly stuck as almost penniless. I have about 40K in an uncomplicated Pru pension pot and need to take it all.
Pru won’t release it until I have the form signed by an IFA and sent to them as it is over 30K.
I don’t have any funds to pay for an IFA so am in a tough Catch 22 situation here.
I am not resident in UK and have lived in France for the last 18 years. I cannot afford to travel to UK.
My ideal scenario would be a phone call with an IFA who would complete the paperwork for the Pru and send it to them, then issue an invoice for an agreed amount but giving me time to get the money from the Pru in order to pay the invoice.

I would welcome any practical advice on how to move this situation forwards please.

What do you mean by the bit in bold?
Are you trying to take it all out at once?

Why not ask for 25% tax free then the rest either as an annuity (as @dunstonh suggested) or regular income?
It is fairly clear your circumstances will prevent you doing a “simple withdrawal of the whole lot”, as described by others.

Thank you for taking the time to reply.

The line above the one in bold states ‘and need to take it all’.
Pru will not release the money until they have received a signed form from an IFA and they state that this is required due to the amount being over 30K.
As I cannot get to an IFA, and have no funds to pay for IFA advice, I am kinda stuck, hence asking here for any advice.

That is not correct.  Pru need an adviser if you are either transferring the pension or accessing the pension flexibly.   If you are buying a secure income, then the safeguarded rule does not apply.

Marcon

Veteransaver said:

dunstonh said:

Do you know the transfer value of the pension? Is it a recent valuation? I only ask as I recently got a transfer value on mine and it had more than halved since 2021

Are you referring to a DB pension (the only asset type to go down as much as that is index linked gilts. Its unlikely you were 100% invested in those).  That is very different to what the OP is referring to.

Yes, mine is a DB pension, which is what I assumed the op's pension was as it required IFA.

Advice is required for any scheme where the transfer value is £30K+ and the scheme has 'safeguarded benefits' (any sort of promise - eg a defined benefit, or guaranteed annuity rate on a DC scheme). I have suggested they go back to the Pru and ask them to confirm exactly what those safeguarded benefits are; just knowing it is called a Flexi Pension isn't enough.

Altior

Marcon said:

Altior said:

Technically, only seeking IFA advice is required, positive or negative. However, if negative then you also need to find a provider that will receive a cash equivalent DB transfer where the client has been advised by a professional that it's not in their best interest. Persistent client in the jargon, and to the receiving scheme there is still therefore an underlying risk. 

No need to be an insistent client - that term only applies where the adviser goes on to facilitate the transfer despite advising the client against transferring. There is no risk at all to the receiving scheme when it is a stakeholder pension, because the law requires them to accept any transfers from a UK registered pension scheme. 

Facts:

1. Advisers have never been the spoilsport 'gatekeepers' as they have often been portrayed, particularly on this site. They have been hamstrung by increasingly onerous FCA strictures and crippling PI insurance costs, which is why so many of them have relinquished their FCA permissions to advise on transfers from DB schemes.
2. When full advice has been given, the adviser must sign the necessary confirmation they have done so - known as a Section 48 certificate.
3. If someone has received full (as opposed to abridged) advice, and they have a statutory right to a transfer from a scheme with safeguarded benefits (a 'promise' of some description), the transfer can normally proceed whatever the advice says, provided the receiving scheme will accept the transfer. The exception is where the trustees of the ceding (paying) scheme identify certain risk factors in the proposed receiving scheme, in which case the transfer may be delayed or blocked to help protect members from falling victim to a scam.
4. Stakeholder pensions must accept any transfer from a UK registered pension scheme. That has been the position since stakeholders were introduced over 20 years ago, was confirmed in the 2015 Treasury consultation and remains the case still. Advice is still mandatory where the transfer value is at least £30K and the scheme has 'safeguarded benefits' (a DB scheme always has safeguarded benefits), because the ceding scheme cannot make a transfer payment without confirmation this has been given.
5. At the time of writing there are stakeholder providers open to new retail business. An individual can therefore apply direct to the provider to open one - easy to do by post, with a cheque for £16. They can then arrange their own transfer (with no adviser involvement beyond the provision of a Section 48 certificate, which enables the DB scheme to pay out the transfer - so no need for any 'insistent client' process). Given the tight timeframes involved with DB transfers, it makes sense to have the stakeholder pension set up before beginning the process.
6. You can then transfer on from the stakeholder pension to your SIPP with no further advice required (it's become a DC to DC transfer), and little chance the SIPP provider will decline it now that you aren't trying to transfer from a scheme with safeguarded benefits.

None of the above is to suggest that transferring is necessarily a good idea...if you've paid for advice (think upwards of £5K), it might make sense to pay heed to it!

I'm aware that stakeholder pensions need to accept transfers, even if the advice is negative. How many lay people are likely to be aware of that? I should imagine most people who try to transfer will attempt to do so using an existing (non stakeholder) platform. And could easily be rejected due to the implied risk that I touched on. 

if negative then you also need to find a provider that will receive a cash equivalent DB transfer where the client has been advised by a professional that it's not in their best interest.

Clearly I didn't state it was impossible to find one. Finding a platform that will accept a negatively advised transfer is just another obstacle in the way of realising a CETV, when the assumed cash value is £30K+. 

There are a plethora of areas in personal finance where people are permitted to make the 'wrong choices' without any sanity check. I'm of the view that if the financial ecosystem offers a function, it's the responsibility of the individual to judge if it's right for them (or not), and they then realise the consequences, positive or negative. Boring, old fashioned personal responsibility. I don't believe society and policy should be determined based on the lowest common denominator. Individuals should of course be provided with the risks, and impact of any possible decisions. I could go into one of my SIPPs now and bet the lot on an AI fund, at peak AI mania. Nobody's going to stop me from doing that, but I am potentially prevented from realising a stated cash valuation of a DB scheme, if it has a certain value. I'd argue there is much more risk involved in betting the lot on AI. 

I started a thread on here about a tiny DB that I have. It was valued at nearly £60K, so not especially worth all the hassle and cost of arranging a CETV. After the swift unwinding of near zero interest rates, the value was literally a few quid over £30K. So legislation still effectively prevented me from transferring, for a trivial amount over £30K. Now it is £27K, and I'm free to transfer without seeking advice, when the value is at its lowest in many years! And the theory would be that's all happened to protect myself from my own decisions...

Veteransaver

Altior said:

It's a tad ironic that CETVs have collapsed since the normalisation of interest rates. I wonder if anyone has challenged negative advice to transfer with a high CETV which is now effectively half what it was at the time the advice was provided!

It is misleading the way that DB schemes present CETVs as a realistic prospect for sums £30K+, when in reality the prospect of a successful transfer is vanishingly slim, and expensive if successful. Hardly any stakeholder has an interest in allowing the transfer, aside from possibly the individual seeking to process one. This is perhaps the inevitable result of allowing people to be compensated for making a grave error, even when advised against it. 

Good point, but there'd be little prospect of success as advisers aren't expected to have a crystal ball and can only advise based on current realities.
I do think the £30k limit is really quite low though. A DB scheme worth only £30k isn't going to have especially great benefits that are going to be a matter of life and death to most people. You're talking about a couple of grand of income a year, it's not going to make a difference to most people in reality.

I guess that's the issue that makes DB schemes such a hassle, people move employers much more often so there must be millions of people with relatively small DB schemes where they've only been with an employer a few years.
And the schemes are fairly restrictive, for me I was only in one for a few years early in my career when I was young and wasn't earning loads.
I left the company and still had 30+ years left till retirement, so you miss out on an awful lot of compound investment growth over that time whilst the pension benefits are only uplifted by CPI, and often capped. 
The income mine will provide is fairly insignificant to what I hope to retire on.
And the dependent's pension provisions aren't that generous, think it just pays out half pension if I die before retirement date, or two thirds if pension has started being paid. It's far better to pass on a decent pot to your spouse rather than 50% of a pretty small annual pension!

Marcon

Altior said:

Marcon said:

Altior said:

Technically, only seeking IFA advice is required, positive or negative. However, if negative then you also need to find a provider that will receive a cash equivalent DB transfer where the client has been advised by a professional that it's not in their best interest. Persistent client in the jargon, and to the receiving scheme there is still therefore an underlying risk. 

No need to be an insistent client - that term only applies where the adviser goes on to facilitate the transfer despite advising the client against transferring. There is no risk at all to the receiving scheme when it is a stakeholder pension, because the law requires them to accept any transfers from a UK registered pension scheme. 

Facts:

1. Advisers have never been the spoilsport 'gatekeepers' as they have often been portrayed, particularly on this site. They have been hamstrung by increasingly onerous FCA strictures and crippling PI insurance costs, which is why so many of them have relinquished their FCA permissions to advise on transfers from DB schemes.
2. When full advice has been given, the adviser must sign the necessary confirmation they have done so - known as a Section 48 certificate.
3. If someone has received full (as opposed to abridged) advice, and they have a statutory right to a transfer from a scheme with safeguarded benefits (a 'promise' of some description), the transfer can normally proceed whatever the advice says, provided the receiving scheme will accept the transfer. The exception is where the trustees of the ceding (paying) scheme identify certain risk factors in the proposed receiving scheme, in which case the transfer may be delayed or blocked to help protect members from falling victim to a scam.
4. Stakeholder pensions must accept any transfer from a UK registered pension scheme. That has been the position since stakeholders were introduced over 20 years ago, was confirmed in the 2015 Treasury consultation and remains the case still. Advice is still mandatory where the transfer value is at least £30K and the scheme has 'safeguarded benefits' (a DB scheme always has safeguarded benefits), because the ceding scheme cannot make a transfer payment without confirmation this has been given.
5. At the time of writing there are stakeholder providers open to new retail business. An individual can therefore apply direct to the provider to open one - easy to do by post, with a cheque for £16. They can then arrange their own transfer (with no adviser involvement beyond the provision of a Section 48 certificate, which enables the DB scheme to pay out the transfer - so no need for any 'insistent client' process). Given the tight timeframes involved with DB transfers, it makes sense to have the stakeholder pension set up before beginning the process.
6. You can then transfer on from the stakeholder pension to your SIPP with no further advice required (it's become a DC to DC transfer), and little chance the SIPP provider will decline it now that you aren't trying to transfer from a scheme with safeguarded benefits.

None of the above is to suggest that transferring is necessarily a good idea...if you've paid for advice (think upwards of £5K), it might make sense to pay heed to it!

I'm aware that stakeholder pensions need to accept transfers, even if the advice is negative. How many lay people are likely to be aware of that? I should imagine most people who try to transfer will attempt to do so using an existing (non stakeholder) platform. And could easily be rejected due to the implied risk that I touched on. 

I'm always happy to help extend people's knowledge - glad my post was of use to you.

The number of advisers who know it is also still quite limited - and if you look back a few years on this forum, you'll find it was being hotly denied by IFAs posting on here (and more generally) that there was any such requirement. The legal position doesn't usually change just because somebody didn't know about it.

I don't know of any non-stakeholder personal pension providers who currently accept DB transfers against advice.

Thank the FCA.

People are often quick to moan if legislation stops them doing something they want to do - until they do it and it backfires, and then the whine becomes a complaint that the government should have done more to protect them.

DRS1

I think this thread has got away slightly from the OP's issue.
They have a Prudential Flexi Pension (whatever that is) with a pot in excess of £30k.
They are 70 years old
So in principle they can draw their benefits from the pension now.
I am going to assume the pension is a DC pension but an older one which may not support drawdown (or modern drawdown).
So if the OP wants to take the whole pot in one go they would need to transfer the pot to a more modern pension.
Is that where the need for an IFA comes in?
Why?  If it was a straight DC plan to DC plan transfer then the £30k figure is not relevant is it?
It must imply there are some special rights attached to the Flexi Pension.
The OP should try to find out what those are.
If a transfer is not possible then the OP should also find out how the Flexi Pension pays benefits - is it simply a case of taking the 25% tax free lump sum and buying an annuity with the rest?  Is drawdown a possibility (or is there a threshold for drawdown  (eg £50k) and the OP's pot is below that so they don't qualify for drawdown)?
If drawdown is allowed what sort of drawdown is it?  Is it the sort where you have to take a regular income within certain bands?  Can the OP just max out the permitted drawdown and get the money that way?

Altior

Marcon said:

Altior said:

Marcon said:

Altior said:

Technically, only seeking IFA advice is required, positive or negative. However, if negative then you also need to find a provider that will receive a cash equivalent DB transfer where the client has been advised by a professional that it's not in their best interest. Persistent client in the jargon, and to the receiving scheme there is still therefore an underlying risk. 

No need to be an insistent client - that term only applies where the adviser goes on to facilitate the transfer despite advising the client against transferring. There is no risk at all to the receiving scheme when it is a stakeholder pension, because the law requires them to accept any transfers from a UK registered pension scheme. 

Facts:

1. Advisers have never been the spoilsport 'gatekeepers' as they have often been portrayed, particularly on this site. They have been hamstrung by increasingly onerous FCA strictures and crippling PI insurance costs, which is why so many of them have relinquished their FCA permissions to advise on transfers from DB schemes.
2. When full advice has been given, the adviser must sign the necessary confirmation they have done so - known as a Section 48 certificate.
3. If someone has received full (as opposed to abridged) advice, and they have a statutory right to a transfer from a scheme with safeguarded benefits (a 'promise' of some description), the transfer can normally proceed whatever the advice says, provided the receiving scheme will accept the transfer. The exception is where the trustees of the ceding (paying) scheme identify certain risk factors in the proposed receiving scheme, in which case the transfer may be delayed or blocked to help protect members from falling victim to a scam.
4. Stakeholder pensions must accept any transfer from a UK registered pension scheme. That has been the position since stakeholders were introduced over 20 years ago, was confirmed in the 2015 Treasury consultation and remains the case still. Advice is still mandatory where the transfer value is at least £30K and the scheme has 'safeguarded benefits' (a DB scheme always has safeguarded benefits), because the ceding scheme cannot make a transfer payment without confirmation this has been given.
5. At the time of writing there are stakeholder providers open to new retail business. An individual can therefore apply direct to the provider to open one - easy to do by post, with a cheque for £16. They can then arrange their own transfer (with no adviser involvement beyond the provision of a Section 48 certificate, which enables the DB scheme to pay out the transfer - so no need for any 'insistent client' process). Given the tight timeframes involved with DB transfers, it makes sense to have the stakeholder pension set up before beginning the process.
6. You can then transfer on from the stakeholder pension to your SIPP with no further advice required (it's become a DC to DC transfer), and little chance the SIPP provider will decline it now that you aren't trying to transfer from a scheme with safeguarded benefits.

None of the above is to suggest that transferring is necessarily a good idea...if you've paid for advice (think upwards of £5K), it might make sense to pay heed to it!

I'm aware that stakeholder pensions need to accept transfers, even if the advice is negative. How many lay people are likely to be aware of that? I should imagine most people who try to transfer will attempt to do so using an existing (non stakeholder) platform. And could easily be rejected due to the implied risk that I touched on. 

I'm always happy to help extend people's knowledge - glad my post was of use to you.

The number of advisers who know it is also still quite limited - and if you look back a few years on this forum, you'll find it was being hotly denied by IFAs posting on here (and more generally) that there was any such requirement. The legal position doesn't usually change just because somebody didn't know about it.

I don't know of any non-stakeholder personal pension providers who currently accept DB transfers against advice.

Thank the FCA.

People are often quick to moan if legislation stops them doing something they want to do - until they do it and it backfires, and then the whine becomes a complaint that the government should have done more to protect them.

No material use, sorry to disappoint. 

The whining and complaining that you allude to is perfectly fine. Who cares, people whine and complain all the time, about everything and anything. Sometimes justified, most often not. The system caving in to those people, and sometimes bailing them out when the responsibility sits completely and demonstrably with them is the problem. I'm reminded of Icesave as a pertinent example. 

dunstonh

The number of advisers who know it is also still quite limited - and if you look back a few years on this forum, you'll find it was being hotly denied by IFAs posting on here (and more generally) that there was any such requirement. The legal position doesn't usually change just because somebody didn't know about it.

I was one of those but the reason was not that it was stakeholder.  The reason was that I believed that the providers that were left offering a stakeholder did so under an intermediary arrangement.    So, whilst the stakeholder pension couldn't block it, if they were using in-house intermediaries, they could block it.  I was convinced they were but I was wrong and they were not.  As it turned out of the four left open for business, two providers were not using in-house intermediaries, one was and the other would only set it up via external intermediaries.    

I don't know of any non-stakeholder personal pension providers who currently accept DB transfers against advice.

Most of the intermediary providers will accept it against advice as long as the adviser puts it through their agency and takes liability.    That is the snag as most advisers will not carry out the transaction if it is not suitable to transfer.    This is in part due to PI insurers and in part due to the FCA saying that advisers should not carry out transactions that they know to be wrong.   Which rather conflicts with the insistent client guidelines.

 

However, whilst those two stakeholder pensions remain open for new business, it's not an issue.    Although I cannot believe that both of them are still open.  They have to be on borrowed time.  I can somewhat understand Aviva still offering it as they like to position themselves as offering virtually all areas of business.  But Standard Life is a strange one.  Maybe whilst the sale of Standard Life was going on, nobody was looking at legacy products.  But now that Phoenix has set up its first new business pension, it may look to end the stakeholder.

dunstonh

I am going to assume the pension is a DC pension but an older one which may not support drawdown (or modern drawdown).

It is a legacy product from pre-RDR.  The name of the product is a red herring as it pre-dates pension freedoms.

So if the OP wants to take the whole pot in one go they would need to transfer the pot to a more modern pension.
Is that where the need for an IFA comes in?
Why?  If it was a straight DC plan to DC plan transfer then the £30k figure is not relevant is it?
It must imply there are some special rights attached to the Flexi Pension.
The OP should try to find out what those are.

Pru also have an in-house salesforce and will try and get people to convert to their modern product that allows drawdown.  However, the FCA permissions do not include the ability to do so with safeguarded benefits and last time I looked, they had no permissions in respect of guaranteed annuity rates.      So, basically, if there are safeguarded benefits, Pru will tell the person that they need to use an IFA as they cannot do it themselves.

The second issue is that the OP is a resident in the EU.    The EU banned UK companies from offering new products to EU residents unless they operate a full office in the country where the person is resident.    As you can imagine, very few IFAs (if any) do that.   A handful of FAs operate branches in areas where there are a lot of expats.  Most providers didn't open offices in EU countries either.

We do not know what the safeguarded benefit is as the OP hasn't told us.   If they don't know what it is then they can ask Pru "what is the safeguarded benefit on this plan".     Its probably a guaranteed annuity rate (statistically, the most common thing).

If the OP was to use the annuity option (assuming GAR), then it does not require an adviser as the £30k+ safeguarded benefits rule only applies when accessing the pension flexibly or on a transfer.  It does not apply when buying a secure income.