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Pension Lump Sum Charges

I have a private pension and want to draw down my tax free lump sum but my provider says I have to pay 3% of its worth to them for mandatory/statutory advice that I really don't want.  Do I have to pay this?

Comments

  • QrizB
    QrizB Posts: 19,421 Forumite
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    edited 29 September at 3:51PM
    Probably?
    Is this an old pension with a legacy pension provider? Can you name them?
    Could you move it to a different ension provider which doesn't make this charge?
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  • Phossy
    Phossy Posts: 200 Forumite
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    That doesn't sound right to me. Can you name the provider so the others can comment more fully.
  • Linton
    Linton Posts: 18,312 Forumite
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    There is no legal requirement to receive advice to draw down from a DC pension unless it has “safeguarded benefits”. The most common such benefit is a Guaranteed Annuity Rate (GAR).

    Another possibility is that your pension is too old to offer drawdown as a standard option.  In that case you would need to transfer it elsewhere. Any modern personal pension such as a SIPP should be OK.

    I suggest you get more details from your provider and let us know the result.


  • dunstonh
    dunstonh Posts: 120,079 Forumite
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    I have a private pension and want to draw down my tax free lump sum but my provider says I have to pay 3% of its worth to them for mandatory/statutory advice that I really don't want.  Do I have to pay this?
    We need to break this down.

    Mandatory advice is only required if the fund has safeguarded benefits and is over £30,000.     So, this would suggest you have safeguarded benefits.   If you don't have safeguarded benefits then advice is not mandatory.

    If you are asking your provider to provide the advice, then they have every right to charge for that advice.  It's not normally the lowest cost way to obtain advice, and any outcome from that advice will use their own product range and their own brand investments.  Chances are that their product range and/or fund range isnt the best option but if you choose to use them, then that is what you get.

    With some providers, if you don't have safeguarded benefits but want them to set up a new pension that supports drawdown as the existing one doesn't, then they will use their in-house sales team to set it up (usually on a non-advised basis).    They charge for that.    I think Prudential are probably the most common example of that.




    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.
  • Albermarle
    Albermarle Posts: 28,708 Forumite
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    Sounds typical of the Prudential.

    OP - In these situations the easiest thing to do normally, is open up a new modern pension and transfer the old one into it. It is a pretty easy thing to do on line nowadays.
  • DRS1
    DRS1 Posts: 1,601 Forumite
    Part of the Furniture 1,000 Posts Name Dropper Combo Breaker
    Wouldn't you want to know what the GAR is and see whether it is worth hanging on to it?
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