Financial Advisor Woes

TheComputerGuru

Hi All,

I am trying to transfer an old pension of mine from Aegon to my ii SIPP. ii have requested that I fill in a Financial Advice declaration form because the transfer is over £30k.

The pension has section 32 buyout protection, which grants me more that 25% tax free cash.

As I am NOT going to take any tax free cash and want to use flex draw down to take small amounts yearly thus allowing me to avoid paying 40% tax, which I would have to pay on the remaining portion of my Aegon pension.

The financial advisor that I engaged is refusing to sign the ii financial advice form as ii is not an advised platform.

My understanding of what they want to do is propose a managed platform which
a) has higher charges
b) the advisor takes a cut of MY money every year

This is probably usual, BUT I don't want some third party "creaming" off money from my hard earned pension.

I know this is not, but it feels like I have been scammed, because their report only confirmed what I had already work out myself.

Any ideas how to get past this hurdle would be gratefully received?

No I am NOT asking for financial advice.

HappyHarry

It should have been made clear to the adviser that you were looking for a one-off piece of work to approve the decision you have made rather than the adviser reach their own conclusion for an appropriate outcome. That would have avoided this situation.

However, the adviser can still sign a form saying that they have provided you with regulated advice. The adviser should only baulk at this if:

1. The form confirms that the adviser is recommending ii, or
2. You are refusing to pay the adviser.

Why is it that the adviser is refusing to sign the form?

TheComputerGuru

This is their exact response to my request that they sign the ii form.

"Hi Mike

I cannot advise a transfer to ii, as ii is not an adviser platform.

I produced an analysis report on your current plans and made you aware of the protected Tax Free Cash (TFC) and the potential consequences of losing this benefit.

Please also note that protected TFC is not a safeguarded benefit. You may want to point this out to whoever needs this form signing."

This is the top of the ii form which if my advisor is right does not need to be signed.

HappyHarry

Your adviser is quite right - enhanced tax-free cash is not on its own a safeguarded benefit. If there are no safeguarded benefits involved, then ii should not require that form signed. I would go back to ii and query the need with them.

TheComputerGuru

Thanks

I will get back to ii on this

Albermarle

As I am NOT going to take any tax free cash and want to use flex draw down to take small amounts yearly

With most pension providers, and I would assume the same with II, you can not take income from the pension without taking any tax free cash. Before you can take flexible drawdown income you need to crystallise some of the pot which automatically generates some tax free cash.

In any case, there are very few scenarios where it would be sensible to not take tax free cash.

NoMore

I would hope the op actually means he doesn’t want to take the whole available tax free at once but instead take it out in smaller chunks using fad. Not that he wants no tax free at all. As said there is no likely scenario where taking zero tax free cash is worth it or even if pensions are setup to allow it.

TheComputerGuru

Further clarification

All of my Tax Allowance will be taken up by my state pension

I am going to take advantage of FAD mechanism

Withdraw a small amount say £5,000 per year (not my real figures)

• Take 25% (£1,250) as tax free sum
• Crystalize the 75% (£3,750)
  • Draw down £312.50 per month
  • Pay 20% tax on this (£62.50)

Not sure my terms above are 100% right, but I think you will get the gist.

dunstonh

Aegon allow the taking of the protected tax free cash and then transferring the residual balance.

TheComputerGuru

https://forums.moneysavingexpert.com/discussion/comment/82112899#Comment_82112899

Whilst Aegon might allow me to do that.

I believe that would be a very silly thing to do as this would mean that the residual balance would have NO tax free allowance hence could tip me into the dreaded 40% tax area.

QrizB

I believe that would be a very silly thing to do as this would mean that the residual balance would have NO tax free allowance hence could tip me into the dreaded 40% tax area.

Let's imagine you've got £100k in the fund and want to take an income of £5k per year as your example above.

1. Transfer the whole amount. Crystallise £5k per year under FAD. You get £1250 TFC, £3750 taxable.
2. Transfer the whole amount, Crystallise all £100k upfront and get £25k TFC that you stash in an ISA, plus £75k taxable pot for FAD. Each year take £1250 from the ISA and £3750 from the crystallised pot.

There's no difference in the tax situation (assuming you've got space in your ISA plans to invest £25k).

Where taking the TFC with Ageon helps is "option 3". I don't know how much protected TFC you have but let's assume it's 30%.

3. Take the £30k protected TFC with Ageon and stash it in an ISA. Transfer the £70k into a FAD pot. Each year take £1500 from the ISA and £3500 from the crystallised pot.

Under Option 3, you're only paying tax on £3500 a year not £3750. You're less likely to pay 40% tax, not more likely.