Misleading Tax Free Cash

Dalglish · 6 July 2018 at 11:30PM

I’ve received an apology from my pension provider who, for the last 8 months, gave me no indication that I could not make a 25% tax
free cash drawdown. I was given repeated verbal assurances that I could make this drawdown and as a consequence I decided to consolidate four schemes from previous employers into this scheme in order to maximise the drawdown. As a final confirmation I asked for the current provider to email me confirmation which they did.

Then last week, I was told the information I’d been given was incorrect and I could not in fact make any drawdown as this was against the scheme trustees policy. I could however move from my occupational scheme and place in a SIPS. I am furious as I’d made plans based on expectations.
The apology letter today confirms that in recorded phone calls everything I’d said was upheld and there had been four opportunities the letter says that the pension administrator had missed to correct this misunderstanding.
As a gesture of goodwill I’ve been offered a cheque for £500.
Is this a common occurrence? Would the £500 be an indicator this is a serious breach?

jamesd · 7 July 2018 at 1:35AM

Please say more about the types of the schemes that you transferred to and from.

It'd be very unusual to have a ban on taking a tax free lump sum for a scheme with an individual pot of money in your name and it really needs more than just against the policy of the trustees to explain it. There are some cases where it can be correct, though.

Trustees can generally make exceptions to normal policies where people have been misled but before suggesting that approach we really need to know more about each of the schemes.

dunstonh · 7 July 2018 at 10:02AM

This post really ought to be in the pension forum as that is more on topic. It isnt to do with auto-enrolment. If a board guide spots this, please can they move it.

I was given repeated verbal assurances that I could make this drawdown and as a consequence I decided to consolidate four schemes from previous employers into this scheme in order to maximise the drawdown. As a final confirmation I asked for the current provider to email me confirmation which they did.

Did you specify you wanted to take flexi-access drawdown or just drawdown or not give any indication of method?

Some providers say they support drawdown. However, in reality, they only support one or two of the options. Typically UFPLS. Indeed, we recently change our template letter to state flexi-access drawdown instead of drawdown because we were getting fed up with the providers saying they supported drawdown when they didn't.

What you want to do is flexi-access drawdown. Most workplace schemes and old schemes do not support flexi-access drawdown.

Is this a common occurrence?

Well, I look at your post and there is the potential for confusion and misunderstanding in that. So, it's not unreasonable to think confusion could occur on the phone if you mixed and matched terminology. For example, if you asked if you could take the 25%. Well, all methods allow you to do that. You needed a specific method.

Would the £500 be an indicator this is a serious breach?

Its not a serious breach. It is a mistake.

it probably cost you nothing to move the money in and it will probably cost you nothing to move the money out to a scheme that does support the method you want to use. So, £500 seems like a good result here.

xylophone · 10 July 2018 at 8:12PM

Do you mean that you have transferred four pensions into your current occupational scheme?

If so, is this current scheme a DB pension?

Misleading Tax Free Cash

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