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  • FIRST POST
    • Hriss
    • By Hriss 13th May 18, 8:08 PM
    • 3Posts
    • 0Thanks
    Hriss
    Losing 25% tax-free cash benefit when transferring scheme with Aviva
    • #1
    • 13th May 18, 8:08 PM
    Losing 25% tax-free cash benefit when transferring scheme with Aviva 13th May 18 at 8:08 PM
    Hi everyone,

    I have a question regarding the kind of benefits I could lose when merging schemes.
    I have a small amount in an ex-Friends Life scheme, now Aviva, with an employer I was only with for several months.
    I am paying into a different Aviva scheme (not Friends Life) with my current employer, so on the website it appears that I have two accounts, the ex-Friends Life one that I'm not paying into, and the current one that is happily growing with my new employer's contributions.
    I've started the paperwork to add the old Friends Life account to the new Aviva account - there is no point having two separate ones, as I am probably paying higher fees on the one I'm not using?

    My main question: in the paperwork it says:
    "The benefits you will lose on transferring scheme:
    You are entitled to the standard 25% tax-free cash
    Your current fund value is XXXX (the ex-Friends-life amount)
    25% of your fund value is XXXX"

    What will I actually lose and will it matter a lot? Will it convert the receiving plan (which I plan to stay with for many years as I like my employer) to one without the 25% tax-free benefit, or just the amount from the transferred scheme?
    And most importantly, how on earth would they know, in lets say 50 years time, if the accounts are merged, how much of it is not eligible for 25% tax-free?? As the amount would have changed drastically and I would have invested in various funds etc. with various gain.

    I really want to consolidate all my pension pots but it is such a hassle and I dont want to be worse off just simply because I've added an old pension pot to my current one, but there doesnt seem to be much guidance out there!

    Thanks in advance,
    Hriss
Page 1
    • Dox
    • By Dox 13th May 18, 8:20 PM
    • 936 Posts
    • 718 Thanks
    Dox
    • #2
    • 13th May 18, 8:20 PM
    • #2
    • 13th May 18, 8:20 PM

    I've started the paperwork to add the old Friends Life account to the new Aviva account - there is no point having two separate ones, as I am probably paying higher fees on the one I'm not using?

    My main question: in the paperwork it says:
    "The benefits you will lose on transferring scheme:
    You are entitled to the standard 25% tax-free cash
    Your current fund value is XXXX (the ex-Friends-life amount)
    25% of your fund value is XXXX"
    Originally posted by Hriss
    No idea if the charges on your old scheme are higher or lower - you'd need to check that for yourself.

    If you transfer the old scheme into the new, you will (unless the law changes!) be able to take 25% of the total 'pot' tax free (including whatever the transferred in amount has grown to) when you finally draw your benefits.
    • dunstonh
    • By dunstonh 13th May 18, 8:35 PM
    • 94,495 Posts
    • 62,444 Thanks
    dunstonh
    • #3
    • 13th May 18, 8:35 PM
    • #3
    • 13th May 18, 8:35 PM
    here is no point having two separate ones, as I am probably paying higher fees on the one I'm not using?
    What makes you think that? Most schemes have the same charges whether its getting contributions or not. a very small number may not but as it happens, a certain large provider actually has lower charges when not paying in as they bulk of their charges are taken on contribution and not AMC. So, you cannot assume anything. Stick to facts and compare the real charges.

    Some schemes get a higher than 25% tax free cash entitlement. These are lost on transfer where you get the default 25% going forward.

    There is no indication on what you have said that you have protected tax free cash.

    And most importantly, how on earth would they know, in lets say 50 years time, if the accounts are merged, how much of it is not eligible for 25% tax-free??
    Transitional reliefs are recording against the plan. When you transfer, the relief would be lost and it would be the default. So, they dont need to know anything other than you qualify for the default. Whatever that happens to be in future.
    I am an Independent Financial Adviser (IFA). Comments are for discussion purposes only. They are not financial advice. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
    • Hriss
    • By Hriss 13th May 18, 8:39 PM
    • 3 Posts
    • 0 Thanks
    Hriss
    • #4
    • 13th May 18, 8:39 PM
    • #4
    • 13th May 18, 8:39 PM
    Thank you very much for you reply!
    Just to make sure I understand correctly, you mean that I will not lose the 25% tax-free cash benefit for the whole amount, or for any part of it, due to the transfer?
    The document wording is very confusing, as it says "the benefits you will lose:" and then doesnt proceed to tell me what I will lose, only what I am entitled to, which doesnt make any sense!
    It also doesnt make sense to pay for a financial adviser for several hundred pounds

    Many thanks again!
    • Brynsam
    • By Brynsam 13th May 18, 10:49 PM
    • 1,568 Posts
    • 1,138 Thanks
    Brynsam
    • #5
    • 13th May 18, 10:49 PM
    • #5
    • 13th May 18, 10:49 PM
    You don't lose the 25% tax free cash. The wording is very unhelpful (not to say wholly misleading) and you might want to ask Aviva to clarify it.
    • kidmugsy
    • By kidmugsy 14th May 18, 5:41 PM
    • 11,586 Posts
    • 8,106 Thanks
    kidmugsy
    • #6
    • 14th May 18, 5:41 PM
    • #6
    • 14th May 18, 5:41 PM
    The wording is very unhelpful (not to say wholly misleading).
    Originally posted by Brynsam
    Maybe Aviva hired someone from HMRC.
    Free the dunston one next time too.
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