Taking out everything from your Pension Fund(s)

Taking out everything from your Pension Fund(s)

Author
Discussion

Skyedriver

Original Poster:

17,655 posts

281 months

Tuesday 27th January 2015
quotequote all
I read in the Torygraph today that a large number of Pension Providers won't be allowing you to take out ALL of your money once April arrives after all. Or there'll be huge penalties to pay.
Apparently the Govt. just said it was a recommendation not mandatory....

DonkeyApple

54,920 posts

168 months

Tuesday 27th January 2015
quotequote all
I'd imagine that regulated firms are crapping themselves over the claims that they will definitely get hit with once an army of idiots have taken everything out, spent it and then turn around and blame the trustee for facilitating the withdrawal. If I were a trustee I'd prefer to ps off customers by getting them to sign a form that they completely understand what they are doing and the consequences every single day for a year and post everyone on the web.

It's basically going to be PPI v2

Simpo Two

85,147 posts

264 months

Tuesday 27th January 2015
quotequote all
I'm not sure which carries more force - the small print in the pension policy when you sign up, or what the Govt do with the goalposts/law afterwards. All I know is that pensions are stupidly complicated.

sidicks

25,218 posts

220 months

Wednesday 28th January 2015
quotequote all
Skyedriver said:
I read in the Torygraph today that a large number of Pension Providers won't be allowing you to take out ALL of your money once April arrives after all. Or there'll be huge penalties to pay.
Apparently the Govt. just said it was a recommendation not mandatory....
Can you post a copy of the article?

Most DC schemes will allow you to transfer to another provider, so you could simply go that and take it to someone who will let you take out your money.

They can't add surrender penalties that weren't in the original contract.

red_slr

17,122 posts

188 months

Wednesday 28th January 2015
quotequote all
It just puts younger people off pensions. The govt says one things, the banks another.
The goal posts move that often now that I really do worry about what will happen when I come to retire.
Its made worse by the fact that the majority of my pension fund has come from my own pocket.


Brite spark

2,052 posts

200 months

Wednesday 28th January 2015
quotequote all
sidicks said:
Can you post a copy of the article?
http://www.telegraph.co.uk/finance/personalfinance...

Brite spark

2,052 posts

200 months

Wednesday 28th January 2015
quotequote all
DonkeyApple said:
I'd imagine that regulated firms are crapping themselves over the claims that they will definitely get hit with once an army of idiots have taken everything out, spent it and then turn around and blame the trustee for facilitating the withdrawal. If I were a trustee I'd prefer to ps off customers by getting them to sign a form that they completely understand what they are doing and the consequences every single day for a year and post everyone on the web.

It's basically going to be PPI v2
Looks like they can see that coming
http://www.dailymail.co.uk/money/article-2927001/P...

Ginge R

4,761 posts

218 months

Wednesday 28th January 2015
quotequote all
Simpo is right. But only because politicians have got involved.

The pension itself is a simple thing - you contribute, you get some tax relief and when you can't work any longer, you take it back out again. The matter of pensions being ready of not underlines the hideous confusion and abject political meddling in this. It was a stupid idea at outset, determined I have no doubt, on the back of a fag packet and done without advice, ostensibly, because the news might upset the markets. Bless. The issue now is providers and politicians covering their backs and keeping the various quangos who stand to gain with their income.

After educating advisers to Diploma standard, the bodies responsible for recruiting folk to discuss retirement income are going to offer, in effect, OJT to candidates who need to have a 'good working knowledge' of pensions. You couldn't make it up.

Folk, it seems, need to be as told as forcibly as possible, that freeing up their pension will result in them being poor, unhappy and miserable. As well they might. Because let's face it, most of them will be. If we're being brutally honest, why are we (in the blink of an eye, a mere 12 months or so) bestowing upon people who only had the foresight to save up solely £25,000 or so in the golden middle third of their life, enough money to last them their final third.. the mantle of 'financial genius'? I accept that there will always be variable.

Yesterday in the Lords, the matter of transferring small pits of out Final Salary pensions was debated. It seems that up to £30,000 can be taken without taking financial advice. It would be a brave provider indeed, who'd accept that. Would I get involved with anything like that? Only if a client pitched up with a letter from a psychiatrist of my choosing affirming sanity.

The issue (the *real* issue) is how government regards people's ability to self determine/self manage. And once you strip away the rhetoric, the answer is 'not much'. And when it comes to pensions savings, frankly, maybe trust shouldn't figure prominently. I know that's not a very fashionable thing to say but that's how it should be. Least of all because government itself manages our money so badly, by default, it can't afford to let us spend any of our own.

But the state gives tax relief in the mild but not altogether completely unreasonable expectation that the money from the public coffers is going to the majority of people so that they might go on a couple of decades worth of day-trips to Skegness and some nice other odds and ends, and not on burning through it all in 6 months in Ayia Napa or Thailand. If you want to do the bucket list, fine.. if you want to swim with dolphins for 6 months in wherever it is they swim before returning to sink sink without trace in some suburban council bedsit, then do me a favour - save for it without help from the state. And me.

Maybe of course, that's where this is all heading, maybe the entire proposition is being reframed so that justification for ending tax relief on retirement income will be as seductive and logical as booking the flight to Thailand ("See, told you. We gave you all your money and look what you did with it.. blimey, you only went and spent it didn't you?").

Pensions are simple, they really are. Maybe I say that because by now, I can spot a lemon pension at a hundred paces and I can see quite quickly what someone needs to do. But retirement financial planning should be a separate financial eco-structure. And one that politicians, regulators and businesses need to steer well clear of. It comes to something when legislative, political and regulatory risk feature as highly on the list of many clients concerns as 'investment', 'shortfall' etc. And especially if anyone is under 40, they would have good reason to worry.

Pensions are valuable, but only as part of a financial strategy. They are not the B all and End all, but they do form a vital component in the grand scheme of things and recommended wisely and in the right amount, a a valuable addition for the right person (especially for someone warning over £50,000 with children who wants to get some lost child benefit back). I just wish that politicians and legislators would steer clear of them.

Rant over, switches safe, clear dry.

sidicks

25,218 posts

220 months

Wednesday 28th January 2015
quotequote all
DonkeyApple said:
I'd imagine that regulated firms are crapping themselves over the claims that they will definitely get hit with once an army of idiots have taken everything out, spent it and then turn around and blame the trustee for facilitating the withdrawal. If I were a trustee I'd prefer to ps off customers by getting them to sign a form that they completely understand what they are doing and the consequences every single day for a year and post everyone on the web.

It's basically going to be PPI v2
This is about DC schemes not DB and hence nothing to do with Trustees!

sidicks

25,218 posts

220 months

Wednesday 28th January 2015
quotequote all
Ginge R said:
Simpo is right. But only because politicians have got involved.

The pension itself is a simple thing - you contribute, you get some tax relief and when you can't work any longer, you take it back out again. The matter of pensions being ready of not underlines the hideous confusion and abject political meddling in this. It was a stupid idea at outset, determined I have no doubt, on the back of a fag packet and done without advice, ostensibly, because the news might upset the markets. Bless. The issue now is providers and politicians covering their backs and keeping the various quangos who stand to gain with their income.

After educating advisers to Diploma standard, the bodies responsible for recruiting folk to discuss retirement income are going to offer, in effect, OJT to candidates who need to have a 'good working knowledge' of pensions. You couldn't make it up.

Folk, it seems, need to be as told as forcibly as possible, that freeing up their pension will result in them being poor, unhappy and miserable. As well they might. Because let's face it, most of them will be. If we're being brutally honest, why are we (in the blink of an eye, a mere 12 months or so) bestowing upon people who only had the foresight to save up solely £25,000 or so in the golden middle third of their life, enough money to last them their final third.. the mantle of 'financial genius'? I accept that there will always be variable.

Yesterday in the Lords, the matter of transferring small pits of out Final Salary pensions was debated. It seems that up to £30,000 can be taken without taking financial advice. It would be a brave provider indeed, who'd accept that. Would I get involved with anything like that? Only if a client pitched up with a letter from a psychiatrist of my choosing affirming sanity.

The issue (the *real* issue) is how government regards people's ability to self determine/self manage. And once you strip away the rhetoric, the answer is 'not much'. And when it comes to pensions savings, frankly, maybe trust shouldn't figure prominently. I know that's not a very fashionable thing to say but that's how it should be. Least of all because government itself manages our money so badly, by default, it can't afford to let us spend any of our own.

But the state gives tax relief in the mild but not altogether completely unreasonable expectation that the money from the public coffers is going to the majority of people so that they might go on a couple of decades worth of day-trips to Skegness and some nice other odds and ends, and not on burning through it all in 6 months in Ayia Napa or Thailand. If you want to do the bucket list, fine.. if you want to swim with dolphins for 6 months in wherever it is they swim before returning to sink sink without trace in some suburban council bedsit, then do me a favour - save for it without help from the state. And me.

Maybe of course, that's where this is all heading, maybe the entire proposition is being reframed so that justification for ending tax relief on retirement income will be as seductive and logical as booking the flight to Thailand ("See, told you. We gave you all your money and look what you did with it.. blimey, you only went and spent it didn't you?").

Pensions are simple, they really are. Maybe I say that because by now, I can spot a lemon pension at a hundred paces and I can see quite quickly what someone needs to do. But retirement financial planning should be a separate financial eco-structure. And one that politicians, regulators and businesses need to steer well clear of. It comes to something when legislative, political and regulatory risk feature as highly on the list of many clients concerns as 'investment', 'shortfall' etc. And especially if anyone is under 40, they would have good reason to worry.

Pensions are valuable, but only as part of a financial strategy. They are not the B all and End all, but they do form a vital component in the grand scheme of things and recommended wisely and in the right amount, a a valuable addition for the right person (especially for someone warning over £50,000 with children who wants to get some lost child benefit back). I just wish that politicians and legislators would steer clear of them.

Rant over, switches safe, clear dry.
clap

Super Slo Mo

5,368 posts

197 months

Wednesday 28th January 2015
quotequote all
Ginge R said:
Simpo is right. But only because politicians have got involved.

The pension itself is a simple thing - you contribute, you get some tax relief and when you can't work any longer, you take it back out again. The matter of pensions being ready of not underlines the hideous confusion and abject political meddling in this. It was a stupid idea at outset, determined I have no doubt, on the back of a fag packet and done without advice, ostensibly, because the news might upset the markets. Bless. The issue now is providers and politicians covering their backs and keeping the various quangos who stand to gain with their income.

After educating advisers to Diploma standard, the bodies responsible for recruiting folk to discuss retirement income are going to offer, in effect, OJT to candidates who need to have a 'good working knowledge' of pensions. You couldn't make it up.

Folk, it seems, need to be as told as forcibly as possible, that freeing up their pension will result in them being poor, unhappy and miserable. As well they might. Because let's face it, most of them will be. If we're being brutally honest, why are we (in the blink of an eye, a mere 12 months or so) bestowing upon people who only had the foresight to save up solely £25,000 or so in the golden middle third of their life, enough money to last them their final third.. the mantle of 'financial genius'? I accept that there will always be variable.

Yesterday in the Lords, the matter of transferring small pits of out Final Salary pensions was debated. It seems that up to £30,000 can be taken without taking financial advice. It would be a brave provider indeed, who'd accept that. Would I get involved with anything like that? Only if a client pitched up with a letter from a psychiatrist of my choosing affirming sanity.

The issue (the *real* issue) is how government regards people's ability to self determine/self manage. And once you strip away the rhetoric, the answer is 'not much'. And when it comes to pensions savings, frankly, maybe trust shouldn't figure prominently. I know that's not a very fashionable thing to say but that's how it should be. Least of all because government itself manages our money so badly, by default, it can't afford to let us spend any of our own.

But the state gives tax relief in the mild but not altogether completely unreasonable expectation that the money from the public coffers is going to the majority of people so that they might go on a couple of decades worth of day-trips to Skegness and some nice other odds and ends, and not on burning through it all in 6 months in Ayia Napa or Thailand. If you want to do the bucket list, fine.. if you want to swim with dolphins for 6 months in wherever it is they swim before returning to sink sink without trace in some suburban council bedsit, then do me a favour - save for it without help from the state. And me.

Maybe of course, that's where this is all heading, maybe the entire proposition is being reframed so that justification for ending tax relief on retirement income will be as seductive and logical as booking the flight to Thailand ("See, told you. We gave you all your money and look what you did with it.. blimey, you only went and spent it didn't you?").

Pensions are simple, they really are. Maybe I say that because by now, I can spot a lemon pension at a hundred paces and I can see quite quickly what someone needs to do. But retirement financial planning should be a separate financial eco-structure. And one that politicians, regulators and businesses need to steer well clear of. It comes to something when legislative, political and regulatory risk feature as highly on the list of many clients concerns as 'investment', 'shortfall' etc. And especially if anyone is under 40, they would have good reason to worry.

Pensions are valuable, but only as part of a financial strategy. They are not the B all and End all, but they do form a vital component in the grand scheme of things and recommended wisely and in the right amount, a a valuable addition for the right person (especially for someone warning over £50,000 with children who wants to get some lost child benefit back). I just wish that politicians and legislators would steer clear of them.

Rant over, switches safe, clear dry.
Interesting post, thanks for that.

I don't have a pension currently. I've got a couple of old frozen ones from previous employers, but the value of them isn't a lot (maybe £10k). Got my own business, the hope is that it'll generate enough funds in the not too distant future to enable me to put money aside, but at the moment I/we can't afford it.

The obvious, and somewhat worrying thing about it all is, that if we can't make the business successful, we're screwed. I'm 41 for the record, with some cash, a house that'll be paid for before I'm 65, and another that's already paid for and that's generating rental income.

I suspect I'm far from the only one with little future provision.

Ginge R

4,761 posts

218 months

Wednesday 28th January 2015
quotequote all
sidicks said:
This is about DC schemes not DB and hence nothing to do with Trustees!
The government announced yesterday that it was going to relax the rules and allow unfettered access to DB pots with a CETV of under £30,000.

Ginge R

4,761 posts

218 months

Wednesday 28th January 2015
quotequote all
Super Slo Mo said:
Interesting post, thanks for that.

I don't have a pension currently. I've got a couple of old frozen ones from previous employers, but the value of them isn't a lot (maybe £10k). Got my own business, the hope is that it'll generate enough funds in the not too distant future to enable me to put money aside, but at the moment I/we can't afford it.

The obvious, and somewhat worrying thing about it all is, that if we can't make the business successful, we're screwed. I'm 41 for the record, with some cash, a house that'll be paid for before I'm 65, and another that's already paid for and that's generating rental income.

I suspect I'm far from the only one with little future provision.
Consider putting the pots together, you won't reduce the charges but you will have the chance to focus on one strategy.

You have another house, so let's assume that that is worth 150k. That alone gives you more than the average retirement provision which stands at about £35000 or so, so you're not doing too badly. Just be mindful that if you want that rental property to ultimately provide retirement income, that you identify a point in your life that the tactic of using it to provide income in retirement is reviewed and reviewed ever more frequently. Just as pension are under regulatory threat, I'm pretty certain that rental properties and buy to let income too, are firmly under the government cash cow spotlight.

Super Slo Mo

5,368 posts

197 months

Wednesday 28th January 2015
quotequote all
Ginge R said:
Super Slo Mo said:
Interesting post, thanks for that.

I don't have a pension currently. I've got a couple of old frozen ones from previous employers, but the value of them isn't a lot (maybe £10k). Got my own business, the hope is that it'll generate enough funds in the not too distant future to enable me to put money aside, but at the moment I/we can't afford it.

The obvious, and somewhat worrying thing about it all is, that if we can't make the business successful, we're screwed. I'm 41 for the record, with some cash, a house that'll be paid for before I'm 65, and another that's already paid for and that's generating rental income.

I suspect I'm far from the only one with little future provision.
Consider putting the pots together, you won't reduce the charges but you will have the chance to focus on one strategy.

You have another house, so let's assume that that is worth 150k. That alone gives you more than the average retirement provision which stands at about £35000 or so, so you're not doing too badly. Just be mindful that if you want that rental property to ultimately provide retirement income, that you identify a point in your life that the tactic of using it to provide income in retirement is reviewed and reviewed ever more frequently. Just as pension are under regulatory threat, I'm pretty certain that rental properties and buy to let income too, are firmly under the government cash cow spotlight.
Cheers for that. I'll have another look at it shortly.

The house isn't quite worth that much, but it's not far off. Tenant is looking to buy it soon, I hope, whether I get another one or two is debatable, in the back of my mind I'm thinking splitting the cash up and getting two properties might not be a bad long term idea, although managing rental property isn't my idea of fun really.

Thanks for the suggestions though.

sidicks

25,218 posts

220 months

Wednesday 28th January 2015
quotequote all
Ginge R said:
The government announced yesterday that it was going to relax the rules and allow unfettered access to DB pots with a CETV of under £30,000.
Indeed, but I thought the post was referring to the Telgraph article, which concerned DC schemes.

It seems that transferring away from a DB scheme is unlikely to be the best option for most people and is a new mis-selling scandal waiting to happen...?!

Ginge R

4,761 posts

218 months

Wednesday 28th January 2015
quotequote all
Apologies, my poor assumption.

If you're on the cusp of death and want to pass on your savings in full etc, it's a strong possibility but for 95%, you'd have to be an adviser with the testes of a mountain goat to put your name to it.

Other advisory genders are available.

Claudia Skies

1,098 posts

115 months

Wednesday 28th January 2015
quotequote all
There's a lot of flapping around this subject but I don't think there will be many problems. Reasons include,

  • People who have saved prudently for a pension are unlikely to do a complete about-turn and suddenly spend the lot.
  • The tax system will still hit very hard if anyone tries to take a lot of money out at once.
Tax system:-

  • Small annual pensions suffer little if any tax
  • Many medium sized pensions are taxed at 20%. But take out several years at a time and the tax will double to 40%
  • Large pensions are taxed at 40%. But take out many years at a time and the tax will increase to 45%

Claudia Skies

1,098 posts

115 months

Wednesday 28th January 2015
quotequote all
sidicks said:
It seems that transferring away from a DB scheme is unlikely to be the best option for most people and is a new mis-selling scandal waiting to happen...?!
That's a good point. Especially given the number of vermin who are more than willing to advertise their ability to "Release cash from your house/pension/[insert next scam]".

Zigster

1,636 posts

143 months

Wednesday 28th January 2015
quotequote all
sidicks said:
Indeed, but I thought the post was referring to the Telgraph article, which concerned DC schemes.

It seems that transferring away from a DB scheme is unlikely to be the best option for most people and is a new mis-selling scandal waiting to happen...?!
For many people, I'd agree that transferring away from a DB scheme is unlikely to make sense.

But there must be a good number of people for whom it would make sense. CETV bases tend towards annuity pricing as the pension scheme member approaches retirement. People with no financial dependents,very short life expectancy, financially sophisticated, etc might be able to get a better income than that provided by the DB scheme.

I do agree about the risk of misselling - which is why I would expect pension scheme trustees to make sure the member understands what they are giving up before paying the transfer value.

ellroy

7,000 posts

224 months

Thursday 29th January 2015
quotequote all
I suspect the reason for some firms not allowing full withdrawal may be as simple as their computer systems not being up to the job. Its happened before with pension providers.

So old schemes do not get full flexibility, but any new contracts, on a new system with the same provider will do.