Cashing a pension under new rules
Discussion
Never failed to be amazed by the wisdom of the PH gurus so I would be glad of some help with a problem
New pension rules sounded like good news to me so I applied to take my pension pot in cash, with a view to buying a BTL with Mrs C to provide for our old age.
Filled in the paperwork and waited for the cheque..... simples......
...well NO actually! Pension provider says that under Sect 48 of the Pensions Schemes Act 2015 I am required to submit evidence of receiving financial advice from a member of FCA to include the advisor's FCA number. Otherwise no money!
Now, the Government's pensions helpline says "Nonsense, you can self certify. Tell them you want your money or go to the Ombudsman." One Financial Advisor says the fee for endorsing the form would be disproportionate to the size of the pension pot. Pension company will not budge.
Where can I go from here? Any ideas very.... very welcome.
New pension rules sounded like good news to me so I applied to take my pension pot in cash, with a view to buying a BTL with Mrs C to provide for our old age.
Filled in the paperwork and waited for the cheque..... simples......
...well NO actually! Pension provider says that under Sect 48 of the Pensions Schemes Act 2015 I am required to submit evidence of receiving financial advice from a member of FCA to include the advisor's FCA number. Otherwise no money!
Now, the Government's pensions helpline says "Nonsense, you can self certify. Tell them you want your money or go to the Ombudsman." One Financial Advisor says the fee for endorsing the form would be disproportionate to the size of the pension pot. Pension company will not budge.
Where can I go from here? Any ideas very.... very welcome.
right according to Mrs Sm1th who's day job is keeping financial advisers in line
you do not have to provide proof of receiving advice from a pensions advisor.
contact your pensions provider telling them you are not going to take advice ,they then should tell you they strongly advise you to contact pensions advisory service (which is free and really a no brainer)they cannot refuse to pay out your pot but be aware of any tax liability's this will raise with mr tax man
so really just contact the pensions advisory service
you do not have to provide proof of receiving advice from a pensions advisor.
contact your pensions provider telling them you are not going to take advice ,they then should tell you they strongly advise you to contact pensions advisory service (which is free and really a no brainer)they cannot refuse to pay out your pot but be aware of any tax liability's this will raise with mr tax man
so really just contact the pensions advisory service
It is a common misconception to say that a person now has the right to take the cash assuming they meet the qualifications. The legislation is not over-riding so accessing the cash is not an automatic right:it all depends on the rules of the pension scheme, or if it's a personal pension, the insurance policy. I do think in due course the weight of demand will lead to cash being available from all pension schemes, whatever their type.
Calling the The Pensions Advisory Service (TPAS) is a good piece of advice. Their Helpline number is 0845 601 2923.
The new legislation provides for everyone to access what is called "guidance" for free. Guidance comes via what's branded as Pensions Wise and is available from two sources: one is Citizens Advice Bureau, the other is TPAS. If you want actual "advice" then this will be available from a suitable able independent financial adviser and is likely to be paid for...you don't get advice for free usually.
I'd suggest that you take your time weighing up the pros and cons: no need to rush. And, I know the pluses are appealing but it's essential to consider all the minuses equally before making the decision.
R.
Calling the The Pensions Advisory Service (TPAS) is a good piece of advice. Their Helpline number is 0845 601 2923.
The new legislation provides for everyone to access what is called "guidance" for free. Guidance comes via what's branded as Pensions Wise and is available from two sources: one is Citizens Advice Bureau, the other is TPAS. If you want actual "advice" then this will be available from a suitable able independent financial adviser and is likely to be paid for...you don't get advice for free usually.
I'd suggest that you take your time weighing up the pros and cons: no need to rush. And, I know the pluses are appealing but it's essential to consider all the minuses equally before making the decision.
R.
The Leaper said:
It is a common misconception to say that a person now has the right to take the cash assuming they meet the qualifications. The legislation is not over-riding so accessing the cash is not an automatic right:it all depends on the rules of the pension scheme, or if it's a personal pension, the insurance policy. I do think in due course the weight of demand will lead to cash being available from all pension schemes, whatever their type.
R.
completely agree Mr Sm1ths view is if this is the case you transfer to a plan that dose allow you with draw your pot this how ever brings its own pitfalls as you may loose various advantages your original plan has.R.
at the end of the day sound advice is essential
Section 48 only applies if yours is a defined benefit (eg final salary) scheme and you wish to take a transfer value to a defined contribution scheme. Even then, it only applies if the transfer value exceeds 30k.
If yours is a defined contribution scheme then they are talking rubbish!
If yours is a defined contribution scheme then they are talking rubbish!
To add to J68's comment, the requirement of the PSA 2015 S.48 for independent financial advice being received before cashing in is a requirement which applies to
R.
- any amount over £30,000, and
- being paid from a defined benefits/final salary scheme, and
- the amount is being paid into a flexible scheme which includes a defined contribution scheme.
R.
OP you need to listen to advice.
You are suggesting you take money from a tax free holding, no IHT, no income tax, bar 10% on dividends and no CGT, and investing in an asset that is liable for income tax on the rental income, CGT on sale and is fully liable to IHT on your death. On top of that assuming full encashment bar 25% the value taken out will be taxed at your nominal income tax rate in one fell swoop.
You are frankly the very reason that the rule was put in place.
You are suggesting you take money from a tax free holding, no IHT, no income tax, bar 10% on dividends and no CGT, and investing in an asset that is liable for income tax on the rental income, CGT on sale and is fully liable to IHT on your death. On top of that assuming full encashment bar 25% the value taken out will be taxed at your nominal income tax rate in one fell swoop.
You are frankly the very reason that the rule was put in place.
ellroy said:
On top of that assuming full encashment bar 25% the value taken out will be taxed at your nominal income tax rate in one fell swoop.
And, unless you can provide evidence of your nominal income tax rate you'll pay emergency tax rate of 40% on withdrawals after your 25% (or so) tax free cash, although you can reclaim the difference through a tax return...OP, pay for professional advice. Then ignore it and do what you wanted to do before you got the advice. Then, in a few years, when it turns out you should have listened to the advice, sue them for not explaining strongly enough just how stupid your idea was.
That's the way it seems to work these days.
That's the way it seems to work these days.
Wow! Thanks gents.... and Mrs Sm1th.
To answer some of the matters raised:-
DWP referred me to a helpline for pension problems 0300 1231047. They were adamant that there is no legislation that makes financial advice mandatory and I am accurately relating the "tell them you want your money" notion.
But clearly you guys know differently because the pot is indeed over £30K (by a whisker) and it is described as a 'safeguarded benefit.'
Nevertheless, for us the BTL thing is a proven formula which has served us well for a number of years.
Ultimately, this is the route we want to take (and are already committed to) so it now seems like a matter of finding the most expedient way of getting the funds released.
I do understand, well almost, what you say about the wisdom of abandoning a 'safeguarded benefit' but as I see it, an annuity based on this sort of pot is not, on its own, going to keep me in my old age whereas invested amongst many other facets in my own property portfolio it has a reasonable prospect of doing so.
I am very grateful for the things that all of you have said. Typical of PH it is the first set of cohesive information that I have received on the subject. Tomorrow I will check out the advice and let you know what happens.
To answer some of the matters raised:-
DWP referred me to a helpline for pension problems 0300 1231047. They were adamant that there is no legislation that makes financial advice mandatory and I am accurately relating the "tell them you want your money" notion.
But clearly you guys know differently because the pot is indeed over £30K (by a whisker) and it is described as a 'safeguarded benefit.'
Nevertheless, for us the BTL thing is a proven formula which has served us well for a number of years.
Ultimately, this is the route we want to take (and are already committed to) so it now seems like a matter of finding the most expedient way of getting the funds released.
I do understand, well almost, what you say about the wisdom of abandoning a 'safeguarded benefit' but as I see it, an annuity based on this sort of pot is not, on its own, going to keep me in my old age whereas invested amongst many other facets in my own property portfolio it has a reasonable prospect of doing so.
I am very grateful for the things that all of you have said. Typical of PH it is the first set of cohesive information that I have received on the subject. Tomorrow I will check out the advice and let you know what happens.
If it's a safeguarded benefit that suggests it's a defined benefit scheme. I.e. A scheme pension will be paid out (likely with increases) as opposed to a pot accumulated at retirement with which you would previously have had to annuitise. It's for this reason that advice is required.
If it's a flexible arrangement (I.e. a defined contribution fund) I don't believe there is a requirement for advice.
If it's a flexible arrangement (I.e. a defined contribution fund) I don't believe there is a requirement for advice.
52C,
0300 1231047 is the published number specifically for getting advice from The Pensions Advisory Service (TPAS) about potential pension scams. It is not their general helpline number. Neither is it the number for the government sponsored new Pensions Wise service, operated by TPAS and Citizens Advice, which service is there to give guidance (not advice) for people considering cashing out their pensions. So, why is the DWP giving out the scam number rather than Pensions Wise number? Odd.
If you have a "safeguarded" benefit then you need to indicate to the provider that you have taken independent financial advice before the provider will come up with the cash. You do not need to actually take that advice of course. This step should be regarded as a logical step to ensure you have fully considered all the options and consequences, rather than a barrier to get over to get your money.
Actually, you mention Sun Life which makes me question what kind of "safeguarded" benefit you have. It could be a personal pension plan with a defined benefit or it could be some form of deferred annuity set up when a pension scheme of which you were a member was wound up, or maybe a policy with a guaranteed benefit of some kind. The use of the term safeguarded means it would not be defined contribution or cash accumulation. If I'm right, getting advice can only be good advice in itself.
R.
0300 1231047 is the published number specifically for getting advice from The Pensions Advisory Service (TPAS) about potential pension scams. It is not their general helpline number. Neither is it the number for the government sponsored new Pensions Wise service, operated by TPAS and Citizens Advice, which service is there to give guidance (not advice) for people considering cashing out their pensions. So, why is the DWP giving out the scam number rather than Pensions Wise number? Odd.
If you have a "safeguarded" benefit then you need to indicate to the provider that you have taken independent financial advice before the provider will come up with the cash. You do not need to actually take that advice of course. This step should be regarded as a logical step to ensure you have fully considered all the options and consequences, rather than a barrier to get over to get your money.
Actually, you mention Sun Life which makes me question what kind of "safeguarded" benefit you have. It could be a personal pension plan with a defined benefit or it could be some form of deferred annuity set up when a pension scheme of which you were a member was wound up, or maybe a policy with a guaranteed benefit of some kind. The use of the term safeguarded means it would not be defined contribution or cash accumulation. If I'm right, getting advice can only be good advice in itself.
R.
The Leaper said:
52C,
Actually, you mention Sun Life which makes me question what kind of "safeguarded" benefit you have. It could be a personal pension plan with a defined benefit or it could be some form of deferred annuity set up when a pension scheme of which you were a member was wound up, or maybe a policy with a guaranteed benefit of some kind. The use of the term safeguarded means it would not be defined contribution or cash accumulation. If I'm right, getting advice can only be good advice in itself.
R.
Could be just a guaranteed annuity rate.Actually, you mention Sun Life which makes me question what kind of "safeguarded" benefit you have. It could be a personal pension plan with a defined benefit or it could be some form of deferred annuity set up when a pension scheme of which you were a member was wound up, or maybe a policy with a guaranteed benefit of some kind. The use of the term safeguarded means it would not be defined contribution or cash accumulation. If I'm right, getting advice can only be good advice in itself.
R.
Just thought it would be a good idea to post an update. As ever, PHers were spot on and I'm grateful for the advice.
I did indeed engage a Financial Adviser, a bit indignant about the fee at first but the info was very useful. Turned out that (as some had already suggested) the requirement for advice certification was that the pot included a (small) 'Protected rights annuity.' Also because the total was just over 30K.
Various projections were done to reflect anticipated life expectancies and although I realise that the FA is there to set out the facts and not make a decision for his client, it was clear to me that the protected rights element was such a small proportion of the whole, that unless I could find a genetic connection with Methuselah then the return on my money could not come anywhere close to that already being achieved in BTL property.
So...... Back to plan A. Money received and BTL already bought and operating....... FA firm will be a good contact for the future ...... A good moan to the pension provider even produced a contribution of half the FA fee!
Thanks again for the good advice from PH. Thought y'all may be glad to hear about a happy ending.
I did indeed engage a Financial Adviser, a bit indignant about the fee at first but the info was very useful. Turned out that (as some had already suggested) the requirement for advice certification was that the pot included a (small) 'Protected rights annuity.' Also because the total was just over 30K.
Various projections were done to reflect anticipated life expectancies and although I realise that the FA is there to set out the facts and not make a decision for his client, it was clear to me that the protected rights element was such a small proportion of the whole, that unless I could find a genetic connection with Methuselah then the return on my money could not come anywhere close to that already being achieved in BTL property.
So...... Back to plan A. Money received and BTL already bought and operating....... FA firm will be a good contact for the future ...... A good moan to the pension provider even produced a contribution of half the FA fee!
Thanks again for the good advice from PH. Thought y'all may be glad to hear about a happy ending.
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