11 Aug 2015, 3:03pm
personal finance:
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  • The Ermine has been stitched up by Hargreaves Lansdown

    As the years roll by the Ermine is becoming grizzled of years, and I have the opportunity of becoming a pensioner rather than an early retiree. In the long glide path from leaving work to getting to this stage I have gradually burned through some of the money I had saved as a wage slave, and just like the aeronautical metaphor, my room for manoeuvre drops as time goes by because the reserves are falling lower.

    A while ago I opened a SIPP with HL, to make use of my £3600 p.a. tax-advantaged savings allowance. What with Osborne’s changes, I was going to take a portion of the DC AVCs I saved in The Firm’s pension scheme to add this to my HL SIPP, then take my tax-free lump sum and draw down the rest under the annual personal allowance for five years until I reach the normal retirement age for The Firm.

    Now I saved in the AVCs pretty much exactly a third of the notional capital that stands behind my defined benefit pension, precisely for the reason that I could take this AVC as the 25% pension commencement tax-free lump sum, If I transfer some of that I give up some of this tax-free capacity, but I can still draw the money tax-free and before 60, just in a different way from how I designed the idea in 2012. The reason I can do that is Osborne’s changes in April 2014, obviously I didn’t know that in 2012 😉

    So I take a butcher’s hook at how to actually do this, starting with their guff on transferring pensions, and I discover that the blighters have tossed rocks all over the runway as I am coming in to land. To wit:

    An Additional Voluntary Contribution (AVC) linked to a defined benefit scheme could give a higher pension and/or tax-free cash if not transferred. We normally insist you take advice to confirm it is in your interests to transfer such pensions.

    Which s a bastard, because this is not a huge amount of money I want to transfer, it’s a few tens of thousands of pounds. I don’t know exactly how much financial advice is but I figure it’s going to be about £400, most of which is going to be to write the letter on fancy headed notepaper that it’s okay for me to get a hold of my own bloody money. It’s a bit like solicitors who don’t get out of bed for much less than a few hundred if you want them to dirty up some of their nice headed notepaper with their laser printer to threaten some oik.

    So basically HL want me to pay about 1% of the transfer to an IFA to cover their arse. I rang them up and outlined what I want to do and why and they said nope, rules is rules. IFA signoff required. So I am now investigating other SIPP providers to see if I can avoid paying swindlers and leeches IFAs for access to my money, but it’s not looking good. I observe that Cavendish Online take a similar line so I may be stuffed on dodging the IFA tax

    Unfortunately you will not be able to transfer from any of the following sources:

    • Additional Voluntary Contributions schemes (AVC) linked to defined benefit schemes

    And I took a look at Monevator’s piece on online financial advice – I found vouchedfor a bit more useful than unbiased which used to be the IFA goto place for search.

    I have only ever taken financial advice once in my life, and it was disastrous

    – which is why I am trying to avoid this. Not just to save myself a few hundred pounds, but my only experience of finacial advice stank. When I was 29 and looking for a mortgage the lovely green-eyed LAUTRO ‘adviser’ Sue persuaded me to go for an endowment mortgage, dangling the potential possibility of the endowment doubling. The young Ermine had no dependants and no use for the life insurance. If I had that need, The Firm’s pension scheme had death in service insurance worth more than the mortgage which was the grounds I finally got a claim settled  for reinstatement to where I would have been with a repayment mortgage.

    However, even if endowments hadn’t started to fall short I was shit for brains to be swayed by that promise anyway. A mortgage term is 25 years, if you take £100 in crisp £20 notes and stick it in your mattress in year 0 then half the value of what you can get with it dies in about 10 years due to inflation, so if the endowment nominally doubles in 25 years you’ve still been stiffed. The Bank of England’s inflation calculator tells me indeed that £100 in 1989 would be worth £222 in 2014 when that mortgage would have been redeemed had I not moved and paid it off early. Precisely what the endowment industry managed to do to screw this up so royally still escapes me.

    It was galling for my parents, who had taken the trouble to properly educate me in things financial. Although this is not a job that parents seem to consider part of their domain  nowadays, my working-class parents did, and they made a decent fist of it. My parents taught me among other things don’t spend more than you earn son, that the NAV of an IT differs from the share price, and my mother had described to me how a mortgage works down the the detail of the payments being mainly the interest to start with and repayment of the capital speeding up towards the end. They had strongly advocated repayment mortgages and told me why, and with the hindsight of a quarter of a century they were absolutely right, but in the tragedy for parents the world over there is no antidote for youthful stupidity and black-and-white thinking – to ask a 29-year old to qualify the double your money promise against effect of inflation on period of time that is nearly the same as his age is a big ask. It takes time and life experience to turn some kinds of knowledge into wisdom. I had the knowledge, but not the wisdom 😉

    how a traditional mortgage builds equity

    how a traditional mortgage builds equity. From the excellent Mortgages Exposed

    Or maybe I was a particular twit. They were strange times, the late 1980s, though the housing market feels the same now, there are people in Britain today who may be on the verge of making a similar mistake

    Anyway, while I now accept that the decision to buy a house then was the dumbest financial thing I have ever done, the amplification of that cock-up through what was basically self-serving and wrong financial advice against my interests makes me leery of the whole financial advice scene. It’s not an experience I feel I want to repeat at a gut level, and it’s not an experience I want to pay for.  I guess I can jump over that by reminding myself this was money the taxman would have stolen 40% of, and indeed money that inflation has bitten 8% out of since 2012.

    11 Aug 2015, 4:23pm
    by Neverland

    reply

    You can hardly blame them for wanting to avoid any legal exposure given all the money that has just been paid over for Equitable Life and PPI miss-selling. I believe between the two it is about £35bn

    Its a fairly safe bet that in 5-10 years their will be another miss-selling scandal regarding these new pension freedoms as cardigan wearing Daily Mail readers with a 5-10 year old sports car, a motor boat and a caravan in the driveway find they have no money to live on

    I also need to learn how to spell miss-selling

    I had started to see this worrying pattern emerge on the MSE forums, although I guess it is how Neverland describes: an ass covering exercise.

    @Neverland I think Miss Selling described Sue very well!

    @ERG Hadn’t spotted that. I haven’t found any way round it with anyone else yet, so it’s probably a CYA job as Neverland called out. Which I will be paying for in the professional indemnity insurance costs fo the IFA 🙁

    Still, on the bright side this is an opportunity I never thought I would have – thought I’d be drawing the pension early and actuarially reduced now and have to separately invest that PCLS, So the big picture looks good.

    Reading through the Pension/Retirement forum there are a few threads complaining about being forced to see (and pay for) an IFA before being allowed access. I think thisismoney recently done a piece on it as well.

    11 Aug 2015, 6:05pm
    by Anxious blog reader

    reply

    @ermine did WordPress eat the end of this blog post? Or just the .

    Just the . – reinstated now 😉

    I thought I read somewhere that any transfers remotely linked to DB pensions was going to require ‘advice’.

    Which reminds me – I have a little pot of AVCs which I paid into many years ago, I guess I won’t be transferring those to HL (or anyone else) anytime soon.

    @Weenie – it seems to be the case. Looks like I need to cut HL some slack then, and if having a DB pension causes me this bit of grief it’s a good problem to have. It’s going to be a funny experience, looking for a financial adviser. And perhaps there are wrinkles I have missed that a pensions adviser knows, because pensions seems to have devious twists and turns at every stage, if I’m going to pay for it I’m going to sweat the purchase…

    The FT has a piece last week on Why IFAs are scared to advise on [this stuff] – link below.

    I quote:

    “Can you just confirm you’ve given me advice so I can get my hands on my pension?” is a typical request. Hoping to obtain this waiver for a couple of hundred quid, such clients react with horror when they are told that access to independent advice could cost a few thousand.

    Good luck….

    FvL

    https://www.google.co.uk/url?sa=t&rct=j&q=&esrc=s&source=web&cd=5&cad=rja&uact=8&ved=0CEQQFjAEahUKEwif05veiaLHAhVmWtsKHfY1CE8&url=http%3A%2F%2Fwww.ft.com%2Fcms%2Fs%2F0%2F289e9400-3b78-11e5-8613-07d16aad2152.html&ei=1XbKVd-ULea07Qb266D4BA&usg=AFQjCNG1FKajQi4t0oBmnKxkL–rSosGYA&sig2=Led3piqsyd1vp1TQctSXiw

    @FvL crikey, if I’m an order of magnitude out on the price of this advice I’ll go bollocks to all that and find another way. Thanks for the FT article BTW. Despite the HL telephone operator claiming HL weren’t a source of advice the FT article gives the lie to this – they do for £500 which would be cheaper than the 2% sting for the full monty. Perhaps this is the crafty way HL charge for their SIPP which I missed.

    12 Aug 2015, 9:40am
    by Neverland

    reply

    It almost seems like Goergie’s “pension simplification” is going to be a wet dream of IFA fees to be paid

    And then in maybe six months time he will completely upend the UK pension system again…

    ..and the government wonder why people who aren’t high earners don’t bother with private pensions…

    12 Aug 2015, 9:57am
    by BeatTheSeasons

    reply

    Start by finding out why they’ve included the word “normally”, i.e in what circumstances are you not required to take advice? Maybe writing a financial blog qualifies.

    Interested to hear how you find the IFA compares to ones of the past…if you do decide to (or are forced to!) meet one…not an ideal situation for either party though.

    @Neverland I also don’t understand why people who don’t pay HRT bother with DC pensions, to be honest 😉 Saving 20% going in to pay 20% coming out, or more if NI and tax are fused, seems an extremely long game for very little upside, though the issues of having more under the personal allowance as a retiree make up a little, and the protection of pension savings against bankrutpcy, benefits means testing and debt collectors during the vicissitudes of modern working life is a form of insurance worth something I suppose.

    @Beat The Seasons I did ring them up – as soon as they heard ‘AVC fund connected with a DB pension’ it became basically rules is rules. There’s no fundamental law against me transferring the AVC to a compliant SIPP provider and treating the HL one as a standalone, but I have failed to find one so far. Cavendish and TD simply won’t touch that sort of transfer

    Initial investigation shows the cost of the IFA is about 2-3% of the amount transferred, so while it is thousands not hundreds it’s not 10 times my estimate.

    The alternative options are run my ISA down a bit over the next 5 years, or draw the DB pension 5 years early and eat a 25% actuarial reduction, liberating the AVC fund and invest it in ISAs over a few years to compensate for the actuarial reduction. That was my original plan as of 2012.

    Although I can’t say I’m thrilled to pay 3% of the AVC fund to get hold of it, it may be better than allowing inflation to consume 20-50% of it over the next five years. Sometimes you have to take the least worst option. This is an option I didn’t think I would have three years ago, but I believe it’s a better option than the original plan of drawing early.

    @AP It is interesting to observe that the LAUTRO commission rates on new endowment sales were stupendously high – 25% of the total (page 7) – no wonder the young Ermine was pushed in the direction of an endowment 😉 I can live with paying 3% of the AVC fund up front, but no wonder endowments fell short if 25% of the initial value of the sum mortgaged went as an upfront bung to the salesforce!!!

    @Ermine I’m not in HRT yet pay into a DC pension AND make AVCs into it! Madness 😉

    I do not only for the 20% tax saving but also the NI savings through salary sacrifice. Plus, as you mentioned; the extra protections from benefits means testing, bankruptcy, potentially some divorce considerations etc and of course the employer contribution.

    @ERG well done on getting sal sac, it seems to be getting a rarer beast these days. In my last few years I took my income down to nearly NMW using sal sac because even after driving my salary down through the HRT threshold into BRT clawing back the 32% (meaning for every £100 you don’t earn net you get nearly £150 saved) was still worth doing. Employer match is also a decent reason – a 100% ROI is hard to come by using any other legal means.

    The whole pensions freedom thing did stink of the government looking for a boost in tax receipts, although a positive step for the financially literate.

    Perhaps with the recent costs of PPI they are right to be jumpy – but there should be some way to get access to your AVC’s without some IFA telling you it’s ok. Perhaps one of us should train as one and offer the service for free 🙂

    We had a talk a month or so back at work on the experience of the freedoms since they came out – similar to what FvL mentioned they were finding IFA’s a bit reluctant (and a distinct lack of Lamborghini purchases).

    Do you know what they actually need from the IFA? Some sign off that you can support yourself and that the reduced pension from the scheme is still enough?

    I’m in a similar bind (but wanting to transfer a small old DB out to a SIPP) I came across these people who do the legwork for IFAs in the background and approached them directly. I’ve been quoted £1k flat fee. I haven’t signed up yet so can’t comment on the process (all I want is the headed paper), but there isn’t any ‘look into my eyes’ type wealth audit involved, which is what normally puts me off the IFA world..

    http://www.professionaladviser.com/professional-adviser/news/2405253/intelligent-pensions-offers-db-transfer-option-to-advisers

    @MrZ what they said on the phone was that to action an inbound transfer of AVCs associated with a DB pension scheme they need both evidence that I had taken advice and that the advice was positive.

    It’s kind of bizarre because the whole point of doing this is to avoid reducing the pension from the main scheme. I will defer the DB pension until NRA of 60 or thereabouts, and run the AVCs flat in the intervening years.

    Mind you, having read Monevator’s last post on the UPFLS and not getting why I should do that instead of taking the 25% PCLS from my AVCs plus SIPP along these lines and drawing down the rest under the tax threshold does make me wonder. It’s starting to look like there are wrinkles here that I don’t understand – for instance using one’s pension as income to increase the amount one can contribute I had always believed was impossible. Income for pension contributions is employment income, I don’t think even unwrapped investment income, BTL rent income or pension income counts, but Greybeard seems to be saying that’s not the case. In which case my understanding is deficient, and maybe HL have a point 😉

    @Grabber – that’s an interesting peek at the dirty underside of the system 😉 Although for the record, I am only looking to transfer out the DC component of mine. The DB is hopefully going to sit right there where it belongs and then at NRA I will get exactly the defined benefit, without any actuarial reduction argy-bargy

    Have you tried AJ Bell? I have been looking at them recently, I have not bumped into any such requirements on their site so far.

    I was fascinated to read about your financially education. Sounds like you were fortunate to have such keyed-up parents. My parents taught me not to spend more than I earn and save for a rainy day. But that was as far as it went really. Everything else I have had to learn myself (and still am doing so!).

    Good luck getting it all arranged!

    @ The DD

    The big win is here

    My parents taught me not to spend more than I earn and save for a rainy day.

    The rest is window dressing, the NAV and shit is great, but doesn’t amount to a hill of beans because the rest is noise, my parents gave me the knowledge to see endowmwents were shit biut not the wisdom to call that under pressure. Spend less than you earn is the key to the castle. Let’s face it, though I made a clusterfuck of pretty much everything else, doing that means the Ermine got to quit at 52, owing nobody n’owt…

    Consider wealth at work as they are familiar with the firms schemes

    my parents gave me the knowledge to see endowmwents were shit biut not the wisdom to call that under pressure.

    I sound like a terribly ungrateful SOB there. My parents did their best, the errors were all my own work. It takes time to turn knowledge into wisdom, and in 2009 I was bright enough through their grace to turn this into action…

    I was thinking that I was missing a trick by having a SIPP rather that AVCs.
    (AVCs mean that you dont have to pay NI or tax on the contributions). A SIPP means you just get the tax relief.

    Looks like just having a SIPP makes things simpler.

    I’ve got a small DB pension from 2.5 years of working in the University system which I was toying with transferring to my SIPP but I may as well just let it run.

    So I’m going to draw down the SIPP to zero between 55 and 60 taking the tax free amount (+25% tax free allowance) each year.

    My DB pension from 60 is just about the tax free allowance so hopefully no income tax for me until I’m an OAP at 67.

    I just hope that they stop messing with the rules

    (I have no idea what this use your pension as an isa guff is about but I hope it goes away)

    Matt

    @Jim I greatly appreciated Wealth@Work’s seminars paid for by The Firm, which assisted me in orienting myself. But they are dear for servicing, 1.5% of assets managed per annum, oy vey…

    @Mattman a SIPP is usually the way to go for simplicity but AVCs have a particular role to play with DB pensions because when I set up the plan in 2012 the AVC let me get the 25% PCLS without losing any defined pension. The extra freedom Osborne created since then gives me an additional option of front-running the DB pension with it instead.

    If I were starting over now I’d probably split my DC savings half and half across AVCs and a free-standing SIPP. I have since found I have to transfer the entire AVC fund – spilitting the DC savings would give me extra optionality. Though I’d have lost the opportunity to salary sacrifice into that part of the pension. Once I’d pushed my salary below the HRT threshold the value of salary sacrifice jumps quite a bit!

    Interesting – and flags up the free option of Pensionwise. Although there’s again the killer clause

    You should be aged 50 or over and have a defined contribution pension

    As soon as people hear DB pension they seem to put their fingers in their ears and go la-la-la-la and don’t get to AVCs which are a DC component. But I’ll give them a go, the price is right 😉

    Also against me is that the sum involved is quite a bit more than the article – there also seems to be a 30k limit above which stricter regulations apply

    Could you possibly explain the advantages of AVC within a DB scheme?

    After looking at the (limited) funds on offer within my Firm’s own DB scheme and the (rather high) fund management fees involved, I elected to invest the difference between the annual allowance and the amount paid into the DB scheme by my Firm into a selection of index funds and ETFs in a SIPP with a low cost broker.

    Is this a dumb move?

    Is the advantage that AVC’s are paid off the topline and whilst I reclaim tax relief on my SIPP contributions, I cannot claim back national insurance ‘contributions’ on them?

    Thanks and keep up the good work.

    I’m an additional rate tax payer

    @Bob The primary advantage of AVCs with a DB scheme is if, and only if, the value of the benefits of the DB scheme are added to the value fo the AVCs to compute the maximum amount of the pension commencement lump sum.

    Let us say for the sake of argument your DB benefits are £10k p.a. at NRA. The nominal capital standing behind that is 20 times this, according to HMRC, ie £200,000. If, and only if, the AVC arrangements are a linked arrangement, which is entirely at the discretion of your employer, you may save in AVCs up to a third of £200,000 (£67,000). At retirement this is now added to the £200,000 valuation of your DB pension, ie a total notional pension capital value of ~£267,000. You may take 25% of this as your PCLS, which so happens to be the AVC savings of ~£67k. This is a simplification, a more technical version from HMRC is here.

    Paying less tax on taxing the money out usually beats the couple of percent difference on fund fees in your last few years before retiring, over longer integration times this may be different.

    If your employer offers salary sacrifice, where the money hits the pension before it is paid to you, then you do not pay NI on those pension contributions. This is particularly valuable to BRT payers, because they stop the taxman stealing 32% tax and NI from they hard-earned as opposed to just the 20% tax. Many employers like this because while they save even more, because they don’t pay the employer’s contribution which is even more. There is a technicality in that you can only salary sacrifice down to the national minimum wage – a wrinkle I dismally failed to spot is that you can save the rest in a SIPP, albeit only at a 20% saving. Obviously you must have other savings you can live off or be able to live off thin air, but this is easier for those desperate to get out who have discharged their mortgages.

    Some employers permit you to sal sac into an employer pension like your works one, which you can then periodically transfer out lumps to a SIPP with funds/fees more to your preferences. I had a vague recollection that FinanceZombie or UTMT did something like that tyo get employer match but then get better rates from a SIPP, but I can’t find the reference now.

    @Bob if you’re paying ART most of the heavy lifting will be done fine in a SIPP, all the way down from 100k to £40k-odd, and given the annual allowance probably won’t let you get your taxable salary any lower than 60k or more you may as well stick with the SIPP 🙂

    The issue of the PCLS being larger with a linked AVC still applies. There’s a case for you considering an IFA paid hourly because pensions are very seriously complex and the details of schemes differ drastically!

    Thanks muchly. Food for thought indeed. It’s complicated slightly by the fact I’m on assignment overseas where (after 12 months) I ceased paying national insurance contributions despite being a UK resident. (Although I plan on topping up to ensure i continue to accrue state pension years – if that exists when I retire (I’m 35)).

    As a minimum I will investigate whether the AVC is a linked arrangement and consider altering the AVC/SIPP split in future. In the short term i.e the next five years or so, with budget changes, it looks like the amount of tax relief available on my pension contributions will be severely eroded so I’m going to focus on maxxing out on SIPP contributions and using up previous years allowances.

    I’m not sure if this was an option with your DB scheme, but I was able to purchase additional years service by transferring cash from the SIPP to my DB scheme. I purchased an additional few years but this was pretty costly given that the calculation of cost per year used some complex formula involving (historically at least) pretty unfavourable gilt/annuity rates.

    Much like yourself, the backdrop of endless ‘reporting’, ‘performance reviews’, ‘excellence guidelines’ and general bureaucratic tedium at my Firm is pushing me towards the exit (and a Haalberg-Rassy 40) . I’m an engineer for an American company so if anything I’d say the piss and bluster spouted from “corporate” is even more soul-destroying than that which you endured.

    Thanks again & all the best.

    @Bob the boat sounds like the way to go when set against excellence guidelines. 😉

    I found everything about pensions hard, counterintuitive and difficult to comprehend, and that was before Osborne’s pension freedoms! I was only warmed up to pensions as a way to ice HRT about five years before quitting but when I did get the picture I hit it hard.

    I didn’t have the option of buying added years – the plus of that is of course that one you’ve paid the money the longevity risk is taken away, in some ways it’s like buying an annuity, which is what a DB pension is at heart. The downside of that is that it adds to the general inflexibility of DB schemes in when to retire, because added years are also actuarially reduced if you draw the pension early. However, you will also have the option to front-run your pension with the SIPP, so it’s all a question of wrangling Excel.

    The win of having a much larger PCLS can be very valuable – for those with a mortgage there is a strong argument to ramp down mortgage repayments in the last 10 years of working to ramp up pension contributions and then discharge the mortgage on retirement with the PCLS, effectively paying off part of the mortgage from gross rather than net income (less the accumulated interest)

    17 Aug 2015, 4:01pm
    by Ian Mclean

    reply

    I was forced to jump through the same hoops by H-L. The answer to a question I put to them did surprise me.
    “What if the IFA advises against the transfer, can I still proceed?” Yes was H-L’s reply.
    “So you are insisting I get financial advice, but you are quite happy if I ignore it?” Yes again!

    So what’s the point of getting the advice I wonder.

    @Ian – looks like H-L’s answer to your question confirms the CYA theory – Hargreaves Lansdown don’t care a jot about whether it’s the right decision for you, but they do care that you can’t blame them later on. They can say to the regulator ‘well we made him pay for advice so he was an informed Insistent Client and our hands are clean, guv’

    @ermine’s article: “Which s a bastard, because this is not a huge amount of money I want to transfer, it’s a few tens of thousands of pounds. I don’t know exactly how much financial advice is but I figure it’s going to be about £400, most of which is going to be to write the letter on fancy headed notepaper that it’s okay for me to get a hold of my own bloody money. It’s a bit like solicitors who don’t get out of bed for much less than a few hundred if you want them to dirty up some of their nice headed notepaper with their laser printer to threaten some oik.

    When I was 29 and looking for a mortgage the lovely green-eyed LAUTRO ‘adviser’ Sue persuaded me to go for an endowment mortgage, dangling the potential possibility of the endowment doubling. The young Ermine had no dependants and no use for the life insurance. If I had that need, The Firm’s pension scheme had death in service insurance worth more than the mortgage which was the grounds I finally got a claim settled for reinstatement to where I would have been with a repayment mortgage.”

    Oh, the joy of hypocrisy.

    You claim that an IFA is going to do nothing much for the money, and then later you explain how you were able to make a successful claim for expensive redress following a historic mis-sale.

    Plan for next week’s article: a rant about how electronic engineers charge hundreds of pounds a day to design “systems” which consist of nothing more than a few components costing pence at Maplin on the High Street. Sigh.

    Come on, Ermine, this stuff is not worthy of you.

    @Jonathan I dunno, if my first experience of financial advice was that of self-serving advice against my interests it doesn’t seem that surprising that I don’t really want to drink water from the same well even after 30 years.

    That advice to prefer an endowment over repayment was 100% wrong for my circumstances, and while buying a house at that time was the bigger mistake and entirely my own work it compounded the risk, particularly before the claim.

    I can live with paying for my own mistakes – I went in there and wanted a repayment, and was sold pretty hard to switch to endowment. The charge of foolishness I accept, but had they simply executed my instruction then I would accept the consequences – even had I been foolish enough before to look at the market and think ‘hey, endowments are great, give me one’ then that would have been my mistake.

    Here I want HL to do what I tell them, I will accept the consequences of my mistakes, but not that of a self-serving salesforce. There’s a world of difference between execution and any sort of attempt to change the instruction. If I went to the IFA and asked ‘what’s the best way to do this’ then sure, pay for it and pay enough to get independence of kickbacks and baksheesh.

    […] can be chilled about the beginning of the end because although it’s taken me six months to get absolutely nowhere with the enterprise, next tax year I can start the engines of a new income stream – first my DC savings to burn […]

    19 Apr 2016, 8:31am
    by Robert Jones

    reply

    Late to the party (as usual), but I’m following your path. I too now wish to transfer my AVC to a SIPP. I’m just up the road from you, and given your situation and mine are almost identical, I’m wondering which IFA you used to get your mandatory advice. I have one quote of 2%, which if necessary I will take, but cheaper *is* better in this case.

    I used Woodward Markwell, The guy handling my case was Mark Barr, the cost was £500 for the advice. The AVC wasn’t quite six figures.

    What HL want is quite narrow and specific. The don’t have any desire to see the advice or even know whether it was positive or negative, but they do want the name of the advisers and their FCA number and for you to say that you have had regulated financial advice on the transfer.

    You can find the FCA registration number from their website 😉

    The total transfer cost was £400 because I got a £100 bung from HL for transferring pension funds worth more than £50k, although I think that offer isn’t there any more.

    It’s probably worth noting that HL seem to offer their own financial advice nowadays which they didn’t when I went through this.

    19 Apr 2016, 4:33pm
    by Robert Jones

    reply

    I’ve spoken to Mark, agreed a fee (same as yours), and arranged a meeting for next week. He seems like a sensible bloke, and I’m sure he will sort me out. That’s saved me a significant sum. Many thanks!

    Excellent – congratulations. And you may as well get your free Cross pen set I suppose 😉

    I’m surprised HL weren’t up for the advice thing, the cynical me had assumed that this was precisely why they got into the market. Oh well.

    Mark was a reasonably smart cookie, he jumped to why I was trying to do this. I look at my projections and I’d be able to easily keep the wolf from the door if I drew my pension now, but burning up that AVC means I get 1) an extra year of full ISA contributions from the PCLS and b) a pension that enough to buy we a pretty decent foreign holiday, a few short breaks and some other niceties, without stock market risk. That sort of guarantee is hard to buy – I took a look at what sort of annuity the AVC would buy for me at 60 on the open market and it was half the value of the increase in DB pension by not eating the actuarial reduction (after I had paid 20% tax on a like for like basis).

    OTOH I take some concentration risk, but since I have the ISA which will be worth a lot more than the AVC that gives me a small amount of protection.

    Do yourself a favour in the dealings with the pension admin (if it’s The Firm) and get the transfer quotation yourself. They won’t talk to IFAs, and worse still they simply drag their feet. You can give the quotation and all the bumf to Mark, so if you initiate that now it will speed up the whole process (the transfer quote is good for 90days ISTR)

    19 Apr 2016, 4:35pm
    by Robert Jones

    reply

    Oh, meant to say that I had already asked HL about advice, and they declined to offer any. I think I read elsewhere that they’ve stopped doing advising on these transfers (presumably they don’t think they can CTA well enough).

     

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