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Post by overthehill on Apr 22, 2023 8:42:47 GMT
That's a strange assertion. In fact, you are legally required to obtain advice before cashing in a DC pension over £30k. The OP's correspondent wants to cash in. We don't know if he has a DB or DC pension, but the rules for cashing in >£30k are the same. It's a couple of years old now, but the Telegraph states the legal position: "If you plan to cash in a defined benefit pension, you are legally required to seek financial advice regardless of how much is in your plan. You must also use a financial adviser if you are planning to cash in a defined contribution pension over £30,000. If your [DC] pension pot is below £30,000, then there is no legal requirement to seek advice. However, given the potentially severe tax implications of taking a large amount of money in a given month, it is prudent to consult a financial adviser before doing this."Also worth a read: www.fool.co.uk/personal-finance/share-dealing/guides/do-i-need-a-financial-adviser-for-my-pension/The Telegraph article confirms that the rules are not the same!
- for a DB scheme you are legally required to seek financial advice
- for a DC scheme you are required to use a financial advisor if you want to cash in your pension (so no requirement to seek advice)
The telegraph article is poorly worded and I am confused by the reference to cashing in a DC pension. You pay money into a ringfenced DC pot and on retirement you take the money from the pot and transfer it to somebody who can provide a pension. So the pot needs to be cashed in before the pension comes into being.
Have the rules changed? I've transferred DC pensions without using an IFA ( 3 times ) unless they've been invisible and free of charge.
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Post by overthehill on Apr 22, 2023 8:49:37 GMT
So I'm assuming it is a DB pension transfer value, you wouldn't need advice for a DC pension.
Cashing in is the same as transfering to a DC pension so the 30k limit applies.
Both myself and my Ex used pensionhelp.co.uk which are based in Manchester. The service was good and the fees were as low as you could expect (still a complete waste of money thanks to legislation). I'm fairly certain if the advice to transfer was not going to be positive based on an early review there would be no charge (whether advice needs to be positive depends on your pension provider). I'm not sure how much they would charge for such a small amount, I had to pay 4k about 5 years ago for a much larger amount. If this was their minimum charge then you and everyone else who wants flexibility is in a bad government enforced expensive undesirable situation.
That's a strange assertion. In fact, you are legally required to obtain advice before cashing in a DC pension over £30k. The OP's correspondent wants to cash in. We don't know if he has a DB or DC pension, but the rules for cashing in >£30k are the same. It's a couple of years old now, but the Telegraph states the legal position: "If you plan to cash in a defined benefit pension, you are legally required to seek financial advice regardless of how much is in your plan. You must also use a financial adviser if you are planning to cash in a defined contribution pension over £30,000. If your [DC] pension pot is below £30,000, then there is no legal requirement to seek advice. However, given the potentially severe tax implications of taking a large amount of money in a given month, it is prudent to consult a financial adviser before doing this."Also worth a read: www.fool.co.uk/personal-finance/share-dealing/guides/do-i-need-a-financial-adviser-for-my-pension/
I think the confusion is around this statement in the article. I'm talking about a normal DC pension pot or SIPP, not whatever is being described below. I don't know what that is or how common they are.
"You have a defined contribution pension scheme worth more than £30,000 with a guarantee of what you will be paid when you retire, and you want to give this up to do something else with it"
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badersleg
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Post by badersleg on Apr 22, 2023 9:47:25 GMT
A reminder that you can get free pension guidance from MoneyHelper (formally the Pensions Advisory Service)
Tim
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Post by bernythedolt on Apr 22, 2023 12:27:47 GMT
That's a strange assertion. In fact, you are legally required to obtain advice before cashing in a DC pension over £30k. The OP's correspondent wants to cash in. We don't know if he has a DB or DC pension, but the rules for cashing in >£30k are the same. It's a couple of years old now, but the Telegraph states the legal position: "If you plan to cash in a defined benefit pension, you are legally required to seek financial advice regardless of how much is in your plan. You must also use a financial adviser if you are planning to cash in a defined contribution pension over £30,000. If your [DC] pension pot is below £30,000, then there is no legal requirement to seek advice. However, given the potentially severe tax implications of taking a large amount of money in a given month, it is prudent to consult a financial adviser before doing this."Also worth a read: www.fool.co.uk/personal-finance/share-dealing/guides/do-i-need-a-financial-adviser-for-my-pension/The Telegraph article confirms that the rules are not the same!
- for a DB scheme you are legally required to seek financial advice
- for a DC scheme you are required to use a financial advisor if you want to cash in your pension (so no requirement to seek advice)
The telegraph article is poorly worded and I am confused by the reference to cashing in a DC pension. You pay money into a ringfenced DC pot and on retirement you take the money from the pot and transfer it to somebody who can provide a pension. So the pot needs to be cashed in before the pension comes into being. I'm struggling to interpret your second bullet point. We (presumably) agree the OP's friend wants to take his entire pot as cash. How does "required to use an adviser" square up with "no requirement to seek advice"? The two seem contradictory. Regarding your final paragraph, it's my understanding for my own AVC and my SIPP (both DC schemes) that, whilst they have a transfer value, a DC pot is never "cashed in" in order to provide a pension. I can drawdown from it or draw lump sums from it or transfer it to an annuity provider to purchase an annuity, but at no point is it ever cashed in, in the sense the Telegraph means, i.e. to take the whole as a lump sum of cash. If you do the latter for a pot greater than £30k, you are legally required to seek advice, AIUI, in some cases (where an underlying guarantee exists). That is borne out by Royal London's response to the OP's friend (assuming a DC, which is probably most likely, given the amount concerned).
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Post by bernythedolt on Apr 22, 2023 12:35:25 GMT
The Telegraph article confirms that the rules are not the same!
- for a DB scheme you are legally required to seek financial advice
- for a DC scheme you are required to use a financial advisor if you want to cash in your pension (so no requirement to seek advice)
The telegraph article is poorly worded and I am confused by the reference to cashing in a DC pension. You pay money into a ringfenced DC pot and on retirement you take the money from the pot and transfer it to somebody who can provide a pension. So the pot needs to be cashed in before the pension comes into being.
Have the rules changed? I've transferred DC pensions without using an IFA ( 3 times ) unless they've been invisible and free of charge.
The thread has become muddled. We are not talking of transferring the pot, which is a separate matter. The OP specifically asks about cashing in his pot - taking the entire proceeds away as cash in his bank - for which separate rules exist.
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Post by overthehill on Apr 22, 2023 12:53:10 GMT
Have the rules changed? I've transferred DC pensions without using an IFA ( 3 times ) unless they've been invisible and free of charge.
The thread has become muddled. We are not talking of transferring the pot, which is a separate matter. The OP specifically asks about cashing in his pot - taking the entire proceeds away as cash in his bank - for which separate rules exist.
Cashing in a DB pension or transferring a DB pension is the same thing. If xfer value > 30k , need to pay an IFA for advice.
Cashing in a DC pension or transferring a DC pension is the same thing. Don't need an IFA. I can cash in or transfer my DC pension to another DC pension tomorrow, no IFA , no charges.
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agent69
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Post by agent69 on Apr 22, 2023 13:06:07 GMT
The Telegraph article confirms that the rules are not the same!
- for a DB scheme you are legally required to seek financial advice
- for a DC scheme you are required to use a financial advisor if you want to cash in your pension (so no requirement to seek advice)
The telegraph article is poorly worded and I am confused by the reference to cashing in a DC pension. You pay money into a ringfenced DC pot and on retirement you take the money from the pot and transfer it to somebody who can provide a pension. So the pot needs to be cashed in before the pension comes into being. I'm struggling to interpret your second bullet point. We (presumably) agree the OP's friend wants to take his entire pot as cash. How does "required to use an adviser" square up with "no requirement to seek advice"? The two seem contradictory. Regarding your final paragraph, it's my understanding for my own AVC and my SIPP (both DC schemes) that, whilst they have a transfer value, a DC pot is never "cashed in" in order to provide a pension. I can drawdown from it or draw lump sums from it or transfer it to an annuity provider to purchase an annuity, but at no point is it ever cashed in, in the sense the Telegraph means, i.e. to take the whole as a lump sum of cash. If you do the latter for a pot greater than £30k, you are legally required to seek advice, AIUI. That is borne out by Royal London's response to the OP's friend (assuming a DC, which is probably most likely, given the amount concerned). In a DC scheme you build up a fund in a ring fenced pot, usually invested in stocks and shares. When you come to the time when you want to start taking a pension you can't take the money out of the pot. You need to cash in the pot and either buy an anuity of transfer the money into a SIPP. You can either decide for yourself what to do, and use the financial advisor as a facilitator, or you can ask the FA for their advice.
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michaelc
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Post by michaelc on Apr 22, 2023 13:17:09 GMT
The Telegraph article confirms that the rules are not the same!
- for a DB scheme you are legally required to seek financial advice
- for a DC scheme you are required to use a financial advisor if you want to cash in your pension (so no requirement to seek advice)
The telegraph article is poorly worded and I am confused by the reference to cashing in a DC pension. You pay money into a ringfenced DC pot and on retirement you take the money from the pot and transfer it to somebody who can provide a pension. So the pot needs to be cashed in before the pension comes into being.
Have the rules changed? I've transferred DC pensions without using an IFA ( 3 times ) unless they've been invisible and free of charge.
How did you manage that? I've been led to believe I will need to pay several thousand pounds to some "advisors" in order to move a DC to a DB and even then it is highly likely they will recommend against the transfer meaning it can't go ahead.
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Post by bernythedolt on Apr 22, 2023 13:49:54 GMT
I'm struggling to interpret your second bullet point. We (presumably) agree the OP's friend wants to take his entire pot as cash. How does "required to use an adviser" square up with "no requirement to seek advice"? The two seem contradictory. Regarding your final paragraph, it's my understanding for my own AVC and my SIPP (both DC schemes) that, whilst they have a transfer value, a DC pot is never "cashed in" in order to provide a pension. I can drawdown from it or draw lump sums from it or transfer it to an annuity provider to purchase an annuity, but at no point is it ever cashed in, in the sense the Telegraph means, i.e. to take the whole as a lump sum of cash. If you do the latter for a pot greater than £30k, you are legally required to seek advice, AIUI. That is borne out by Royal London's response to the OP's friend (assuming a DC, which is probably most likely, given the amount concerned). In a DC scheme you build up a fund in a ring fenced pot, usually invested in stocks and shares. When you come to the time when you want to start taking a pension you can't take the money out of the pot. You need to cash in the pot and either buy an anuity of transfer the money into a SIPP. You can either decide for yourself what to do, and use the financial advisor as a facilitator, or you can ask the FA for their advice. Let's break this down. I could be wrong, but this is my understanding for my own DC pots... Agreed.You can... and this is what the OP wants to do. You can take the whole lot as a lump sum of cash and blow it all on a Ferrari, taking none as pension, but there are rules for that very reason. For some DC pots (those with certain guarantees), you're required to take IFA advice if it's over £30k. Here, "cash in" the pot means something subtly different. It's actually a transfer of funds. You are not crystallizing the funds into cash in your bank. You are transferring them to an annuity provider or another pension provider, who will then pay you a regular income, for example.
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michaelc
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Post by michaelc on Apr 22, 2023 14:48:31 GMT
I accept that there is a Ferrari problem that needs to be solved as otherwise the state picks up the tab when there there is no money left.
What I find hard to accept is paying thousands of pounds whose advice can in many cases be overridden (not in mine sadly). How many people who are hell bent on buying a garage full of supercars are going to be dissuaded by someone he's forced to pay who tells him not to buy those cars/yahchts/planes ?
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agent69
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Post by agent69 on Apr 22, 2023 14:57:43 GMT
In a DC scheme you build up a fund in a ring fenced pot, usually invested in stocks and shares. When you come to the time when you want to start taking a pension you can't take the money out of the pot. You need to cash in the pot and either buy an anuity of transfer the money into a SIPP. You can either decide for yourself what to do, and use the financial advisor as a facilitator, or you can ask the FA for their advice. You can... and this is what the OP wants to do. You can take the whole lot as a lump sum of cash and blow it all on a Ferrari, taking none as pension, but there are rules for that very reason. For some DC pots (those with certain guarantees), you're required to take IFA advice if it's over £30k.
There's no dispute that you can take the whole of your accumulated funds if you so chose. However, I thought you had to liquidate the DC pot and transfer the cash somewhere than allows you to crystalise the funds, before cashing them in.
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adrianc
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Post by adrianc on Apr 22, 2023 15:03:53 GMT
I accept that there is a Ferrari problem that needs to be solved as otherwise the state picks up the tab when there there is no money left. What I find hard to accept is paying thousands of pounds whose advice can in many cases be overridden (not in mine sadly). How many people who are hell bent on buying a garage full of supercars are going to be dissuaded by someone he's forced to pay who tells him not to buy those cars/yahchts/planes ? The MANY people who've been persuaded to move their pension into somebody else's (mildly disguised) pocket by a persuasive cold-calling "adviser"... www.thepensionsregulator.gov.uk/en/pension-scams
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Post by bracknellboy on Apr 22, 2023 15:38:14 GMT
In a DC scheme you build up a fund in a ring fenced pot, usually invested in stocks and shares. When you come to the time when you want to start taking a pension you can't take the money out of the pot. You need to cash in the pot and either buy an anuity of transfer the money into a SIPP. You can either decide for yourself what to do, and use the financial advisor as a facilitator, or you can ask the FA for their advice. Let's break this down. I could be wrong, but this is my understanding for my own DC pots... Agreed.You can... and this is what the OP wants to do. You can take the whole lot as a lump sum of cash and blow it all on a Ferrari, taking none as pension, but there are rules for that very reason. For some DC pots (those with certain guarantees), you're required to take IFA advice if it's over £30k. Here, "cash in" the pot means something subtly different. It's actually a transfer of funds. You are not crystallizing the funds into cash in your bank. You are transferring them to an annuity provider or another pension provider, who will then pay you a regular income, for example.
Or more likely these days, transferring them from the pension wrapper to a drawdown wrapper. Where you are, as far as I'm aware, free to do whatever you want with them, which could mean drawing down the whole lot in one go if you wanted to. Which given that you MIGHT have multiple DC pots of differing amounts - or have a small DC pot only alongside say a DB pot - could be an entirely reasonable thing to do for a given DC pot of a given size in certain circumstances. Other than tax implications, I was not aware of any requirement to seek IFA advice before proceeding. But my not being aware, does not mean it may not be the case in some circumstances.
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michaelc
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Post by michaelc on Apr 22, 2023 15:53:46 GMT
I accept that there is a Ferrari problem that needs to be solved as otherwise the state picks up the tab when there there is no money left. What I find hard to accept is paying thousands of pounds whose advice can in many cases be overridden (not in mine sadly). How many people who are hell bent on buying a garage full of supercars are going to be dissuaded by someone he's forced to pay who tells him not to buy those cars/yahchts/planes ? The MANY people who've been persuaded to move their pension into somebody else's (mildly disguised) pocket by a persuasive cold-calling "adviser"... www.thepensionsregulator.gov.uk/en/pension-scamsSurely it doesn't cost 10 thousand pounds for someone to tell you what you're doing is a scam ?
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adrianc
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Post by adrianc on Apr 22, 2023 15:57:54 GMT
Surely it doesn't cost 10 thousand pounds for someone to tell you what you're doing is a scam ? It doesn't cost £10k to get a pension adviser, either.
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