How do I cash my pension?Advice or Non-Advice?

If only I knew then what I know now.

Before I worked in the financial services industry I took out a pension so I could make additional  contributions linked to my company pension. My company insisted I conduct this arrangement through the preferred company financial advisor which I did.

We discussed my needs and concluded the following requirements-

• Portability as I intended to change jobs throughout my career, therefore no high transfer fees
• Low charges as I understood the negative impact of high charges on fund performance
• Medium risk funds as I had over 25 years to retirement and wanted steady growth.

The only documentation I received was a copy of the fact find that reflected our conversation on needs analysis. The scheme commenced by salary deduction a couple of weeks later.

Big mistake no 1 - I did not chase up a copy of the policy schedule so therefore did not check the following key things-

• Administration fee
• Annual management charge
• Fund selected and track record of performance
• Pension Transfer Fee
• Commission paid to the Financial Advisor 

Big mistake 2 -with the passage of time my pension pot got parked at the back of my mind and I did not request annual pension statements so I could track the performance of my pension.

Even if you take financial advice still check the risks below.

From personal experience a few things to look out for.

Second to the purchase of your home, your investment into a pension maybe one of the most important things you buy and it is critical to get it right and keep an eye on it.

I made a big mistake, as my company recommended the financial advisor I trusted him to make the right purchase and did not carryout the checks. Oh how wrong I was.

Wiser and older I recently approached my pension provider for a benefits statement and a transfer value as I  decided to take the tax free cash sum for this pot and invest the balance in a flexi access drawdown fund.

What a shock I was in for when I saw the numbers, they were so bad I assumed they must be wrong and asked my provider to check them. Oh my goodness they are correct .

I feel a spreadsheet coming on and I start to crunch the numbers and investigate, my financial advisor certainly had not provided best advice and this is what I found:- 

• It certainly was not a portable pension, the charge for transferring was 35% of the fund something I simply would not accept.
• The charges were far from low in fact the highest I could find, an annual management charge of 4% of the fund wiping out any investment gains.
• An administration charge of £2 pm deducted from the fund.
• To add injury to insult I discovered when I spoke to the company actuary these deductions helped to fund the obscene commission paid to the agent. In my case over 60% of the first 2 years premiums were deducted to offset the commission paid. Thereafter 2.5% of the annual premiums were paid to the agent as servicing commission. The agent did not contact me once after the sale or send me any information on my pension.
• The investment performance of the fund was well below the average of the industry.

It took me 18 months of complaint letters and referral to the Financial Services Ombudsman, but I got the 35% transfer charge cancelled along with compensation for the unfair charges. Apparently as prices can go up and down there is no come back for poor fund performance. 

Buyer beware.

Disappointed with your pension pot at age 55 a few things to watch out for -

• Unreasonable Transfer Charge
• Excessive high annual management charges
• Poor fund performance
• Administration fees
• Tax liability on income and drawdown payments
• Funding for retirement maybe for 30 years.

Pension health check and facilitating pension release.

My bad experience with pension providers, with delays, unfair contracts and jargon covering up bad practices is the main reason Retirement Ahead was created, to help people approaching retirement get what they deserve, a fair deal. At Retirement Ahead we know what to look out for and how to put it right. We can facilitate all the administration when dealing with pension providers and  pension trustees. 

We work closely with our clients to provide all the factual  information they need to make the right decision to meet their needs. We also carryout an indepth health check on their pension pot to ensure they get a fair deal on their pension release and help facilitate tax free payments, purchase of an annuity and investment in a flexi access drawdown.

Advice or non -advice.

I fully appreciate there will be many, many professional advisors that will do a good job, but for me, once bitten twice shy and I prefer to obtain all the factual information I need to make an informed decision. If I decided to take advice, which most companies will insist if you have guarantees linked to your pension pot, then I want to understand the full cost of the fees upfront and validate the recommendations.

You really cannot afford to make the wrong investment decision or take the wrong option to meet your needs. It is important to consider all the factual information and take a measured approach.

If you need help, then Pension Wise provide free, impartial government guidance about your defined contribution pension options. If you are unsure this is a good starting point.

https://www.pensionwise.gov.uk/en

For those of you who need advice, then appointing an independent financial advisor registered with the FCA is the right route forward. Financial advice is likely to cost between £1500-£2000.  Please do not abdicate your responsibility, but delegate and keep a watching brief.

In conclusion there is a place for advice and non-advice pension release depending on your individual needs and the complexity of your pension arrangements. There is a lot to consider if you are thinking about taking cash from your pension early, the tax implications, the amount and frequency of taking a tax free cash sum, choosing the best annuity or regular income provider or where to invest the remainder of your pot for a flexi access drawdown.

For more information visit our site at www.retirementahead.co.uk and complete the enquiry form for a free consultation. 

I have shared my own personal experience with you to flag some important things you should look out for when taking financial advice and the cost if you do not receive best advice. The content is for  information only and should not be construed as financial or legal advice.


February 2018