‘Don’t pull up the lad­der on our pen­sion free­doms’

The Daily Telegraph - Your Money - - FRONT PAGE -

Too many pen­sion­ers are be­ing forced to take costly ad­vice when they trans­fer small fi­nal salary pen­sions, writes Sam Brod­beck

Bri­tain’s great fi­nal salary pen­sion cash-in is grind­ing to a halt, new fig­ures show. Although the past year has seen an un­prece­dented in­crease in the num­ber and value of gold-plated pen­sions be­ing swapped for cash lump sums, the most re­cent fig­ures show a marked slow­ing. It is thought that more than 100,000 peo­ple quit fi­nal salary schemes in the 2017-18 tax year alone, cashing in an av­er­age of £200,000 a time. But high-pro­file scan­dals, in­clud­ing the cases of hun­dreds of steel­work­ers who be­lieved they were wrongly con­vinced to cash in com­pany pen­sions, have caused a rapid re­trench­ment to just 20,000 in the first quar­ter of this year.

MPs have warned of “the next pen­sions mis-selling scan­dal” but oth­ers main­tain that, in the right cir­cum­stances, swap­ping a guar­an­teed in­come for a more flex­i­ble lump sum is wholly ap­pro­pri­ate and po­ten­tially life-chang­ing.

Part of the rea­son for the slow­down in trans­fers is that ad­vis­ers must sign them off when pen­sions are worth £30,000 or more. Now Sir Steve Webb, the for­mer pen­sions min­is­ter, cur­rently a di­rec­tor at Royal London, the mu­tual in­surer, has backed calls from Tele­graph Money to raise the cap.

Fear of future com­plaints has dras­ti­cally shrunk the pool of firms will­ing to un­der­take the work. If you can find an ad­viser, fees eas­ily run into sev­eral thou­sands of pounds be­cause of the com­plex­ity of the ad­vice.

This news­pa­per has pre­vi­ously called for the £30,000 thresh­old to be raised so that fewer peo­ple are forced to take ad­vice on rel­a­tively small pen­sion pots. Sir Steve said it looked “a bit daft” to force peo­ple to spend such high sums when the pen­sion be­ing trans­ferred might make up only a small part of their wealth.

“If the £30,000 pot is all the longterm sav­ings you have, you shouldn’t even be think­ing about a trans­fer,” he said. “But if it’s some­thing you’ve picked up along the way and is mar­ginal to your in­come, hav­ing to pay sev­eral thou­sand pounds seems dis­pro­por­tion­ate.”

Un­der cur­rent rules, a pen­sion that pays as lit­tle as £20 a week could be deemed large enough to war­rant tak­ing ad­vice. Royal London wants the thresh­old in­creased to at least £50,000. For sums be­low that level, the firm said peo­ple should sim­ply have to show that they have used the Govern­ment’s free pen­sion ad­vice ser­vice, Pen­sion Wise.

Tele­graph Money reader Ian Han­d­ley, 59, is one of thou­sands of peo­ple to have had a pos­i­tive ex­pe­ri­ence since trans­fer­ring his fi­nal salary pen­sion 18 months ago. Mr Han­d­ley, who runs a mort­gage bro­ker­age in Sur­rey, built up the pen­sion dur­ing a 20-year ca­reer with Lloyds bank.

He did not want to say pre­cisely how much the pen­sion was worth now, but said the “trans­fer value” was 28 times the in­come he would have re­ceived. This means that if the pen­sion was due to pay him £20,000 a year, he would have re­ceived £560,000 by trans­fer­ring.

Mr Han­d­ley paid around £5,000 to a spe­cial­ist ad­vice firm, Tide­way, for ar­rang­ing the trans­fer, and on­go­ing fees of 1pc a year in to­tal to Tide­way and Charles Stan­ley, a wealth man­ager, which jointly man­age the pen­sion pot.

Giv­ing up a guar­an­teed in­come is “not for ev­ery­one”, he con­ceded, “but peo­ple should have the free­dom to de­cide – for me it’s been bril­liant”.

He added: “There were three rea­sons for trans­fer­ring. The lump sum I re­ceived was as high as it will ever be, and hav­ing got cap­i­tal into my hands I feel I can sig­nif­i­cantly out­per­form the trustees of the Lloyds pen­sion scheme by tak­ing more risk. Lastly, on the ba­sis that death and tax are the only two cer­tain things in life, it’s bet­ter for

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