Pension Freedoms: Considering your options is key for savers

Types of Pension Plans


Under recent UK pension legislation changes, retirement savers now have the freedom to draw their pension as cash and spend the money how they like – or do they?

Whilst the rules have changed, the regulator’s stance on consumer protection has not. Before The probability is anyone with a defined benefit or final salary pension will have to pay for expensive advice before they can move the money into a SIPP or Qualifying Recognised Overseas Pension Scheme (QROPS).

Even then, the provider can turn down the transfer of a pension if a financial adviser has recommended the cash should not be moved. The catch-22 is the government has pledged pension savers can take control of their pots, but financial firms are so scared of complaints if the client loses money after the transfer that they carte blanche refuse to accept a transfer in. The rules say retirement savers must take advice before moving a pot of £30,000 or more regardless of whether the advice agrees a transfer is a good or bad financial decision.

Transfer trigger

Providers accept they have no legal obligation to turn down a final salary pension transfer as long as the retirement saver has taken advice but it’s a business decision if they do so. However, looking at pension freedom can come at a cost to retirement savers. Most financial advisers charge at least £1,000 as the starting point for a transfer analysis – and the bill can keep on rising the bigger the pot.

Although all but one SIPP provider requires sight of positive advice supporting a transfer, few make this clear on their websites and documentation, retirement savers do not find out until they have triggered the transfer.

It could be argued that this just wastes money for the client and can diminish the value of retirement savings, as the Financial Conduct Authority (FCA), has instructed to financial advisers that this the starting point for recommending a transfer from a final salary pension pot to a SIPP, QROPS or other defined contribution scheme, provided that the transfer analysis outcome is favourable.