Pension drawdown at 55

[LooseCannon101]

I have decided to draw down my private pension at age 55. My pension, about £100k, is with Prudential in their With-Profits Fund.

I have told them of my intention to take the maximum tax-free lump sum and £500 per month whilst ideally remaining in the aforementioned fund. Unfortunately, they have told me that I must use a financial advisor to transfer out of the With-Profits Fund if I wish to drawdown my fund.

I am not too happy about moving from a fund with a decent performance, and also using a financial advisor - the first time ever! Any advice and/or help much appreciated.

P.S. - I also have a company pension and dividend income from a highly diversified world equity investment trust.

[Alaric]

I am not too happy about moving from a fund with a decent performance, and also using a financial advisor - the first time ever! Any advice and/or help much appreciated.

That's something of a gotcha. They won't let you drawdown from the With Profits fund presumably because of the guarantees and they won't let you leave the With Profits fund, also because of the guarantees.

Unless there's a guarantee in your documentation of access to drawdown whilst remaining in the With Profits fund, your options seem limited.

You might need to check whether you are allowed to switch out of the With Profits fund without them demanding that you pay for financial advice. If so, then you request two separate actions. The first is to switch to a fund or funds that isn't With Profits. The second is to put that fund or funds into drawdown.

[LooseCannon101]

Thanks for the replies. I have worked out that the private pension should last until the start date of my state pension. Both the company pension and dividend income are increasing at or above the rate of inflation.

As regards Prudential's rules on drawdown, it seems like I have no choice but use a financial advisor - probably one recommended by them. I suspect they consider it best practice even though I am fully aware of the sharks preying on naive investors.

I have asked for information on the alternative products that they offer with a drawdown option but they will only deal with an advisor. It is bit of a Catch 22 situation.

When George Osbourne came up with the idea of pension freedom, I wonder whether he considered how the financial industry would respond - forcing retail investors out of decent schemes because a shortened time frame does not give sufficiently high returns to the provider. If I am forced to use an advisor, I will certainly question his/her fee structure and their knowledge of the financial markets!

[SKYSHIP]

Crucial question - You don't state what the PRU performance is/was. What has been the compound growth since, say, 2001.

That was the year I took my company pension away from the PRU and switched into my self-managed SIPP.

The PRU performance wasn't bad; but a compound 7% from 1980-2000 was frankly not good enough through the most
benign market conditions. (1987 saw a dramatic fall, but over time was lost as a blip!)

In much more difficult times I've since compounded at 13%pa in a relatively risk free but active way.

Even if not totally Market competent, a diverse allocation to 20 investment trusts will likely well outperform
the PRU.

Start with accessing that unmentioned performance stat in the first sentence above...

[xxd09]

Hi All
I remember about 15 years ago being in something of the same position ie transferring out of two or three With Profits Fund
I was young then so not worried about Guarantees more about the Fund costs
However when anyone of them told me I needed a Financial Adviser I said that it was my money and that I would be responsible for the financial decision of Transfer-they then gave in and let me go ahead.
Seemed to work then-maybe not now
xxd09

[ursaminortaur]

Hi All
I remember about 15 years ago being in something of the same position ie transferring out of two or three With Profits Fund
I was young then so not worried about Guarantees more about the Fund costs
However when anyone of them told me I needed a Financial Adviser I said that it was my money and that I would be responsible for the financial decision of Transfer-they then gave in and let me go ahead.
Seemed to work then-maybe not now
xxd09

Anyone who is invested in a pension product which contains safe-guarded benefits (eg DB pension or with-profits pension with a GAR) which has a transfer value in excess of £30,000 is now legally obliged to obtain advice from an FCA authorised adviser when seeking to transfer the pension.

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/495377/pension-benefits-with-a-guarantee-factsheet-jan-2016.pdf


Section 48 of the Pension Schemes Act 2015 and regulations made under it require pension scheme members who have subsisting rights in respect of safeguarded benefits worth more than £30,000 under the scheme to take appropriate independent advice from an FCA authorised adviser

Unless you provide evidence of having obtained such advice the pension scheme you are hoping to transfer to will not allow the transfer to take place.
If you obtain advice but it is against you going ahead with the transfer you can still legally go ahead with the transfer. However increasing numbers of pension providers have been refusing to accept transfers from such "insistent clients" in recent years. Hence it is worth checking with the pension provider you would be transferring to whether they would accept a transfer if the advice given was negative before spending money on getting that advice.

[Alaric]

Hence it is worth checking with the pension provider you would be transferring to whether they would accept a transfer if the advice given was negative before spending money on getting that advice.

There is also the problem that the advice given may be correct but worthless. For the sake of argument you are 5 years from normal retirement age and request a transfer value. The standard analysis would notionally invest for 5 years and then buy an annuity. That may tell you whether the Transfer Value is good or poor value for money, but next to useless if your intent is to drawdown the value over the next five years, or even invest and take the dividends.