Fees for a Pension Withdrawal Plan

It's not quite that simple.

Most standard pension plans do not allow you to take withdrawals directly - you need to transfer pension funds to a specialist fund withdrawal (now termed 'unsecured income') pension vehicle - this could be a SIPP or a special Pension Fund Withdrawal contract available from an insurance company.

Of course you will need to pay fees, as these sorts of plans are more time-consuming and costly to administer than a standard annuity. Generally, you pay the fund management AMCs (just like you would under a pension plan or Unit Trust / OEIC), then you pay either an upfront charge (say 2-3% of the transfer value), or an annual cost for the administration.

Most competitive SIPP providers would charge you, say £300 to set-up a SIPP, then probably about £150 p.a. to handle the fund withdrawals.

You either need to do a lot of research, or get some independent advice.

P.S. The income levels are no longer in the 35 - 100% range. They now range from £1 p.a. to 120% of the GAD maximum.

Rgds Neil.

This one looks good value, and considerably cheaper than the rates you quote, although I have no experience of the company:

I was quoting average figures. Obviously some are higher, some are lower.

The Hargreave Lansdown option is an Execution-Only SIPP. Therefore, if you are confident in making your own investment decisions, then this sort of arrangement can provide very good value. Often the additional costs comes from costs of paying for independent advice. Some people need it. Some people don't. Some people know a lot about investment. Most people don't.

A while ago I constructed a calculator at:

I built it because I found it a bit frustrating that there seemed to be no easy way of comparing whether a SIPP was actually better value than a PP, or vice versa.

It can be seen that in many cases, the cost of running a SIPP like the one in question can actually be much (often very much) lower than even a stakeholder pension - assuming that you are not trading investments on a daily basis and racking up lots of stockbroker commissions.

Rgds Neil.

Also, in regard to your first point, most drawdown administrators pay out withdrawal income on a PAYE basis - therefore, they usually deduct

If you are a higher-rate taxpayer, you will have to settle the difference on your next tax return.

Yes

explains the background. Unsecured pension (USP) is what your refer to as a Pension Withdrawal Plan (different providers have different names just to confuse the issue). This continues until you're 75.

If you still don't want to purchase an annuity then you need to join a religious grouping such as the Plymouth Brethren, which will enable you to use an alternatively secured pension (ASP) until death.

It is. Rip off financial providers deliberately make things sound complicated in an attempt to justify their fees. Percentage charges are a good warning sign. The paperwork costs the same whether it's £100,000 or £1,000,000.

Ask them, but as a benchmark; £150.

Out of interest which provider is it ? and when you know, how much do they charge for USP or transfer out (including any Market Value Adjustment - MVA).

Here's the charges for one of the most flexible and best value for money SIPPs on the market and the one that I happen to use. Depending upon what your pension provider charges, it may be worth your while to transfer it to this, although if your providers rips your off on a USP setup fee then they're liable to rip you off on a transfer out as well.

"Establishment & administration

Establishment £100 (£50 if member under age 18) Special Offer - Free until 30/09/2006 Annual administration Free Transfer in from another registered pension scheme £50 Single contribution £15 per single contribution Regular contribution £15 to establish or vary a direct debit Transfer out to another registered pension scheme* £50 Repayment of excess contribution £25 . . . Benefits

Set up unsecured pension (USP), including paying any lump sum benefits £150 Set up alternatively secured pension (ASP) at age 75 £150 Pension payment £10 per instalment USP and ASP Reviews £75 per review Payment of death benefits Time cost basis Annuity purchase £75 Insufficient funds e.g. to pay benefits or charges £25"

There's a good pensions forum here and SIPP forum here . To which Andy Bell, the SIPPdeal managing director contributes .

hth

Daytona

Thanks

Daytona

Even these sort of charges can have significant effect if the fund is below is a minimum threshold.

One fact that was ommitted was the size of the pension funds in question.

In many cases, it is dangerous to completely rule out buying an annuity.

Neil.

Whoops ! I meant to post the GAD link -

I knew that was the case prior to the recent changes, but I had an IFA round here yesterday selling SIPPs to me and my wife. He made no mention whatsoever of this problem at age 75, he said our children could be enrolled in the same scheme and the fund would be passed on to them (as a pension fund) at the second death of myself/wife.

Presumably buying an annuity at 75 would yield a really good bonanza pension given the short life expectancy at that age. Does it really happen? What annual pension could a male, 75 , expect to get by purchasing £200k's worth of annuity?

I fail to see why the Gov. is so hooked on getting people's private pension moeys into annuities come hell or high water.one would almost begin to suspect that their motives are not protecting the interests of the pensioner, first and foremost. ;-)

DG

Not much over 10%. It will be based on the life expectancy of someone who has

I think for a man it's about 10 years, so with a level annuity and a gilt interest rate of 4%, this only gets an annuity at 12.1%. Add in guarantees, RPI increases and/or spouse's pension and it'll be even lower.

Of course they aren't. They are protecting their own interests, they don't want the pensioner to run out of money and so have to claim means tested benefits.

It still is AFAIK

I wouldn't sign up to anything without double checking their recommendations here or on TMF.

What charges does there recommended SIPP have ?

Getting an annuity probably isn't regarded as a problem to many. Did you say that you didn't want an annuity ?

I'm aware of these family schemes but don't know the details.

What specification of annuity ?

They consider the needs of pensioners with the state pension, S2P and the minimum income guarantee. It's just plain common sense for them to lay off a proportion of the risk on to commercial companies. People would only winge and vote out any party that raised taxes sufficiently to take on the role that pension/annuity companies have now.

Governments are bad at business because the talents an MP requires (looking busy whilst doing nothing and arguing) are not the talents required to run businesses efficiently. Therefore it makes sense to restrict them to providing basic minimum services rather than allowing them to attempt and fail to run more grandiose schemes (of which there are numerous examples).

Daytona

Hi,

I just wan't to come back and clarify a point regarding the ASI (Alternatively Secured Income).

I believed before April that anyone could now defer buying an annuity indefinitely. However, the small print that was creeping out started to confuse me, and I checked it out further.

It seems that although the motivation for ASI is to allow certain religious believers to avoid annuity purchase, it is effectively open to anybody who wants it. The flip side is that if you go down this route, the funds used for ASI will be included as part of the members estate and probably subject to IHT - but the remainder can still be passed down, which it would not with an annuity.

However, if anyone believes that I am wrong here, please let me know / point me to the evidence ....

Rgds Neil.