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Age Partnership offers pension cash access for 1.25%

Equity release broker Age Partnership is to offer members of pension schemes access to their cash for a flat fee of 1.25 per cent.

As part of the Government’s pension reforms people aged 55 and over will be able to take their entire private pension pot as cash. However, pension schemes and providers do not have to offer access to the new flexibilities themselves but must allow members to transfer to a scheme that does.

Age Partnership head of retirement strategy James Dean, the former chief executive of Aegon Direct, says the firm is in talks with pension schemes wary of offering freedoms but keen to give members access to an alternative.

He says: “We have developed a low cost, straightforward service for all-comers, irrespective of fund size, that allows them to exercise their new pension freedoms whatever their individual needs may be.”

Members moving their savings through Age Partnership will be charged 1.25 per cent even if they take the full amount as cash. They will then potentially be subject to additional income tax if the withdrawal pushes them into a higher than normal tax band.

Protect and Invest Chartered Financial Planners director Michael Roberts says: “It’s not ideal for people to pay to access their own money – that would be for the scheme to offer the flexibilities themselves – but no-one’s going to offer the service for free.”

Evolve Financial Planning director Jason Witcombe says the lack of a market makes it hard to say whether Age Partnership’s offering is good or poor value.

He says: “1.25 per cent sounds cheap if it’s £20,000, but expensive if you’ve got £500,000. If there’s one provider they can offer what they want, but it should come down as more enter the market.”

The majority of occupational schemes are still undecided about whether to offer member access to the freedoms within the scheme, according to a survey of 80 schemes by actuaries Xafinity.

In addition, just 5 per cent of schemes are planning to let members withdraw pensions as a lump sum, while only 2 per cent will offer full flexibilities including drawdown.

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Comments

There are 6 comments at the moment, we would love to hear your opinion too.

  1. Advised or non-advised ?

  2. ^^^ I strongly suspect non-advised as that was their annuity proposition.

    Unless they are arranging their own scheme, it will be interesting to see which provider(s) would be willing to offer a product simply for those people wanting to ’empty’ their pensions and what their charges will be…. I can’t imagine many will do it for free.

    This is something providers need to wake up to as I don’t want to be doing business with firms who are basically giving admin costs away ‘for free’ to those wanting to strip out their pensions leaving longer term investors to carry that cost.

    I’ve not looked at a triviality in the last 6 months or so but I’m waiting for providers to change the terms of their SHP plans so that the freedoms can’t be used – leaving personal pensions (and therefore opening the door for exit penalties) to be the only way to achieve this.

  3. A non-advised, transactional model based on this % will bring in a healthy profit, even for funds just above triviality. For larger funds, the % figure becomes comparable to advised fees around the traditional benchmark for advice (funds of £80-£100k). If Age Partnership do offer regulated advice (which I believe they do), then I would imagine this would be the benchmark for offering such services.

    Additionally, I hope where the service links with occupational schemes, members are clear on what is and is not being offered. Mentioning no names, the one of largest traditional corporate brokers has been very successful in convincing members (and indeed a number of scheme trustees) that they are an avised service when in fact, no advice has been given…

  4. Will the scheme accept transfers from DB schemes ?

  5. Looks like this kind of outcome is inevitable. Many schemes will not want to provide such pension freedoms from within their own scheme for reasons of cost/lack of profitability. So it seems clear that a very small number of companies such as Age Partnership will offer this facility. Until IT systems catch up with demand and tax deduction requirements so that it is as simple as making a withdrawal from your current account then specialists will be needed to facilitate this kind of freedom. Whether or not it is a good or bad thing is debatable. In some ways it is good for advisers, as it sets the baseline at 1.25% for non-advised transactions so should help those who seek advice understand how our costs may be higher.

  6. Hopefully I can add a little further clarity to Sam’s article and the comments so far. The service we are offering for an initial 1.25% is for a non-advised service. Should a client want or need advice then it is available via our own advisers. Although Sam is spot on with what he has reported, it is a fairly narrow view of our overall service, which is for the full range of pension freedoms from annuity through to drawdown.

    Whilst we can certainly help customers whose own schemes will not allow them access to their own money via the imminent pension freedoms, this is only one aspect. We don’t expect many clients will want to fully en-cash once they understand things like how it is taxed, etc. The service is for those clients who either don’t want, don’t need or choose not to take advice (even though it is available) and want access to a ‘simplified’ version of drawdown at a much lower cost. Therefore we expect most will use it to access an income rather than as an en-cashment vehicle.

    Our starting point for those wanting to en-cash would be to point them back to their original provider as an easier, possibly quicker and cheaper way of accessing their funds. However, we all know that many many schemes are simply not yet geared up to offer that access. We can provide that help, with information and all the administration needed for the transfer.

    To answer the question on DB. We offer DB through advice, however with the news in the last few days on the Government relaxing transfer rules for sub £30,000 funds then watch this space.

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