It appears the only way to describe the UK financial services sector is “one large mutual back-scratching rip-off” in which the customer is forced to use the services of an independent financial adviser who is neither needed nor wanted.
My wife has a small pension pot of around £20,000 with Aviva which she wants to access, but it will only allow her to do this if she “does it through an IFA”.
I can understand that people are vulnerable to rip-offs but this is a relatively simple transaction, so how is it that Aviva can insist we waste more money taking unnecessary advice? Can it legally do this? JC, Bakewell, Derbyshire
Under new rules, anyone over the age of 55 with a defined contribution (DC) pension can access all, or some, of the money from their retirement pot.
Only those who want to convert their final salary scheme of more than £30,000 to a DC pension in order to access their money, or who has a pension with certain other “safeguarded benefits” (such as a guaranteed annuity rate) will have to prove they have taken independent financial advice first. This would not apply to your wife since her pension is a DC one and, in any case, the sum is under any advice threshold.
“We would be very interested to see how Aviva has interpreted the recent rule change in a way that would require a consumer with a small pension pot to pay for financial advice before they can access their money,” says a spokesperson for the Financial Ombudsman Service, which invites your wife to get in touch.
Luckily, Aviva suddenly realises it is all a mistake. The way you want to access money is via a new method catchily titled Uncrystallised Funds Pension Lump Sum route (usually pronounced Ufplus) which allows you to do it without converting it to an income drawdown product.
Says a spokesperson: “On review, we accept that we misunderstood this particular request to access funds within her existing pension, which does not require advice.”
Given the new freedoms to cash in pension policies, and the onus on pension companies to ensure customers know what they are doing, yours is likely to be the first among many cases. If you’re contemplating a career change, consider going into independent financial advice – it’s going to be a lucrative future!
If you need help email Anna Tims at your.problems@observer.co.uk or write to Your Problems, The Observer, Kings Place, 90 York Way, London N1 9GU. Include an address and phone number.
