If you have a pension pot and want to access your money how much should it cost you?
Your Pension Pot
The value of your pension pot should be…the value of your pension pot.
Seems like an odd thing for me to say but some pension pots have exit penalties.
Your pension pot provider might say it is worth £500,000 but when you want to take the benefits, or transfer to another provider they say it is only worth £468,000.
This usually applies only to really old pension pots and the Association of British Insurers have said recently that nearly nine out of ten pots don’t have such exit penalties.
Watch out if yours does.
Facilitation Fees
The market for what is described as Flexi Access Drawdown is slowly evolving with different pension providers moving at different speeds to deliver this option.
There is a good deal of extra administration involved in a provider paying out a series of payments from your pension pot so expect in many instances to pay a fee for the facility.
Somewhere in the order of £150-£250 is probably about the going rate much more than that sounds expensive, much less sounds like a bargain.
Advice Fees
If you don’t want to take advice you don’t have to (unless you have a defined benefits or safeguarded rights plan – for example a guaranteed annuity rate on your pension pot).
If your pension pot provider is telling you that you have to take advice then they are likely to be wrong.
The government has said it is your money and the pension pot provider should be helping you do this not obstructing you.
If they are being obstructive it is usually because they are fearful that you are going to take all your pension pot, spend it and then complain later that the pension pot provider should have stopped you doing something foolish. This is of course rubbish.
You are an adult and you know full well that if you take all of your pension pot and blow it that is your fault not theirs!!
If you do want the protection that impartial, independent professional advice brings, one of the jobs of the adviser is to educate you not to do something really silly with your money.
Expect to pay for these professional services and they are not cheap. But they are valuable and offer you a lot of protection (yes, I know you would expect me to say that!).
Taxation
The cynic in me understands that pensions freedom and choice changes are about raising the tax take.
The government will love you to bits if you take all of your pension pot now and pay a hefty chunk of income tax on that money.
A smarter move might be to take the tax free cash and the rest of your pension pot in stages to keep tax down to the minimum.
So be aware of exit charges, facilitation charges, advice charges and taxation. Do you still want to take your pension pot?
