The ambiguity in the title is painful. This is not the time to hit the pensions panic button, that time was this time last month and if you are still waiting to get your tax -free cash through Flexi-Access Drawdown, then you are in for a fortnight of squeaky-bum as you wait for the money to transfer to your account – or worse- arrive as a cheque!
And there is “no-time” for those who are starting the process. Having been through it, I would say that if you are in a workplace pension, you have left it too late and you may have to wait on the platform and watch your train pull out
This blog is speculative, as all thinking on budget pension measures are. But this blog is not about what the Chancellor will do, but what ordinary people with their tax-free cash being spoken for , are going through as the panic mounts. What I am writing about is customer service and there is nothing speculative about mine, the quality I have experienced has been poor
Speculation over what will happen
Claer thinks that shaving the tax-free cash sum to £100,000 is unlikely, because it will really annoy NHS Consultants , who apparently are the old greys who do the whistle test. Annoy them and you won’t get them going into work. Fine state of affairs this is.
I think that the Chancellor should not tax savings with national insurance on employer contributions, partly because the public has heard the message “no changes to national insurance “, not the nuanced message about types of national insurance; partly because tax-free cash is a raid on pensions. You simply lose a quarter of your potential pension if you lose the tax-free cash. That most people have no idea how to get a pension from their pension is another thing. We need to sort that out too, but Reeves should start by creating a culture of pension savings when “pension” stands for lifetime income, not a Lamborghini.
Let’s face it, if you have a tax-free cash sum of more than £100,000, you have a pot of more than £400,000 and you are more likely to be buying Lambos than Mondeos.
I couldn’t afford not to pay off my mortgage which is interest only and runs out in two years. I simply don’t have a plan B, I had to take my cash or risk not being able to extend the loan. I took my money and hated having to do it (I didn’t take my cash from my occupational scheme as I want pension not cash). This is my story.
Quality of Service
Of the holy trinity of Value For Money measures which include performance and charges, the third “quality of service” is the least definable. Like background music, service is best when it isn’t noticed and becomes an issue when it is front of mind.
I received a couple of hundred thousand pounds from Legal & General , it hit my back account after five weeks of sending in forms and fretting about things getting lost in the post. The money arrived at 8.30 am and I got a text alert. By 9 am I had paid off my mortgage. That is the quality of service I get from First Direct and I get it from Starling Bank too. I get text alerts on unusual transactions , I can replace my bank card in my apple wallet with a phone call. But if I want to take money from my pension- it takes five weeks.
And I’m one of the lucky ones. My other pension pot is with Nest. To get my tax-free cash from Nest I have to transfer my pension to a SIPP provider that can give me my tax-free cash without me cashing in my pension. With Nest there is no such option – there is no flexi-access drawdown despite it being ten years since pension freedom was announced. So unless you want to enter into the Nest Wallet arrangement, you are into T+ a few weeks.
I wrote to my friend Richard Hardy at Nest – there is no nicer man. He wrote back and said that flexi-access was on its way but… I had also got a whole load of requirements I had to meet to transfer my money which assumed I was transferring to an occupational pension scheme. I wasn’t – well not yet. Transferring a workplace pension to a SIPP requires a degree in financial planning and a CF16/17 compliance qualification – or perhaps a Bee- Keeper.
My money is still with Nest – trapped by bureaucracy – it is too late to move it, my attempt at forestalling never got off the ground. I suspect I am not the only one grinding my teeth.
What my experience of wanting to take control of my personal and workplace pension is that despite me taking all the risk of making the wrong decision, making any decision is pretty tough.
There could be hundreds of thousands of people in SIPPs, workplace DC plans and in DB pensions who will have thought about but failed to realise their pension plans before October 30th and they will all be waiting nervously for the Chancellor’s pronouncement.
If there is an overnight reduction in tax-free cash or some equally draconian forestalling measure, then it won’t just by Rachel Reeves who will be feeling the heat,
Penson companies that operate on antique systems with “lipstick on the pig” front ends, are getting found out and I expect many will fall short on the quality of service metric for value for money as a result. Chronic lack of investment in the member experience and in particular “at retirement decumulation” options, is catching up with them. The 700,000 or so of us who are reaching retirement and hitting five week + delays in drawing down cash are realising that the fees paid on our mature pots are not providing value for money. I paid L&G over £3,000 last year and have been paying them a similar amounts for the last decade. Nest took nearly 2% of my money on the way in and charge me a third of a percent on my money but the service I get from them at retirement is truly awful.
The VFM reports from L&G’s IGC and Nest’s Chair of Trustee tell me I am getting value for money, but I disagree. I know what good quality of service is and I’m not getting it. October 30th could be the day or reckoning for our pension behemoths and if they are found wanting, they can’t say they weren’t warned.