Do I have to pay an advisor 3% to transfer a pot of £49,000 to another pension provider?

Question

I am looking to re-invest a stand-alone pension (originally called an AVC pension: Additional Voluntary Contributions pension) so that I can take 25% as a tax-free lump sum and retain flexibility in how I use the fund to buy a pension (or take the remainder in cash if government plans go ahead, as I hope). My current provider will not let me withdraw any money before retirement and then only offers an annuity which appears to be very poor value. The fund is a little over £49,000 after deducting a small penalty for early transfer from my current provider. I am 59 and I intend to retire when I am a little over 60, in June 2015, though my current scheme has a retirement date of 2nd April 2015. The period between now and then is short and I prefer to take the risk of choosing my own pension provider. But it seems that most funds require me to use an independent financial advisor, and the ones I've found so far will charge 3% of my fund as well as hourly rates to give me advice (not really needed) and effect the transfer (which I do need). I think that paying over £1,500 to simply transfer my small pension to another scheme is very expensive. But do I have a choice? And if I do, how do I go it alone?

Answer 1

No, I do not. The advice is to take advice :-) but it is not required. Several "low cost" SIPPs allow an "Execution Only" transfer from some pensions (generally not occupational or defined benefits schemes [where transfers are generally a bad idea anyway] but FAVCs such as mine are ok). Best Invest is one such, and the fees are indeed relatively low. As far as anyone knows, the government's plans for changes to rules on using pension funds would still apply even once I've transferred my pension pot and begun to withdraw funds (provided I don't commit myself to an annuity or other irrevocable investment).

I am not a financial adviser, nor employed or otherwise connected with Best Invest, and I'm not endorsing their SIPP schemes, just giving them as an example of what can be done.

[Added after I carried out my plan] I found the process very straightforward; I needed to apply for a pension fund with my new provider and fill in a transfer form, which set up the scheme and transferred the funds with no expense required. Once the money arrived in my pension account I filled in another form to take the lump sum and set up regular withdrawals from the fund. I had my lump sum within a couple of months of initiating the transfer. I'm very happy I did not take independent advice because it would have been very poor value for money. During my researches I was approached eagerly by one firm promising to get me my money quick and claiming to be an independent financial advisor. Luckily I mistrusted the service they offered.