What is the cost of £3,000 to just withdraw £9,000 tax free from my pension?

When my pot was full last month, it was inconvenient to explain – but luckily I had tax-free savings in my pension prepared for this situation.

I have £120,000 in a Personal Income Pension (Sipp) with the AJ Bell investment foundation, which I have built up over 20 years of prudent savings.

Since I am over 55, the rules allow me to withdraw large sums of money tax free pension fund as a single currency – or smaller currencies as I choose.

I told AJ Bell that I wanted to take £9,000. I was expecting a payment of around £100 and the money would appear in my current linked account within a couple of days. How wrong I was.

At first, I was told that this issue would be dealt with quickly and labeled as ‘priority’. But after the hassle of 17 email exchanges in 11 days, I was told the bad news.

Before he paid my £9,000, he told me to prepare and pay for a legal document. I looked at how much it cost to get it. The answer? £3,000 minimum.

AJ Bell insists I pay £3,000 to access £9,000 of my own money.

This seems to be the reason I have two small trading stocks in my Sipp. This is a great shop and T-shirt shop in Cardiff that I bought through my Sipp ten years ago to give me a little money. The salary is currently worth around £200,000 to me at £20,000 a year.

The beauty of holding them in a Sipp is that the income is tax-free. When I take it for my own use it is subject to income tax.

They have found it a good investment. Now they are preventing me from accessing the tax-free income I so desperately need.

The pension rules, I was told, made sure I had to pay for the new valuations of both houses before I could get the money. This, I was led to believe, was standard practice.

Valuations cost as little as £3,000 due to the complexity of the housing law.

So, I said to AJ Bell, it’s like a bank saying to a customer, ‘You have £20,000 in your current account but they won’t give you a penny until you pay it back. £1,500 for your own home survey’.

But this argument did not cut the ice. Rules are rules. It’s the ‘it says no software’ argument that many companies keep coming back to.

When you withdraw tax-free money from a pension, the first 25 per cent is tax-free, and the rest may attract tax. Your pension provider needs to know how much your pot is worth in total to be able to calculate the tax-free amount.

Setting the value of a pension pot is easy when there are stocks, shares and bonds. But it’s more difficult when commercial items come in that need to be paid for.

However, my Sipp contains £60,000 in easily accessible cash in addition to the two stock items. Indeed, if he takes £9,000 of tax-free income, AJ Bell can set aside another £27,000 of taxable income (three times the tax-free income) without receiving when the Sipp is paid in full.

So I complained. Thirty years of presenting television shows for the BBC and ITV about poor and expensive services means I don’t take this sort of thing lying down.

I did what every customer should do and I didn’t take no for an answer. I told AJ Bell that I would complain to the Pensions Ombudsman – I had to wait for the company to look into my complaint first, however – and I wrote this article.

Two days later, I received an email saying the position had changed. The administrators looked at my case and decided that I did not need expensive research. AJ Bell said: ‘Initially, the costs were requested to prepare accurate calculations of your tax-free income and to comply with HMRC rules.’

However, as I have just paid £30,000 into my Sipp, AJ Bell will be able to ‘adjust its recorded value and avoid the need for valuations’. The e-mail continued: ‘We do not do this as it may adversely affect the amount of tax-free income you receive. So, we went out of our way because you don’t want to get the value of the property.’

This kind of burdensome regulation that governs commercial property needs to be changed. Tens of thousands of pensioners own stocks through their Sipps.

Currently, the strictest reading of the rules requires operators to tell consumers that they must pay for expensive surveys every time they want tax-free cash.

This is too much of a warning in my view, and it is unnecessary.

I’m changing my Sipp provider – because the fees have jumped

You will not be surprised to learn that I plan to leave AJ Bell. But I heed the advice of Jenny Ross, of Which? Pensions, says: ‘If you want to transfer your Sipp to another provider, the new provider will handle the transfer for you. But keep in mind that some providers charge an exit fee if you move anywhere. But you may think that this is too expensive.’

This experience with AJ Bell was the last straw. Over the past five years, I have looked in awe at his rock prices.

In that time, my annual wages have risen from just £1,600 to almost £2,500 – a 60 per cent increase.

That sum includes around £1,500 in ‘property management costs’ as AJ Bell collects the rent for two small shops owned by my Sipp in Cardiff, £340 in quarterly ‘management costs’ ‘, £320 in ‘off panel administration fees’ (this is what I paid for the opportunity to convince AJ Bell to invest in a monitoring fund), £180 in ‘withdrawal fees’ money’ and £130 for additional one-off payments.

IPM, a Hertfordshire-based Sipp manager, charges £800 a year for the same services – a saving of more than 60 per cent.

This includes the asset management fees that IPM requires before allowing me to access tax-free income. Other companies offering similar services include Investec and Dentons.

By the way, it seems I’m not the only one who’s worried about the legal burden of holding commercial property in Sipps.

Even AJ Bell himself said he would not be interested in managing new retail assets.

The reason, according to Nick Reeve, editor of Pensions Expert, is that the rules are more complicated, expensive and time-consuming than those designed to prevent fraud.

He says: ‘This is because some bad guys can hit commercial property to protect people.’

At the moment, I’m moving my Sipp as soon as I can. Don’t ask who shot it, AJ Bell: it’s yours.