Pension transfer rip off

martinr970 · 16 February 2018 at 1:51PM

Hi everyone, and firstly thanks very much for allowing me to join.

I have a deferred final salary pension that I want to switch into a SIPP. I'm 53 now and financially secure, and have self managed my own SIPP for years. I am very happy to manage my own pension.

The cost of transferring a lump sum pension is 3% of fund value and in my case that's £3.5k!!! I think it should be more like £500 for someone like me who understands the risks and just wants to invest it my way. The deferred pension company Telent insist that I take advice so they are protected, which I can understand for all those people who don't understand the risks.

My question is can someone recommend a regulated independent adviser who isn't so greedy?
Thanks in advance,
Martin.

Drp8713 · 16 February 2018 at 2:10PM

The problem is, there are people capable of making these sort of decisions without advice (of which you may be one), and there are people who think they are capable but actually are not. If they just took every one at their word half of them would lose the lot.

That is why there is a requirement to get advice if the transfer is over £30k.

You see people on here all the time who say they are capable of managing their money, before going on say they want to withdraw large amounts in one go paying 40% tax to pay off their 2% mortgage, or take their 25% tax free cash to put in a savings account that pays less than inflation.

pip895 · 16 February 2018 at 2:19PM

There are places that charge lower - I am paying just over 1% but I doubt you will get anyone to do it for under £2500 these days. Its a hot topic at the moment and there is more work in it than you imagine.

In my case the advisors found discrepancies in the documentation sent out by the pension company and we ended up getting a revised transfer value which paid for the advice several times over!

Dorian1958 · 16 February 2018 at 2:28PM

I can understand you being annoyed if you are faced with 3%, I paid 1.25% - you need to shop around. But your particular pot size may mean that the amount is not worth a lot of IFA's time/trouble (and liability) so you get quoted a larger %. Ask if the IFA is a Pension Transfer Specialist, then check on the FCA website that they are accredited.

Aegis · 16 February 2018 at 2:52PM

martinr970 wrote: »

Hi everyone, and firstly thanks very much for allowing me to join.

I have a deferred final salary pension that I want to switch into a SIPP. I'm 53 now and financially secure, and have self managed my own SIPP for years. I am very happy to manage my own pension.

The cost of transferring a lump sum pension is 3% of fund value and in my case that's £3.5k!!! I think it should be more like £500 for someone like me who understands the risks and just wants to invest it my way. The deferred pension company Telent insist that I take advice so they are protected, which I can understand for all those people who don't understand the risks.

My question is can someone recommend a regulated independent adviser who isn't so greedy?
Thanks in advance,
Martin.

£500? You must be joking. Even when someone thinks they want to transfer at outset, all of the advice process still needs to be followed, starting with the assumption that the transfer is in the wrong.

Final salary transfers are about the most complex bits of work we advisers ever undertake - why on earth would we do them for £500 when they take ages, require very specialised knowledge and could come back as a complaint in future even if there's nothing wrong with what we've done because of how complaint companies tend to operate. Being taken to the Ombudsman costs more than £500 in itself even if the complaint is entirely unjustified, so charging £500 would be monumentally stupid of the adviser.

You're going to need to adjust your view on what is reasonable, because no adviser worth paying for is going to take you on for £500 or a final salary transfer.

HappyHarry · 16 February 2018 at 4:00PM

I think it should be more like £500 for someone like me who understands the risks and just wants to invest it my way.

This is very high risk business for an adviser.

The adviser needs to demonstrate either;
1. why the transfer is in your best interest, and document it as such or
2. demonstrate that it's not in your best interest and document it as such with very clear warnings.

To do either, the adviser will need to spend a lot of hours of work on this, it's not something they could cobble together in one afternoon.

e.g. the adviser will need to know your full circumstances and objectives, including an analysis of where you intend to invest the funds. The adviser needs to complete a full analysis of your existing DB pension, including revaluation rates, increases in payment rates, death benefits pre and post retirement age and a host of other features of the scheme. The adviser then needs to provide written advice, which the adviser will be liable for forever. The adviser will need to pay their PI insurers for undertaking such work, in addition to the usual FCA costs and FSCS levies. The adviser will need to pay for a TVAS report, as well as all the other costs associated with running any business.

The adviser will also look to make some profit. After all, the adviser wants paying too. the adviser will be a pension transfer specialist holding advanced qualifications, so will want paying more than most advisers.

With all due respect, your idea of paying £500 for this level of work and risk is wishful thinking. Personally, I think £2,500 is very cheap.

Malthusian · 16 February 2018 at 4:18PM

martinr970 wrote: »

The cost of transferring a lump sum pension is 3% of fund value and in my case that's £3.5k!!! I think it should be more like £500 for someone like me who understands the risks and just wants to invest it my way.

The main component of the £3,500 is risk and liability. You are a higher risk than average, because people who think they know what they are doing are more likely to lose all their money and then complain than people who are happy to go along with the adviser's recommendation to invest in a broadly diversified portfolio and leave it there without trying to time the market.

Also, the adviser has to research the way you want to invest it and ensure that it is suitable and appropriate. Advice along the lines of "I advise you to transfer so that you can invest your way" is an automatic mis-sale. If the adviser hasn't researched what the pension is going in to, they can't possibly know whether it's a good idea to transfer. It's like advising someone to jump off a cliff without knowing what's at the bottom.

The cost of researching your chosen investments and checking whether they are suitable has to be added to the price. With a client who just wanted to take their advice and invest in the IFA's model portfolio, a large part of the research would already have been done.

So in summary, it costs the IFA more to give you advice because you believe you understand the risks, not less.

If you're able to use your self-management skills to generate sufficient extra growth year-on-year to beat the defined benefit pension, surely a 3% upfront fee is inconsequential?

dunstonh · 16 February 2018 at 4:45PM

The cost of transferring a lump sum pension is 3% of fund value and in my case that's £3.5k!!! I think it should be more like £500 for someone like me who understands the risks and just wants to invest it my way. The deferred pension company Telent insist that I take advice so they are protected, which I can understand for all those people who don't understand the risks.

1 - there is no 3% of fund value. That is just the price one particular firm has quoted you. Other firms will be different.
2 - £500 - are you having a laugh. You forgot the smiley to indicate you were joking.
3 - £2500 is actually quite reasonable.

You say you understand risks. If that was the case, you would not consider £500 a sensible figure.

Do you honestly believe £500 is sensible for a transaction that carries a lifetime of liability. An annual cost to the advice firm forever. A transaction that the FCA consider missold unless proven otherwise. A transaction that historically considered to be wrong 4 times out of 5. The fact you can still access the FOS 10-20-30-40 years from now and tell loads of lies in your complaint and the FOS will consider them.

DIY investors are actually a higher risk to an advisory firm. The advice firm, when they are doing it, can keep the risks under control. DIY investors are free to muck it up but can still complain that the advice firm let them get into that situation. (FOS upheld a complaint on that basis last year).

Pension transfer rip off

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