Defined Benefit Transfer Costs

sandsy · 31 January 2018 at 9:13AM

freddymoney wrote: »

Most IFA's I speak to combine the advice and the transfer cost together.
There is nothing on the FCA website about transfers being mandatory IFA task. J

You misunderstand the process.

Most advisers give advice on the transfer and advice on where to invest the money afterwards.

The government made advice on the transfer compulsory. This is where most of the risk is for an adviser. They cannot just transfer it. They have to analyse it and say whether the DB scheme will give you better outcomes for your circumstances or if the D.C. scheme will. There is no get out clause from doing this bit whatsoever.

Advice on where the money is invested afterwards isn’t compulsory. So it is possible for you to say which scheme you want to go to and state you want it all invested in fixed interest deposits.

BUT, an adviser can’t simply ignore that as it affects the analysis of whether a D.C. scheme will be better for your personal circumstances.

And quite frankly, if sticking it all in fixed interest deposits is your intention, it’s highly unlikely they’ll be able to recommend a transfer for you due to the risks of your money losing value relative to inflation. Whereas staying in the DB scheme normally has inflation proofing built in for most people.

HappyHarry · 31 January 2018 at 9:35AM

freddymoney wrote: »

1, scheme needs to be analyzed
2, to see what benefits it offers,
3, how well funded it is, whether any parts of the scheme are subject to statutory protections

Exactly my point, how many times do you do this for the same fund, if you have done it once you don't need to do it again for every investor.

Each and every DB scheme is different. Revaluation in deferment, increases once in payment, death benefits pre and post retirement are different for every scheme. Some schemes have weird and wonderful benefits and restrictions. Looking into all the details of a scheme, and understanding how it affects one particular client, is a time consuming task.

However, I agree that if you can find an IFA who specialises in one scheme, and knows all the quirks of it, (and the differences between the various sections of the scheme, because they all have different rules for different sections), then the IFA will need to do less work in analysing the scheme.

However, the risk of providing transfer advice remains. Never mind how well an IFA knows a scheme, they still have to give advice, and the risk on that advice lasts a lifetime. The cost of the transfer advice is only partly to do with the hours spent on the work.

Asking an IFA to take on that risk is going to cost you money.

Whilst you could expect an IFA to charge you an hourly rate to set up an ISA or General Investment Account, I doubt you will find any IFAs that will charge you on an hourly basis for DB transfer work. This is because the risk to the IFA is so great, and IFAs will need to charge a premium to make it worth their while taking on that risk.

mgdavid · 31 January 2018 at 2:19PM

freddymoney wrote: »

1, scheme needs to be analyzed
2, to see what benefits it offers,
3, how well funded it is, whether any parts of the scheme are subject to statutory protections

Exactly my point, how many times do you do this for the same fund, if you have done it once you don't need to do it again for every investor.

If an IFA did one a week, how often do you think they would find the customer was in the same pension [STRIKE]fund[/STRIKE] scheme as a past customer?
There are c. 6000 active ones, and a much larger number of closed ones.

Aegis · 31 January 2018 at 5:31PM

mgdavid wrote: »

If an IFA did one a week, how often do you think they would find the customer was in the same pension [STRIKE]fund[/STRIKE] scheme as a past customer?
There are c. 6000 active ones, and a much larger number of closed ones.

And the ones that are giving advice on the same scheme all the time are either hard to find because they're so specialised or Active Wealth types that get in trouble with the FCA over their commoditisation of DB work.

northeastcanuck · 31 January 2018 at 6:18PM

freddymoney wrote: »

However, it is my contention that IFA's are doing this work (research) frequently and therefore they accumulate knowledge about the potential funds for the investor and therefore the workload should be less and so should the fees. I spoke to one IFA who has already recommended a fund and they are already familiar with my circumstances as they did a review 2 years ago. They still want to charge me £4000.00 to do the transfer paperwork. J

Generally with any professional you are paying for their knowledge, not how “hard” they have to work. The value is in the knowledge. If you do not place any value on knowledge then i am not surprised you are struggling to get an IFA who is willing to do it on the cheap just so you can manage it yourself. Good luck.

freddymoney · 31 January 2018 at 8:13PM

Maybe I should be much clearer about my circumstances. I have a property portfolio worth 750K which gives me 40K a year revenue, I own personal property worth about the same. I have no mortgages and no debts. I have two other personal pensions with a current value of £350K, this will be worth £500K when I reach my planned retirement date. In summary, I have assets of about £2 million. I don't need to worry if I have enough to see me the next 20 years, my concern is how I am going to spend it. All I want is my DB pension moving from one place to another at a fair price so I can then decide what I want to do with it. I don't care if it makes nothing while i make my mind up. Forecasts and growth etc don't interest me.

JoeCrystal · 31 January 2018 at 8:38PM

freddymoney wrote: »

Maybe I should be much clearer about my circumstances. I have a property portfolio worth 750K which gives me 40K a year revenue, I own personal property worth about the same. I have no mortgages and no debts. I have two other personal pensions with a current value of £350K, this will be worth £500K when I reach my planned retirement date. In summary, I have assets of about £2 million. I don't need to worry if I have enough to see me the next 20 years, my concern is how I am going to spend it. All I want is my DB pension moving from one place to another at a fair price so I can then decide what I want to do with it. I don't care if it makes nothing while i make my mind up. Forecasts and growth etc don't interest me.

Except whatever the fees IFA quotes are a fair price and you should have no trouble paying it hmm? You highlighted that your IFA want to charge you 3% of the pot. Good, pay that fees then.

I would say that someone with your assets is certainly in within top 2% of the population on the whole. The requirements is there to protect the majority of the people who are lucky enough to have a DB pension scheme and I see that as a good thing.

freddymoney · 31 January 2018 at 8:45PM

I am where I am because I have worked very hard all my life since I was 15 years old and avoided paying out for things which I considered to be not good value for money. Just because I have it does not mean I should waste it.

JoeCrystal · 31 January 2018 at 8:47PM

freddymoney wrote: »

I am where I am because I have worked very hard all my life since I was 15 years old and avoided paying out for things which I considered to be not good value for money. Just because I have it does not mean I should waste it.

Then in this case, don't bother. You win in either case. You either pay a fee and get a pension pot that will be in your control or an guaranteed lifetime income once you reach normal retirement age until you die. So what is the fuss? Few thousand pounds isn't really that big of a deal to be honest compared to several hundred thousand pounds.

Oldskool90 · 31 January 2018 at 8:59PM

I!!!8217;m going through the same process and also finding the same problems in that IFA!!!8217;s are asking what I perceive as silly money to advise and signed a form that confirms I!!!8217;ve sought advice. £7.5K - £9.5K so far on a £249K pot. Most are also insisting working on an ongoing basis which defeats the whole purpose of the transfer to a SIPP which is to cut out all the middlemen with their fingers in the pie. My SIPP has exceeded all other funds I!!!8217;ve ever had by a long stretch by simply buying blue chip companies.
My reasons for transferring are simple in addition to that above
!!!8226; SIPP treatment on death appears far superior to my DB scheme in that it can be passed on indefinitely (yes there is tax as you might expect, which can be managed, but it doesn!!!8217;t disappear)
!!!8226; The annual GMP if projected forward doesn!!!8217;t appear to be able to complete with even a modest return on a SIPP
It appears IFA!!!8217;s would have you believe there is weeks of work involved here, for what should by now be an essentially routine process. I!!!8217;m being quoted 4 !!!8211; 6 weeks work to !!!8220;research!!!8221; amongst other claims of how much work is involved.
I!!!8217;ve also been told that !!!8220;When advisers sign these documents to confirm that the member has received advice, they are confirming that the transfer is suitable for the member.!!!8221; This particular IFA retracted that when I directed him to the FCA site where it discusses insistent clients.
Basically as far as I can tell the FCA / government by trying to protect consumers from unscrupulous IFA!!!8217;s giving bad advice have now handed IFA!!!8217;s a cash cow and they know it. Ironic really and if it wasn!!!8217;t so costly I would laugh!!!8230;
Now can anybody point me towards an IFA who they have had experience of dealing with this type of transfer / advice and didn!!!8217;t charge thousands please?
thanks

Defined Benefit Transfer Costs

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