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    • normanna
    • By normanna 15th Sep 17, 2:34 PM
    • 16Posts
    • 11Thanks
    normanna
    Conversation with IFA about DB transfer
    • #1
    • 15th Sep 17, 2:34 PM
    Conversation with IFA about DB transfer 15th Sep 17 at 2:34 PM
    Hi

    We spoke with an IFA today as we'd previously decided to transfer out of our defined benefit schemes. We haven't come to this decision lightly but it feels the best route for us. We have around £900k and £800k values currently.

    The IFA would charge £6.5k each and we would require the funds to be managed by his company (no tie in period) and his initial advice was to invest into a cautious moderate fund with growth rate of between 5.5% and 6.2%. Charges would then be 1.48% ( 0.73 fund charge, 0.25 platform charge and 0.5 his ongoing advice charge). Taking inflation into account the returns would in reality mean around an increase of between 1 to 2% a year.

    He said we could explore other options if we wanted to increase risk. He also said that we would find it difficult to find an IFA to sign off on the transfer if we wanted to self manage a personal pension or SIPP - I'm not too sure what the difference between the two is.

    We had been thinking about self managing as we do manage other investments ourselves and would probably split into cautious and higher risk with cautious funds being the majority. He also said it is worthless to consider tracker funds as they are a waste of time with such a large investment as there would be too much risk.

    Would be good to hear others thoughts on what he's said along with the charges please
Page 1
    • CBX1985
    • By CBX1985 15th Sep 17, 3:06 PM
    • 13 Posts
    • 10 Thanks
    CBX1985
    • #2
    • 15th Sep 17, 3:06 PM
    • #2
    • 15th Sep 17, 3:06 PM
    I'm a financial adviser.

    First of all, the most important thing to consider is why you want to take the money out? What pension are they offering you at Normal retirement age? Just because it seems a large amount, its't a reason to take the money.

    Taking money out of a functioning DB scheme, unless at risk of going into PPF prior to your 65th birthday, is a massively high risk activity.

    Secondly, is that two pensions of 900k and 800k + £1.7m? If so that isn't a bad quote for such a large transfer. Charges are about standard in general for this kind of activity.

    I find it surprising he said index funds are so risky. That is simply not true. They have outperformed managed funds, and you gain on fees as they are lower. Some people prefer managed funds, but that isn't to say indexed ones are naturally riskier - they simply aren't.
    • marco_79
    • By marco_79 15th Sep 17, 3:29 PM
    • 207 Posts
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    marco_79
    • #3
    • 15th Sep 17, 3:29 PM
    • #3
    • 15th Sep 17, 3:29 PM
    I transferred out of a DB scheme recently after much thought, consideration and independent financial advice from a pension specialist. My transfer value was x38 at £840k. I'm 38 and was forced to transfer to a DC scheme leaving my DB deferred for the next 20 years.
    The IFA has taken a 1% fee and my investment will be actively managed, total fees 1.5%.
    I'm now no longer contributing to my own pension due to LTA considerations but putting that money into S&S ISAs again managed.
    Smile and be happy, things can usually get worse!
    • Aegis
    • By Aegis 15th Sep 17, 3:54 PM
    • 4,773 Posts
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    Aegis
    • #4
    • 15th Sep 17, 3:54 PM
    • #4
    • 15th Sep 17, 3:54 PM
    He said we could explore other options if we wanted to increase risk. He also said that we would find it difficult to find an IFA to sign off on the transfer if we wanted to self manage a personal pension or SIPP - I'm not too sure what the difference between the two is.

    We had been thinking about self managing as we do manage other investments ourselves and would probably split into cautious and higher risk with cautious funds being the majority. He also said it is worthless to consider tracker funds as they are a waste of time with such a large investment as there would be too much risk.
    Originally posted by normanna
    Personally there are some warning signs here. Starting with the fact that he won't sign off the transfer recommendation unless you agree to invest with him - I can somewhat understand this position as it makes the compliance easier, but as an independent adviser he should be able to advise on the pension transfer based on whatever investments are going in. If he thought you were falling for a scam, that's one thing, but if you are experienced investors who understand how to put together portfolios that you feel are appropriate, then my view is that you should be able to do this.

    His comments about it being difficult to find an IFA to sign off such a transfer may be valid, but in honesty it just sounds like he wants to retain the business. I doubt he has conducted any sort of market analysis to see how many advisers would be okay with doing so. I have done this for clients before, and although I do ask for evidence that they have been investing, I wouldn't look to block a transfer if the clients didn't want to share their exact strategies with me.

    I think the final warning sign is his attitude to trackers. Calling them "worthless" or "too risky" without some pretty good reasons is outright wrong. Trackers certainly have their place within portfolios, and the more I look at the investment world the more I realise that trackers are a viable strategy. I tend to steer people in drawdown towards at least an active asset allocation with some analysis as to where the income should be drawn from, but even if you wanted to go for a pure passive portfolio the extra risk is still likely offset by the reduction in fees.

    Is your adviser definitely independent?
    I am an Independent Financial Adviser
    Anything I say on the forum is for discussion purposes only and should not be construed as personal financial advice. It is vitally important to do your own research before acting on information gathered from any users on this forum.
    • dunstonh
    • By dunstonh 15th Sep 17, 4:28 PM
    • 89,587 Posts
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    dunstonh
    • #5
    • 15th Sep 17, 4:28 PM
    • #5
    • 15th Sep 17, 4:28 PM
    There are a few recent threads where the discussion has been about advisers only signing off on it if its a positive recommendation.

    These seems to be a position more common with FAs rather than IFAs or IFAs that are appointed representatives rather than directly authorised.

    Given the number of people that seem to think they are using an IFA when its actually an FA, it is worth checking the status of yours.

    I also think the fee of £13,000 is far too high.

    He also said it is worthless to consider tracker funds as they are a waste of time with such a large investment as there would be too much risk.
    There is a place for managed and there is a place for trackers. Anyone that shows bias totally to one method or the other doesnt really understand investing. FAs, rather than IFAs, tend to be biased to their own managed options. So, again, this is pointing towards the adviser being an FA rather than an IFA.

    For reference, we operate three portfolio types to cater for different people (i say we but we buy in the data and analysis although we carry the liability and responsibility). We have active, passive and hybrid. The hybrid is consistently the best performer of the three. Hybrid being a mix of active and passive.
    I am an Independent Financial Adviser (IFA). Comments are for discussion purposes only. They are not financial advice. Different people have different needs and what is right for one person may not be for another. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
    • ams25
    • By ams25 15th Sep 17, 5:37 PM
    • 94 Posts
    • 75 Thanks
    ams25
    • #6
    • 15th Sep 17, 5:37 PM
    • #6
    • 15th Sep 17, 5:37 PM
    Have you considered and discounted transfering out of one of the schemes only and retaining the other? If you have the bulk of you expenses covered by a DB pension + SPs then you can take more risk with the balance. Maybe better than taking a very cautious approach with the combined sum.
    • k6chris
    • By k6chris 15th Sep 17, 6:37 PM
    • 137 Posts
    • 222 Thanks
    k6chris
    • #7
    • 15th Sep 17, 6:37 PM
    • #7
    • 15th Sep 17, 6:37 PM
    Does anyone else find the offer of a "cautious moderate fund with growth rate of between 5.5% and 6.2%" slightly high?? Could just be me, but sounds like a wonderful fund!!
    EatingSoup
    • kidmugsy
    • By kidmugsy 15th Sep 17, 6:37 PM
    • 9,850 Posts
    • 6,641 Thanks
    kidmugsy
    • #8
    • 15th Sep 17, 6:37 PM
    • #8
    • 15th Sep 17, 6:37 PM
    Have you considered and discounted transfering out of one of the schemes only and retaining the other? If you have the bulk of you expenses covered by a DB pension + SPs then you can take more risk with the balance. Maybe better than taking a very cautious approach with the combined sum.
    Originally posted by ams25
    Yes, and it lets the couple transfer the DB scheme that offers the highest transfer value multiple. Or keep the one with the best inflation-protection. Or keep the best funded. Whatever appeals to them. Worth a thought anyhow.
    • greenglide
    • By greenglide 15th Sep 17, 7:56 PM
    • 2,897 Posts
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    greenglide
    • #9
    • 15th Sep 17, 7:56 PM
    • #9
    • 15th Sep 17, 7:56 PM
    ..... or keep the one with the best survivor benefits.

    Or the one where the holder has the higher life expectancy?
    • BLB53
    • By BLB53 15th Sep 17, 9:37 PM
    • 1,155 Posts
    • 935 Thanks
    BLB53
    He also said it is worthless to consider tracker funds as they are a waste of time with such a large investment as there would be too much risk.
    This is rubbish...I would go no further and look around for a more professional IFA.
    If you choose index funds you can never outperform the market.
    If you choose managed funds there's a high probability you will underperform index funds.
    • sandsy
    • By sandsy 15th Sep 17, 10:25 PM
    • 1,218 Posts
    • 715 Thanks
    sandsy
    Hi

    We spoke with an IFA today as we'd previously decided to transfer out of our defined benefit schemes.
    Originally posted by normanna
    Talk about doing it the wrong way around! The whole purpose of taking financial advice is to get a recommendation from the professional on whether it's likely to be the right thing for you to do. To walk in there with a predetermined mindset, and ignore the warning signs you've been given is naive at best.

    You've come away still not understanding the difference between a personal pension and a SIPP. The adviser has indicated that you could increase your risk although the recommended investments aren't consistent with that. Honestly, it sounds like a mis-sale in the making.

    The point of taking advice and getting a personalised recommendation is that you can take an informed decision. I really don't think you're at that point yet.
    • bostonerimus
    • By bostonerimus 16th Sep 17, 1:26 AM
    • 1,121 Posts
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    bostonerimus
    Do not work with this adviser. You are in charge and if they insist on managing the money after the transfer analysis then they are not listening to you....the client. Also whatever the arguments about trackers vs active funds I think everyone will agree that the comments about trackers are just wrong; a tracker portfolio can be as risky or as conservative as you want depending on how it's constructed. Did the IFA do a budget with you so you know how much income you require......that combined with your risk tolerance and whether or not you want to leave a legacy are vital in the planning. And those fees are ridiculous.

    However, you are jumping the gun a bit. Are you sure the DB to DC conversion is the way to go? Can you give us some numbers about your age: when the DB pensions would start; the death benefits; your current ages; the amount of the annual pension, is it index linked? What about doing a transfer with just one of the pensions.....a DB pension, state pensions and a DC pot of say 900k would be a very nice mix in many circumstances. Did your adviser look into that options?
    Last edited by bostonerimus; 16-09-2017 at 1:55 AM.
    Misanthrope in search of similar for mutual loathing
  • jamesd
    He said we could explore other options if we wanted to increase risk. He also said that we would find it difficult to find an IFA to sign off on the transfer if we wanted to self manage a personal pension or SIPP - I'm not too sure what the difference between the two is.... He also said it is worthless to consider tracker funds as they are a waste of time with such a large investment as there would be too much risk.

    Would be good to hear others thoughts on what he's said along with the charges please
    Originally posted by normanna
    He's lying to you. Find someone else who won't treat you like a sucker on charges and what you are or aren't allowed to do.

    The legal requirement to do a transfer from a defined benefit scheme is to have received financial advice. The DB scheme is required by law to ensure you have. You are not required to act according to the advice but this adviser has told you about the rules from two years ago before pension freedoms where that usually was needed. So any adviser who will give you advice for or against the transfer is sufficient and you can transfer even if they say it's a bad idea.

    A SIPP is a self-invested personal pension. Just a personal pension that allows more investment choices. The better known personal pensions for individuals are also SIPPs just because it's a bit more flexible in what you can do. Being able to invest in shares, investment trusts and exchange traded funds is where the difference usually shows up.

    Tracker funds vary in risk, depending on what they are tracking. A bond tracker has bond risk, an equity tracker has equity risk for whatever market or type of investment it's tracking. Managed funds can be managed to reduce or increase risk compared to what their underlying investments are. The adviser may have thought that you would be more inclined to take advice about managed funds than trackers.
    • username12345678
    • By username12345678 16th Sep 17, 1:44 AM
    • 134 Posts
    • 56 Thanks
    username12345678
    IF you decide to go ahead then you could give the IFA a year or two while you take advantage of the information overload that is the internet.

    I was/am in a similar situation and tbf I moved from a mindset before transferring of definitely self-managing to eventually going with the IFA/WM for the first year.

    Will I be ready in another 6 months to manage what for me (and you) is your families future? I intend to be.

    But if i'm not my view is it's better to pay someone a fee to avoid mistakes that could cost you many times that charge.

    Best of luck!
    • bostonerimus
    • By bostonerimus 16th Sep 17, 2:12 AM
    • 1,121 Posts
    • 629 Thanks
    bostonerimus
    IF you decide to go ahead then you could give the IFA a year or two while you take advantage of the information overload that is the internet.

    !
    Originally posted by username12345678
    This could well be a terrible move. Why compromise when we are talking about life savings. Do the due diligence to get it right the first time because getting it wrong could be very expensive, The adviser sound very dubious.
    Misanthrope in search of similar for mutual loathing
    • username12345678
    • By username12345678 16th Sep 17, 3:19 AM
    • 134 Posts
    • 56 Thanks
    username12345678
    This could well be a terrible move. Why compromise when we are talking about life savings. Do the due diligence to get it right the first time because getting it wrong could be very expensive, The adviser sound very dubious.
    Originally posted by bostonerimus

    My reply was in a general sense rather than specifically about the OP's choice of FA/IFA.

    I do get your point though.
    • C_Mababejive
    • By C_Mababejive 16th Sep 17, 10:22 AM
    • 10,295 Posts
    • 9,340 Thanks
    C_Mababejive
    Just a side issue rather than starting yet another pension discussion but if a functioning DB scheme has a rush of transfers out, what measures can they and do they put in place to protect the scheme and those choosing to remain?
    Feudal Britain needs land reform. 70% of the land is "owned" by 1 % of the population and at least 50% is unregistered (inherited by landed gentry). Thats why your slave box costs so much..
    • martin1959
    • By martin1959 16th Sep 17, 11:37 AM
    • 228 Posts
    • 200 Thanks
    martin1959
    I am interested in this subject as going through process currently. Interested to hear thoughts on our proposal....

    Currently have a DB pension that would now give me £1000 pm pension, or £44k and reduced pension of £660 pm. If we went down this route I would take the cash and reduced pension.

    Offered CETV of £290k.

    My plan is to take max tax free cash £75k and use as deposit for Buy to Let flat PP £200k. Each year take make lower tax wdl from pension fund £35k (I earn £5k pa from part time job - and yes I know there will be a £6k tax liability) and pay £30k off of mortgage.

    Flats in our area sell very quickly and are always in demand, and would currently produce £1000pm rent. Once mortgage is cleared after 3-4 years, will own flat outright, producing £300 more per month than DB pension would (after taking lump sum), and should still have £75-100k in pension fund.

    Longer term value of flat will rise, rent will rise (as DB pension payment would have) but MOST importantly, on death, the flat will pass to children, unlike pension which is a lottery as to how long you will live....

    Just interested to hear thoughts......
    20 plus years as a mortgage adviser for Halifax (have now retired), and I have pretty much seen it all....
    • Linton
    • By Linton 16th Sep 17, 11:59 AM
    • 8,495 Posts
    • 8,438 Thanks
    Linton
    I am interested in this subject as going through process currently. Interested to hear thoughts on our proposal....

    Currently have a DB pension that would now give me £1000 pm pension, or £44k and reduced pension of £660 pm. If we went down this route I would take the cash and reduced pension.
    Originally posted by martin1959
    Why?

    Assuming the numbers stay the same until you take your pension, you are giving up £340/month=£4080/year of index linked income for £44K. On a crude calculation ignoring tax and inflation linking you would be worse off after 11 years. Your life expectancy in your mid 60's is around 20 years.



    Offered CETV of £290k.

    My plan is to take max tax free cash £75k and use as deposit for Buy to Let flat PP £200k. Each year take make lower tax wdl from pension fund £35k (I earn £5k pa from part time job - and yes I know there will be a £6k tax liability) and pay £30k off of mortgage.

    Flats in our area sell very quickly and are always in demand, and would currently produce £1000pm rent. Once mortgage is cleared after 3-4 years, will own flat outright, producing £300 more per month than DB pension would (after taking lump sum), and should still have £75-100k in pension fund.

    Longer term value of flat will rise, rent will rise (as DB pension payment would have) but MOST importantly, on death, the flat will pass to children, unlike pension which is a lottery as to how long you will live....

    Just interested to hear thoughts......
    Looks very high risk to me. Your DB pension is guaranteed and index linked no matter what for as long as you live. The possible flat is a single point of failure. What if you have problems evicting a non-paying tenant? What if flat prices dont rise? What if rents dont rise? Have you accounted for costs? What if something catastrophic happens to the flat?
    • kidmugsy
    • By kidmugsy 16th Sep 17, 12:01 PM
    • 9,850 Posts
    • 6,641 Thanks
    kidmugsy
    Currently have a DB pension that would now give me £1000 pm pension, or £44k and reduced pension of £660 pm. If we went down this route I would take the cash and reduced pension.
    Originally posted by martin1959
    Just as well you're not going down that route then.
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