Issue transfering Pension with GMP

pensionmatt

I have an old pension from am old employer which contains GMP element. I am, along with other old pensions, trying to move these all into 1 single SIPP. I'm experiencing problems getting this last one with the GMP element transfered to my new SIPP provider.

Details are:
The transfer value figures that have been provided to me are as follows:

Total Transfer Value = £8600
Protected Rights included in Transfer value = £3000 (£1400 pre 6 Apr 1997 and £1600 post 5 Apr 1997)

This gives me a:
TOTAL GMP at DOE = £47.84 per year

Due to the GMP element my new SIPP provider has refused to move unless I pay them £495 to go and see their affiliated Financial Adviser. They say its because I need to be sure that I am making the right decision and they need to protect themselves against bad pension advice etc etc

My understanding is that I will still keep all the fund on transfer - so the full £8600 (inc the £3000 protected rights). And the only bit I would be losing is the guarantee of future minumim payment of £47.84 per year. Is that correct ???

Surely it does not make sense to have to pay more than 10 years worth of protected benefit to make them feel comfortable that I am doing the correct thing financially for myself ???

Surely the bad advice is to pay more than 10 years worth of benefit in fees to find out if that benefit is worth keeping ???

I've offered to sign any waivers and write any letters they require but the chap on the phone said "sorry we must be sure that you have received Financial Advice on this".


Can this be right ??? Can anyone help ??? Am I missing something ???

Thanks Matt

dunstonh

Due to the GMP element my new SIPP provider has refused to move unless I pay them £495 to go and see their affiliated Financial Adviser. They say its because I need to be sure that I am making the right decision and they need to protect themselves against bad pension advice etc etc

Which is the correct response. The FSA have stated that they consider occupational pension transfers to start on the basis of being wrong unless proven otherwise. This includes direct offer/direct to provider cases.

A S32 buy out bond is classed as an occupational scheme.

My understanding is that I will still keep all the fund on transfer - so the full £8600 (inc the £3000 protected rights). And the only bit I would be losing is the guarantee of future minumim payment of £47.84 per year. Is that correct ???

Are you sure its a low as that?

Surely it does not make sense to have to pay more than 10 years worth of protected benefit to make them feel comfortable that I am doing the correct thing financially for myself ???

The risk to the firm is that in 5-10 years time you then complain and they dont have a leg to stand on. Or if the FSA visit them and ask them for evidence of the checks made and they cant prove anything they run the risk of a fine that can go into millions.

I've offered to sign any waivers and write any letters they require but the chap on the phone said "sorry we must be sure that you have received Financial Advice on this".


Can this be right ??? Can anyone help ??? Am I missing something ???

It is right. Its a consequence of the FSA not allowing people to make decisions for themselves and taking action against firms that allow people to do it. Mainly brought about by the high number of complaints and the stats which are about 9/10 cases being better off left where they are.

pensionmatt

Yes unfortunately - the GMP element clearly staes on the Transfer Quote I received:
£47.84 per annun


So basically I am stuffed. I have a pot of money - £8600 - that I cannot move to a SIPP - so it will have to stay being badly managed and returning well bellow the market average - which will in the 30yrs until my probable retirment cost me thousands per annun just to protect £47.84

Or I can pay a fortune to a bloke to agree with me and type a letter.

pensionmatt

BTW - thx dunstonh for the reply

magpiecottage

As DunstonH says, are you sure it is just a GMP?

The majority of occupational pensions with a GMP actually have fully defined benefits.

A few have a pot of money that will give you whatever they can buy at the time subject to the GMP. A Section 32 Bond will almost certainly be on this basis too but as you say it is with an occupational pension, in the absence of any other detail I would think it more likely that you had a fully defined benefit.

That has considerable advantages and I would say £495 to be advised was a very reasonable price.

pensionmatt

thx magpiecottage - most useful also - think for now then I'll leave it be where it is and just put some cash into my SIPP myself

might re-evaluate and see and IFA next year - getting financial house in order this year and so far I'm happy with progress

vbm

Matt I would echo others and say, that annual payout seems quite low for the transfer value.

Although it is seldom a good idea to transfer you could of course find a provider that will allow you to conduct an execution only transaction into a Stakeholder pension (this will ensure no exit penalties) and then subsequently transfer this to your SIPP provider.

dunstonh

Although it is seldom a good idea to transfer you could of course find a provider that will allow you to conduct an execution only transaction into a Stakeholder pension (this will ensure no exit penalties) and then subsequently transfer this to your SIPP provider.

Since the FSA issued its warnings on occupational pension transfers being considered as mis-sales unless proven otherwise and that would include execution only and direct to provider cases, you would be hard pressed to find a provider willing to do it.

vbm

dunstonh wrote: »

Since the FSA issued its warnings on occupational pension transfers being considered as mis-sales unless proven otherwise and that would include execution only and direct to provider cases, you would be hard pressed to find a provider willing to do it.

Surely the nature of an execution only transaction would preclude that from being a mis-sale.

I would also add that in my experience most providers (insurance companies, in this context rather than specialist SIPP providers) do accept E/O transactions.

In order to satisfy the FSA definition of EO the instruction must be customer originated, complete and specific, e.g. in a transfer context:

‘I wish to transfer my ABC pension to my pension policy 123456 to SRA 65 and invest it in the UK Equity Index Fund

dunstonh

I would also add that in my experience most providers (insurance companies, in this context rather than specialist SIPP providers) do accept E/O transactions.

Personal pensions and stakeholders yes but occupational schemes, no.

Up to a couple of years ago you could get away with just a warning. However, the FSA issued a warning (as mentioned above) that didnt just cover advice cases and since then providers have nearly all stopped taking them.

In order to satisfy the FSA definition of EO the instruction must be customer originated, complete and specific, e.g. in a transfer context:

‘I wish to transfer my ABC pension to my pension policy 123456 to SRA 65 and invest it in the UK Equity Index Fund

The FSA also say that you cant use execution only as a reason to do a transaction that you believe may be wrong.

vbm

dunstonh wrote: »

Personal pensions and stakeholders yes but occupational schemes, no.

Up to a couple of years ago you could get away with just a warning. However, the FSA issued a warning (as mentioned above) that didnt just cover advice cases and since then providers have nearly all stopped taking them.



The FSA also say that you cant use execution only as a reason to do a transaction that you believe may be wrong.

I am not sure what providers have stopped taking them. Could you name them ? As far as I am aware most insurance companies still take them.

You will see some pure SIPP providers refusing to take them, either because in the case of Suffolk life or Hornbuckle Mitchell because they have complex products that they think require advisor imput, or in the case of HL, that their business model is based on e/o and taking on DB transfers would be a risk to that model.

If an e/o instruction is clear, client originated and satifies the e/o definition it is my experience that an instruction even from a DB arrangement will be accepted by a provider.

Providers have a two stage process. Whereby fistly you will be sent a letter asking you to take advice and outlining the risks asscoaited with pension transfers and usually giving details of IFA promotions. This will not mention any further steps of the process and will seem like a dead end.

If you then respond to this letter, making it clear you want to proceed, you will be given a declaration to sign and paperwork to complete an e/o transaction.

Providers will also accept, an e/o instruction when it is submitted by a directly authoried firm. As long is it is made clear that 'this is an E/O instruction, to be processed under agency number....'

The provider would then record the basis of advice for FSA reporting. Granted if there is a huge amount of business coming through the e/o channel of either a provider of a intermediary, you will probably face questions regarding your processes. But e/o is still a legitimate way of conductiing business regardless of the ceding scheme type.