Being forced to seek IFA on pension transfer

dunstonh

xylophone wrote: »

This may well be so but the specifics of the case were very important in this instance - it would be difficult to justify not transferring out!

Whilst the odds of it being bad advice would be low in this case, it requires virtually all the analysis that a normal transfer would have. No shades of grey here. Its black and white. i.e. Is it an occupational pension transfer? yes it is. The admin expectations are ever increasing. That is not a bad thing when it comes to quality but it does mean simple common sense transactions are getting priced out of advice.

bmm78

xylophone wrote: »

This may well be so but the specifics of the case were very important in this instance - it would be difficult to justify not transferring out!

I agree that it is how it should work. However, in the current regulatory environment there isn't an option to fast track "no brainer" style cases like these, at least not in relation to pension transfers. While there may not be much risk from FOS in terms of an individual complaint, the FCA are likely to look at systems, controls, processes etc, where the advice in a given case is secondary to how the firm actually goes about it. A lot of the significant fines dished out to advisory firms are in relation to what led to the advice as much as the advice itself.

The "bigger picture" always has to be considered for this type of business. The majority of IFA firms do not hold permissions for pension transfers, due to the higher qualification requirements and the risks/costs involved. Proposal forms for indemnity cover will ask about the number of occ pension transfers completed and increase the premium accordingly - suitability won't be a consideration. I know of cases where buy-out negotiations have broken down because the parties couldn't agree on pension transfer liabilities.

Just my two cents, but you really need a fee of at least £1,000 before pension transfer advice makes sense for the advisory firm. Of course, there are a lot of transactions where that figure doesn't make sense for the customer. Those looking to transfer DB schemes valued just over the £30k cut-off point are going to struggle to get value next April.

addedvaluebob

£500 for getting a couple of quotes from pension companies that compare the DB scheme and the new DC transfer, doddle. 'All the analysis '- the receiving scheme do it for the adviser, they don't sit down with a piece of paper and a calculator

The only argument against doing pension transfer business is the cost of the PI. If a company or individual cannot be bothered to achieve the 'higher qualifications' then they will by omission not be able to work in this field. If they were gas fitters it used to be called being Corgi registered

Your_Hero

addedvaluebob wrote: »

£500 for getting a couple of quotes from pension companies that compare the DB scheme and the new DC transfer, doddle. 'All the analysis '- the receiving scheme do it for the adviser, they don't sit down with a piece of paper and a calculator

Are you sure about this? This couldn't be any further from the truth.

The only argument against doing pension transfer business is the cost of the PI. If a company or individual cannot be bothered to achieve the 'higher qualifications' then they will by omission not be able to work in this field. If they were gas fitters it used to be called being Corgi registered

If they're not qualified to advise on pension transfers they won't and can't do it.

It's the qualified advisers that we are talking about here and I can assure you it isn't just the cost of PI. The amount of work required to justify a pension transfer is significant and the starting point of the advice is that it is deemed unsuitable advice by the FCA unless you have overwhelming evidence of suitability.

Enterprise_1701C

My OH is of an age where he can withdraws some of his pension. We wanted to do this, but we were told it the rest of it would have to be put into another fund and this would cost us £900.

We decided to wait until next April, withdraw the lot and invest it as we see fit.

If the pension company had said they would charge £50-£100 we would have gone ahead.

dunstonh

00 for getting a couple of quotes from pension companies that compare the DB scheme and the new DC transfer, doddle. 'All the analysis '- the receiving scheme do it for the adviser, they don't sit down with a piece of paper and a calculator

You are living in 1988. You are so far from reality today that nothing in that statement rings true.

Enterprise_1701C wrote: »

My OH is of an age where he can withdraws some of his pension. We wanted to do this, but we were told it the rest of it would have to be put into another fund and this would cost us £900.

We decided to wait until next April, withdraw the lot and invest it as we see fit.

If the pension company had said they would charge £50-£100 we would have gone ahead.

Very different scenario to the topic of this thread.

However, in your case, you are going to go DIY without knowing what is best and having no consumer protection if you make the wrong choice. The adviser on the other hand has to carry out research and due diligence and carry liability for that advice for the rest of their life. If you know what you are doing you could save a fee. However, if you dont then it could be a costly mistake.

There is expectation that in the coming years, an awful lot of people who think they know what they are doing are going to make costly mistakes when it comes to drawing their pension funds in a single go.

atush

Enterprise_1701C wrote: »

My OH is of an age where he can withdraws some of his pension. We wanted to do this, but we were told it the rest of it would have to be put into another fund and this would cost us £900.

We decided to wait until next April, withdraw the lot and invest it as we see fit.

If the pension company had said they would charge £50-£100 we would have gone ahead.

So next year, to avoid paying an IFA now, you are going to pay how much income tax on that pot?

You could be cutting off your nose to spite your face.

If your current pension is a DC pension you should be able to transfer it for less than extra income tax paid to withdraw the lot.

Aegis

addedvaluebob wrote: »

£500 for getting a couple of quotes from pension companies that compare the DB scheme and the new DC transfer, doddle. 'All the analysis '- the receiving scheme do it for the adviser, they don't sit down with a piece of paper and a calculator

Any adviser that simply used an illustration from a receiving scheme to justify a transfer from a ceding DB scheme would be raked over the coals by the Ombudsman if a complaint were ever made in future. Sometimes the analysis itself can be done quickly, by which I mean around an hour of work. After that the report needs to be written, and given the sheer number of possible options associated with pensions, this is almost never a case of simply plugging numbers into a template. Every pension transfer report I write is different, and the regulatory requirements usually mean that the report stretches to 10 pages or more even for relatively simple cases. Usual topics include:

• Background for the client
• Objectives for the pension (not as simple as it seems in most cases)
• Risk profile of the client, including the implications of investing at that risk profile
• Analysis of the existing scheme, including accrual, early retirement factors, late retirement factors, death benefits, commutation options, funding status and protection if the scheme goes bust
• Evaluation of the pensions market (including the mandatory section on why the recommendation isn't a stakeholder pension, despite these being largely obsolete)
• Recommendation of a new pension, including information on how to implement the transfer and details of how the recommendation meets the client objectives. Should also include details of what, if any, benefits will be lost or different under the new scheme
• Recommendation on investments to be held within the new scheme and justification as to how those fit in with the client's risk tolerance and pension objectives
• Charging analysis, including critical yield assessments and an indication on how achievable the critical yield is given the pension investment options and the client's risk profile
• Details of any and all risks involved in implementing the transfer. Market risk, out of market risk, inflation risk, shortfall risk, legislative risk, etc. Not a short section by any means
• Full information on all fees and charges applicable for the advice and any ongoing servicing.
• Cancellation rights, including those for the advice itself

The only argument against doing pension transfer business is the cost of the PI. If a company or individual cannot be bothered to achieve the 'higher qualifications' then they will by omission not be able to work in this field. If they were gas fitters it used to be called being Corgi registered

There's also the compliance cost (a nominated pension transfer specialist is expected to review all transfers for a firm over and above any existing checks) and the cost of any specialist evaluation software needed for recommending pension transfers. CPD, FCA levies, FSCS levies, risk of complaints, etc all also come into play when deciding whether a firm should carry out this sort of business.

In short, it's not as simple as "get a quote, send it to client" and there's a good reason why pension transfers have higher price tags than almost any other type of business.

addedvaluebob

You are living in 1988. You are so far from reality today that nothing in that statement rings true.

Is no-one allowed an opinion? I'm living in the world where I have project managed pension transfer reviews, drawdown mis-selling cases and pension switching over the last 18 months. I am qualified as a pension transfer specialist and whilst the list of things that Aegis quotes looks extensive most of the words will be pre-filled by the report writing software. As for the other costs of running a business these are no different to running any type of business, its just the names of the costs that change

dunstonh

Is no-one allowed an opinion?

Yes. However, an incorrect opinion helps no-one. What you described isnt what happens today. It is closer to what happened in the past but nothing like today.

As for the other costs of running a business these are no different to running any type of business, its just the names of the costs that change

So, why do you think that £500 turnover is the same as £500 take home pay?