Moving from DB scheme

pensionsnewbie

There is an option, but I am not sure if this is in addition to, or would lead to a reduced pension - good point thank you, will go and read the small print and report back

sandsy

Just to double check - is the estimated value £15k now or was it £15k when you left the company in 2000?

Your_Hero

However he has recommended a fund, which if you take account of his 2% set up fee £8k, plus a monthly management fee of.75% plus fund managers fees we are looking at 4% in the first year just in fees alone.

Has the adviser actually given you advice already or is this the preliminary discussion of fees for the case?

In other words, have you had a TVAS report completed with a full financial report detailing his recommendations and you know exactly what the critical yield required is? I suspect this may not be the case at all.

pensionsnewbie wrote: »

I am looking for a low risk, low cost DC pension plan - thoughts please. Also which companies will accept a transfer from a DB to DC plan.

Thanks in advance

Let's forget about the fees for a second, but you want a "low risk, low cost DC pension plan". From the rest of your post and by your own admission, you are not a sophisticated investor and probably not enough to consider transferring out of a DB (guaranteed benefits) scheme into a risk-based scheme.

The reason why the fees are high is quite simply because this is a high-risk advice area. We have recently seen a complaint upheld by FOS for a DB transfer that dated back to 1993. Compensation on a case 21 years ago. (http://www.moneymarketing.co.uk/news-and-analysis/pensions/lg-ordered-to-compensate-investors-over-unsuitable-pension-transfer-advice/2015943.article). Amongst other reasons, the ombudsman argued that "Mrs A’s very cautious attitude to risk should never have seen her transferred into a personal pension". The cost to put this right would be significant. Obviously the advice processes today are a lot tighter, but nothing will stop the FOS from ordering compensation when the goal posts change in the future. Even if an adviser followed the guidelines set by the FCA, the FOS will usually favour the client in these cases.

The starting point for pension transfers are that they are unsuitable unless it can be proven without any doubt that it is in your best interests. From what I can see, you really only have 2 reasons to support your case for a transfer out: 1) You have no spouse, so potentially better death benefits. 2) Accessing the LS earlier. These are quite weak reasons and financially you will almost certainly be worse off. This is a very typical case we will see a lot more of post April 2015. I would not be surprised if in 10-15 years' time a similar case like this will see a complaint made against the provider (if non-advised) or the adviser when your money runs out or when your pension loses a lot of money because of poor performance.

I certainly would not touch this case even if you wanted to pay me £8,000 in fees.

kidmugsy

In light of Your Hero's comment, why not try to find another way to achieve your ends? Couldn't you increase your mortgage to release money for the house repairs? Could you look after your daughter's financial prospects by taking out life insurance?

Come to think of it, have you checked whether you'd be giving up any life insurance by leaving the DB scheme?

reeves100

Hi Pensionsnewbie!

You have set out some obvious reasons why you would wish to access your pensions and the new rules/proposals should certainly be investigated in your situation. I would suggest that you consider the following:

1. The work involved in pension transfers, particularly from defined benefit/final salary schemes should be carried out by an expert
2. There are many variables to consider and this level of advice will obviously come at a cost
3. It may not actually be advisable and there may be other options for you to consider
4. You could negotiate a fixed fee as opposed to a percentage
5. There are a huge number of options for investments and you should seek independent financial advice on this. This is a significant consideration as your money is likely to remain invested for some time.
6. It is such a lot of money it would take a long time to draw down and may be needed to provide you with income right through your retirement it will be worth having an ongoing advice relationship in place
7. As the arrangement is likely to be in place in the longer term any initial fees will have a reduced impact as time goes on and can be recovered by investment growth. Adviser should provide illustrations to demonstrate this clearly for you.

I do hope this help - please do come back to me if you want any further questions answered

pensionsnewbie

Thank you everyone for your continuing advice and guidance.

I went on my pensions providers website to try and find a few more answers and, after the very strong steer and sound advice you have all given me about not moving, I found this:


'Did you know you may be able to transfer your final salary benefits into a different pension arrangement? This would give you the opportunity to restructure your pension if you do not wish to have an automatic spouse's pension or guarantee period. You can request an online quotation here'. :eek:

I have asked the pension provider whether I can take my TFLS at age 55yrs and leave the rest of my pension in tact as I think this is the best option for now.

Linton

Your_Hero wrote: »

The starting point for pension transfers are that they are unsuitable unless it can be proven without any doubt that it is in your best interests. From what I can see, you really only have 2 reasons to support your case for a transfer out: 1) You have no spouse, so potentially better death benefits. 2) Accessing the LS earlier. These are quite weak reasons and financially you will almost certainly be worse off. This is a very typical case we will see a lot more of post April 2015. I would not be surprised if in 10-15 years' time a similar case like this will see a complaint made against the provider (if non-advised) or the adviser when your money runs out or when your pension loses a lot of money because of poor performance.

I certainly would not touch this case even if you wanted to pay me £8,000 in fees.

Would the apparent and unusual generosity of the transfer value being broadly equivalent to the commercial cost of an equivalent annuity affect your assessment? Surely the advisor could propose for example that the OP transfers, takes the TFLS and uses the rest to buy an index linked annuity at no greater risk than staying with the DB pension. Or taking into consideration the OPs other £15K pension the choice of a fixed rate annuity may be justifiable.

Your_Hero

Linton wrote: »

Would the apparent and unusual generosity of the transfer value being broadly equivalent to the commercial cost of an equivalent annuity affect your assessment?

Indeed, a higher transfer value offered would mean that, with all things being equal, a lower critical yield is required to broadly match the level of pension in the DB scheme. However, even a lower critical yield would still mean that the client needs to take some degree of risk, usually still fairly high, so you would need to assess it with their ATR, capacity for loss, and the critical yield on the TVAS report.

Surely the advisor could propose for example that the OP transfers, takes the TFLS and uses the rest to buy an index linked annuity at no greater risk than staying with the DB pension.

The trouble is there's investment risk to begin with when you transfer out and until you secure your benefits. For OP, this is from age 55 to the NRA, 60. Depending on the transfer value offered, and therefore the critical yield required, the client would typically need to take a medium-high level of risk to achieve this. Even if this growth rate was somehow achievable, this does not necessarily mean the same level of pension can be provided because we've also made assumptions about the annuity rates.

Or taking into consideration the OPs other £15K pension the choice of a fixed rate annuity may be justifiable.

No, the analysis needs to be on a like-for-like basis, and the annuity rate is set by the FCA. The other DB scheme of £15,000 gives some weight to support capacity for loss and ability to take risk, but this is not a reason in itself to transfer.

xylophone

The OP states that she has a deferred FS pension scheme, another FS pension scheme (I can't quite make out whether this is with her current employer or another deferred scheme) and presumably will be entitled to state pension when she is 66/67?

If she will have no mortgage to pay at retirement and two (at least)guaranteed income streams, a case could be made for a transfer out of the deferred scheme into a SIPP?

The transfer out would enable her to take the tax free lump sum that she requires for home improvements/mortgage repayments/education etc - the balance would remain invested within the SIPP for her to access as required when she needs to?

And it would appear that Hargreaves Lansdown facilitated a transfer out for one poster .....https://forums.moneysavingexpert.com/discussion/5053691

Linton

xylophone wrote: »

The OP states that she has a deferred FS pension scheme, another FS pension scheme (I can't quite make out whether this is with her current employer or another deferred scheme) and presumably will be entitled to state pension when she is 66/67?

If she will have no mortgage to pay at retirement and two (at least)guaranteed income streams, a case could be made for a transfer out of the deferred scheme into a SIPP?

The transfer out would enable her to take the tax free lump sum that she requires for home improvements/mortgage repayments/education etc - the balance would remain invested within the SIPP for her to access as required when she needs to?

And it would appear that Hargreaves Lansdown facilitated a transfer out for one poster .....https://forums.moneysavingexpert.com/discussion/5053691

I agree - this does seem to one of the few cases where a transfer out could be justifiable.