Transfer out of Final Salary Scheme - HELP!

Hope2015

Hello all.


I am wanting to transfer a pension out of a final salary scheme into a flexible drawdown SIPP. The purpose is to repay crippling debt.


The facts as I understand them so far:
1. I must have the agreement of a suitably qualified IFA before the transfer can go ahead.
2. I still have to pay for advice even if the IFA rules against the transfer.
3. The main criterion for ruling in favour is that the critical yield from the proposed new pension scheme would be likely to be more than from the existing scheme.
4. If the transfer cannot be approved on the critical yield test, then my personal circumstances can be taken into account.


The circumstances are these:
a. The transfer value is £37000
b. The monthly pension would be approximately £100 per month - gross.
c. I have debts of £36000, annual interest potentially £6000 per year. (Debt incurred over several years unemployment, due to ill health.)
d. I am 61 and currently in temporary, part-time work but my health is unreliable.
e. My gross income in retirement (from May 2019) will be £15200, from additional robust pension schemes.
f. My mortgage is small and payments small.
g. I have no dependents and no partner.
h. Savings, £3000.


I am worried sick about the next few years: my employment prospects are uncertain and my health might deteriorate again. The opportunity to pay off most of my debt, save the interest payments and avoid the possibility of losing my home is a 'no brainer' to me.


Can anyone please advise as to what case I should put forward to give me the best possible chance of having the transfer go ahead? Given that IFAs seem to be very wary about these transfers, is it likely that anyone will agree with me, or will they just take my money and say no? I've been quoted between £1500 and £3500.
Thanks.

kidmugsy

The crucial bits seem to me to be:

Hope2015 wrote: »

.. to repay crippling debt.

... my personal circumstances can be taken into account.


The circumstances are these:
a. The transfer value is £37000
b. The monthly pension would be approximately £100 per month - gross.
c. I have debts of £36000, annual interest potentially £6000. (Debt incurred over several years unemployment, due to ill health.)
d. I am 61 and currently in temporary, part-time work but my health is unreliable.
e. My gross income in retirement (from May 2019) will be £15200, from additional robust pension schemes.
f. My mortgage is small and payments small.
g. I have no dependents and no partner.

Transferring out of an FS pension is often mad, but you fit the case of its being sane: your health makes the potential pension less valuable, your expensive debt makes the capital more valuable, and you can see your way to an adequate income in retirement. I suppose an IFA could assess whether the CETV offered is decent value. He might also discuss how else you might rid yourself of debt. Perhaps you could draw all your FS pensions early, getting the corresponding tax-free lump sums and the monthly payments. Could you increase your mortgage and so replace expensive debt by cheap debt?

However I don't think it's accurate to say

Hope2015 wrote: »

1. I must have the agreement of a suitably qualified IFA before the transfer can go ahead.

My impression is that you must consult an IFA: I believe some providers will accept a transfer even against the advice of the IFA, presumably because that advice puts the responsibility squarely on your shoulders, so that they can feel you won't turn around and successfully sue them later on.

hyubh

Hope2015 wrote: »

Given that IFAs seem to be very wary about these transfers, is it likely that anyone will agree with me

Perhaps a minor point, but given your stated aim, the legal position is not that you have to convince an IFA that it's a good thing, since while you have to get professional advice, you are free to ignore it. Moreover, so long as they fulfil a set of checks set out by the Pensions Regulator (see here), getting the DB scheme to agree to a transfer out shouldn't be a problem. Rather, your issue is convincing a new pension provider to take the transfer.

Hope2015

Thanks hyubh


I've been told by my preferred new pension provider (Hargreaves Lansdown) that they won't accept my cash unless an IFA agrees I should transfer. My current provider has no problem with the transfer and is being very helpful. I will try to find an alternative recipient for the pension, however I trust HL and want to drawdown the cash over the next 2 financial years.
Any suggestions as to an alternative?

dunstonh

Currently playing out in the financial media and the professional bodies are warnings that advisers should proceed on transactions for insistent clients where the advice is that the pension should not be transferred. Providers appear to be increasingly taking that stance too. i.e. the advice has to be that the transfer is suitable. Advice and going against that advice is going to be harder to find.

Given that IFAs seem to be very wary about these transfers

And rightfully so. The FOS uphold more complaints than reject on transfers like this.

Have you looked at debt management plans?

pete-20-11

Contact someone like step change - they may be able to help - e.g. Debt management plan, freeze the interest etc.

jamesd

Here's a list of providers who'll take over £30k against advice: Aegon, Aviva, AJ Bell, Canada Life 9case by case decision), Dentons (case by case decision), Friends Life. Of those only AJ Bell and Canada Life will accept transfers of up to £30,000 without advice.

See the link in my post for other lists, including those who will take transfers over £30k with the adviser recommending in favour of the transfer.

xylophone

Just a thought - your health is uncertain - are you likely to require means tested benefits or even contributory benefits?

In effect, you would be converting your DB pension to a DC pension.

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/417473/pension-flexibilities-dwp-benefits.pdf

atush

You seem to fit the very small minority case where transferring the pension could be in your interests, BUT ONLY if you can stay out of debt afterwards?

davide691

@Hope - PM me for the IFA I used for my transfer. Unless he’s now whacked his fee up, he'll probably do it for half the lower value of what you’ve been quoted. P.S. I’m not on commission!

Hope2015

Thanks jamesd - this is just the kind of info I need.