Transferring a Defined Benefit Fund

jojororo

I have a pension pot in a defined benefit scheme in region of £250k from previous employment.

I have been running my own limited company for last ten years and I am looking to convert my pension fund to a SASS

After 18 months of wrangling with the pension company and trustees they have cleared all the paperwork and fund I want to move to but at the last minute hit me with this new law (as at April 2015) that I need to have a letter from a Financial Advisor stating that they have given me advice on the rights/wrongs of such a move.

I'm not sure where to start on this but have been reading that some IFA's are asking anywhere from £2k to 3% of the fund just to write a letter.

Regardless of the rights/wrong of such a transfer - can anyone advise the cheapest and quickest way of getting such a letter ?

Thanks
Jo

xylophone

http://www.out-law.com/en/articles/2015/march/transferring-safeguarded-defined-benefit-pensions-to-defined-contribution-schemes-to-be-regulated/

https://www.fca.org.uk/static/fca/documents/policy-statements/ps15-12.pdf

https://www.unbiased.co.uk/

sandsy

You don't have a pot in a defined benefit scheme - you have the promise of a defined income during retirement. You can choose to give that up for a lump sum of an equivalent value, as determined by the trustees.

The new law requires you to take advice if the lump sum offered exceeds £30k. The letter is not simply a letter, but involves making a recommendation of whether this course of action is likely to be in your best interests or not. It involves comparing the benefits you'd be giving up with how you could achieve the same income using a personal pension and annuity. Effectively, it provides a check on whether the lump sum offered is a fair value.

Undertaking this work is a specialised activity, and the risk of not assessing it properly carries substantial personal liability for the relevant financial adviser hence the high cost.

In most cases, the advice will be not to transfer out of a defined benefit scheme. Whilst the trustees will still let you, if you can show that you've taken advice, irrespective of whether the advice was to transfer or not, you may have trouble finding a pension provider to accept your lump sum without the necessary go ahead from a financial adviser. This is because providers are worried that they'll be seen to facilitating an action which is not in your best interests.

dunstonh

I'm not sure where to start on this but have been reading that some IFA's are asking anywhere from £2k to 3% of the fund just to write a letter.

Just to write a letter? Do you really think it is that which costs the money?

Regardless of the rights/wrong of such a transfer - can anyone advise the cheapest and quickest way of getting such a letter ?

£2k is cheap.

Annisele

I also think £2k is cheap, given the liability the IFA would be taking on.

Suppose he just writes "I've advised Jo not to transfer his final salary pension", and gets you to sign a letter that says "I insist". Now suppose that in 15 years' time, you realise you'd be £500k better off if you hadn't transferred. Would you complain that you didn't understand what you were giving up?

Even if you wouldn't make that complaint, some people would. Which means telling you it's a bad idea isn't enough - the IFA would have to quantify why it was a bad idea. And it might not actually be a bad idea (probably is, but might not be). The IFA would have to do quite a bit of investigation to work that out.

TH1878

jojororo wrote: »

Regardless of the rights/wrong of such a transfer - can anyone advise the cheapest and quickest way of getting such a letter ?

Thanks
Jo

Just knock up some IFAs letterhead on Photoshop and write your own. It's only a letter after all.... Can't be too difficult.

Credit-Crunched

TH1878 wrote: »

Just knock up some IFAs letterhead on Photoshop and write your own. It's only a letter after all.... Can't be too difficult.

Fraud, great recommendation.

Bizzyppl

New user so I cant post link!
This may be of use
copy and paste to google will take to PDF
Statutory Instruments 2015 No. 742
PENSIONS
The Pension Schemes Act 2015 (Transitional Provisions and
Appropriate Independent Advice) Regulations 2015

TH1878

Credit-Crunched wrote: »

Fraud, great recommendation.

Tongue firmly in cheek. I'm a Chartered Financial Planner with the AF3 qualification allowing me to advise on DB transfers - it is most certainly not "just a letter" as described by the OP.

We had someone, not known to us, come into our offices recently asking us to sign a transfer form to confirm that he understood the risks involved with a DB transfer - I sent him packing.

dunstonh

We had someone, not known to us, come into our offices recently asking us to sign a transfer form to confirm that he understood the risks involved with a DB transfer - I sent him packing.

Something many of us have had. Something that does appear to have been noticed is that the ones saying they dont want advice and know what they are doing are more often than not the ones that actually need advice and dont have a clue what they are doing.

mgdavid

dunstonh wrote: »

Something many of us have had. Something that does appear to have been noticed is that the ones saying they dont want advice and know what they are doing are more often than not the ones that actually need advice and dont have a clue what they are doing.

Oh so true, and in so many different areas of life