final salary pension scheme

xylophone

It appears that the pension that the OP wishes to transfer out is a deferred DB pension from a previous employment.


He is currently working and a member of LGPS - he also expects a full state pension at state pension age.

He would also be able to call upon what remained in the DC pension created from the pension transfer.

Under these circumstances, he would be unlikely to be destitute or reliant on the state in old age though probably not as well provided as he would have been with the deferred DB pension.

Even this is not certain as it may be that with the DB in DC, he would be able to better manage his taxation situation.

Presumably, if he found an IFA with the necessary permissions and paid him to produce a report, even if that report were negative, he could demonstrate to the Trustees of the deferred pension that he had taken the necessary professional advice so that they would facilitate a transfer out.

He would then need to find a pension provider willing to accept a transfer but it would appear (see my previous post), that this is not impossible.

I am very much in favour of DB pensions, and would urge anyone to think and think again before contemplating a transfer out - however, in certain circumstances, the situation is not clear cut and it may be that the OP's situation fits those circumstances.

However, one does wonder what is preventing an IFA being willing to even consider the case.

greenglide

But in this case the IFA chose to actually transact the business even though they had said it was not in her best interest. I dont believe this is the case on this thread although it is possible that the OP has wanted then to do this?

You would have thought that the IFA was foolish in the extreme to proceed on the basis of a signed waiver from a customer who was unable to read or write (depending on the reason, of course)!

Malthusian

@Greenglide: Absolutely, I believe the case illustrates why the IFAs the OP has visited have refused to touch it, even on an "inconsistent client" basis or to merely provide a letter confirming they have received advice.

I agree entirely that the IFA was foolish and said as much. However, the perils of "insistent clients" were not as much discussed in 2012 as they are now (post pension freedoms). And the IFA appears to have been afraid that if they refused to serve a client because she was illiterate there would be a potential claim under the Disability Discrimination Act. (*edit* Personally I think that's rubbish and probably a post-hoc justification for doing the business. But you can argue it's a valid concern.)

xylophone

to merely provide a letter confirming they have received advice.

Surely in the case of the OP, the IFA could simply produce a report (paid for) stating that the transfer was not recommended and refuse to transact the business?

It would then be up to the OP to demonstrate to the Trustees that he had received advice ( show the report), and then find a provider willing to accept the transfer, even if against advice which is (apparently) possible.

In the case of the illiterate client, the IFA should simply have refused to transact the business?

Brogden

xylophone wrote: »

I am very much in favour of DB pensions, and would urge anyone to think and think again before contemplating a transfer out - however, in certain circumstances, the situation is not clear cut and it may be that the OP's situation fits those circumstances.

However, one does wonder what is preventing an IFA being willing to even consider the case.

Well said. There is no single rule for all and the world is not as 'black and white' as Malthusian's world appears to be.

Although receiving advice of this type now, my thoughts for the OP would be that it would probably be in his best interests to stick with the DB scheme and receive pension/PCLS either now or sometime later. I think he is coming to this conclusion himself. The reason I would say this is there is a seeming requirement to spend moneys from the pot now that will not be easily replaced.

If he can achieve what he wants with this constraint and keep the scheme benefit then he will no doubt be better off in the long run.

For those who have no immediate requirement to spend, are concerned about the woeful provision for spouses and children which are available to a deferred pensioner and would wish for maximum flexibility of income and planning of tax then a transfer to PP/SIPP may be something to consider.........if anybody will talk to you about it........

Malthusian

Brogden: That's rather unnecessary considering you came to exactly the same conclusion as me ("that it would probably be in his best interests to stick with the DB scheme and receive pension/PCLS either now or sometime later"). I didn't claim there was a single rule for all, but transferring out of a final salary scheme is generally considered a bad idea in the absence of compelling evidence to the contrary. Which we haven't seen.

xylophone wrote:

Surely in the case of the OP, the IFA could simply produce a report (paid for) stating that the transfer was not recommended and refuse to transact the business?

You are still setting yourself up as the first port of call for when the client changes their mind and wants to put in a complaint. And such a complaint may very well succeed if the FOS decides that the adviser didn't go to enough lengths to make the client understand that this was a bad idea, or if the client couldn't be expected to understand that it was a bad idea. Most IFAs do not want to take the risk. Although as has been covered, "most" is not "all" and if the OP keeps shopping around he should eventually find someone willing to take the money.

xylophone

And such a complaint may very well succeed if the FOS decides that the adviser didn't go to enough lengths to make the client understand that this was a bad idea, or if the client couldn't be expected to understand that it was a bad idea

It is surely not beyond the competence of an experienced professional to construct a report stating "I do not recommend that John Smith proceeds with the transfer of his DB pension from XYZ for the following reasons......... and under these circumstances will not transact this business".

If the IFA has not transacted any business and moreover has specifically stated that in his opinion, a transfer is not to be recommended, how on earth can he be regarded as having any liability whatsoever to the client?

Brogden

Malthusian wrote: »

Brogden: That's rather unnecessary considering you came to exactly the same conclusion as me ("that it would probably be in his best interests to stick with the DB scheme and receive pension/PCLS either now or sometime later"). I didn't claim there was a single rule for all, but transferring out of a final salary scheme is generally considered a bad idea in the absence of compelling evidence to the contrary. Which we haven't seen.



You are still setting yourself up as the first port of call for when the client changes their mind and wants to put in a complaint. And such a complaint may very well succeed if the FOS decides that the adviser didn't go to enough lengths to make the client understand that this was a bad idea, or if the client couldn't be expected to understand that it was a bad idea. Most IFAs do not want to take the risk. Although as has been covered, "most" is not "all" and if the OP keeps shopping around he should eventually find someone willing to take the money.

I'm sorry....I know that you know what you are talking about. From the point of view of pure £'s value throughout the years (if you live :eek:) the DB scheme is probably never going to be beaten.

It's just typical of internet forum discussions that nothing ever seems to be said 'in the round' if you know what I mean. This is a huge and emotive subject and a few pointed little posts just don't really cut it and we can all be guilty of that.

We are living in a contrived framework where advisers are personally afraid (or precluded from) advising on certain matters. It is one of the many modern contradictions of life and there are others springing from the consumerist / nanny-state / politically correct brigade too.

Seemingly nobody can think for themselves.

Brogden

xylophone wrote: »

It is surely not beyond the competence of an experienced professional to construct a report stating "I do not recommend that John Smith proceeds with the transfer of his DB pension from XYZ for the following reasons......... and under these circumstances will not transact this business".

If the IFA has not transacted any business and moreover has specifically stated that in his opinion, a transfer is not to be recommended, how on earth can he be regarded as having any liability whatsoever to the client?

Everybody is watching their own backsides Xylophone. It seems that to perform any type of function or to have any type of occupation exposes the individual to huge personal risk. It is unfair for me or anybody else to single out IFA's......they are just blown by the same ominous breeze as all others.........

On the subject of the transfer, the onus is on the scheme trustees to be satisfied that the member has received advice from the suitably qualified and permissioned IFA. If the scheme trustees then release the transfer value there is nothing required of the receiving scheme to check other than their usual ID / KYC / due dilligence etc. However, an increasing number of SIPP providers are now insisting on seeing a recommendation from an IFA which says 'transfer' and if this is not available they will not accept the transfer value. Seemingly they are not trusting the transferring trustees or are terrified of receiving a troublesome piece of business. It is belt and braces and they are watching their backsides too.

I have concerns that this move may ultimately start to jeopardise all forms of DB to DC transfer. IF we then also take account of the fact that public service workers cannot transfer to a DC vehicle (because, through no fault of their own there is no fund to transfer) it is not absloutely impossible to imagine that there may sooner or later be a little bit of a revolution........:(

Malthusian

xylophone wrote:

If the IFA has not transacted any business and moreover has specifically stated that in his opinion, a transfer is not to be recommended, how on earth can he be regarded as having any liability whatsoever to the client?

The IFA presumably (hopefully) charged a significant fee for doing a transfer value analysis and providing a formal recommendation. And if he had not provided the letter saying "A transfer is not to be recommended", the client could not have gone ahead with the DB transfer, under the "safeguarded benefits" rules.

Even if the IFA did not provide any intermediation on the transfer, even if the client identified his own SIPP provider and did it all himself... the IFA still took money from the client in exchange for giving him the letter which allowed him to transfer the DB pension. The IFA could have stopped the DB transfer by not giving him the letter. Ergo, the IFA is responsible for the DB transfer. There's your liability.

I'm not saying it's right, I'm saying that's the line which has been proven to work on the Financial Ombudsman Service. Clearly he didn't explain to the client well enough that he shouldn't proceed, because if he had the client wouldn't have proceeded. The client could not be expected to understand such things. And so on.

You might think it's shaky logic, but it doesn't matter. It's not a question of logic, it's a question of who is the most obvious target when the client has blown his cash and is looking for someone else to blame. By taking the client's shilling the IFA is setting himself up as Complaint Target Number 1. The client is not going to complain against the DB scheme he transferred out of because he has no chance of success with the Pensions Ombudsman. He could make against a complaint to the SIPP provider, but the SIPP provider will simply point to the fact that he was advised by an IFA. So a complaint is made against the IFA with the Financial Ombudsman which has a history of upholding such complaints.