Financial advisor catch 22

Happyfeet1

I am in the process of obtaining transfer values for 2 final salary pensions . I have been told by my provider that before I can access my funds I will need proof that I have taken financial advice . Sounds reasonable , given the amount involved and the risks involved . Problem is I cannot find any independent advisors willing to meet with me to discuss my plans for investing in property with funds available as I presume they feel that they won't be earning from any ongoing investments through me ? I am of course willing to pay for advice but not one of the 10 companies I have contacted have come back to me ? What can I do ! I just need a financial advisor to sit with me and to confirm that they have given me financial advise . I know what I want to do with the money and am aware of the tax implications etc etc this seems a catch 22 situation !!!

jamesd

At what point did they balk and turn you down?

Final salary transfers are a high risk area for IFAs so not a popular area of business. Fees would start at perhaps the £1,000 to £2,000 and increase as the value increases due to the higher amount of potential redress payment.

i assume that you know that it is prohibited to hold most types of residential property within a pension, so you'll be restricted to commercial property or some large student housing schemes and some other more minor exceptions to no residential.

dunstonh

Problem is I cannot find any independent advisors willing to meet with me to discuss my plans for investing in property with funds available as I presume they feel that they won't be earning from any ongoing investments through me ?

Are you sure that is the reason?

i could understand a boutique IFA with their fixed models and processes perhaps telling you that as clearly you do not fit their model. However, a general IFA would more likely still refuse it because the investment methods you want to use are poor quality and suggests low investment knowledge and that makes you high risk.

I just need a financial advisor to sit with me and to confirm that they have given me financial advise .

And when it all goes wrong, that adviser will have to take the blame for it. That is the root cause of the problem. The single biggest area of failure in recent times have been SIPPs investing in unregulated investments. Most of which linked to property. One of the biggest mis-sales of the late 80s, early 90s were final salary pension transfers. You want to transfer out of a final salary scheme into a SIPP using property. Its almost as if you want to hit every mis-sale area going and most advisory firms are not interested in anything that even hints towards that sort of thing.

bigadaj

It's high risk for an ifa to deal with, but it's the property element that is likely to be the critical element.

As James says what you can invest in with pension funds is very restrictive when it comes to property, and returns from them aren't as easy for an ifa to assess as would be the case from equities or bonds.

What type of property are you proposing?

AnotherJoe

This would be a double whammy for an advisor. Two very high risk / likely to be poor ideas so when in five years time you come back and sue the advisor on the grounds he didn't sufficiently warn you not to do either, and despite all the warnings, loses (it's happened before) and has to pay out compo, his insurance premiums rocket. All that for a couple hundred quid in "advice"

I'm not an advisor, but if I was I'd be shopping for a barge pole on Amazon, and I still wouldn't touch your case with it.

RickyB2000

What are you trying to do? You mention tax implications which makes me wonder. Are you looking to transfer, cash in the pension, take the tax hit and then buy property? Are you over 55? Or do a transfer and buy property in a pension? Though I can't image the first option would make anyone more comfortable (in fact I assume the tax hit would make them even less so)

bigfreddiel

Why transfer two final salary pensions? Can you do better? Do you have other pensions to fund your life?

So if an ifa sat with you and said don't do it, but I will say you have had advice. Based on that you transfer your two pensions and lose the lot. Would you sue the ifa for bad advice? Or something else?

Happyfeet1

The 2 final salary pensions pay 32k per year until my demise so let's say I live 25years past retirement so until 90 the provider therefore has in effect paid out 700k to me . The income will be taxed and probably net me circa 2.2k a month so over 25 years this would be worth 660k . If I take out the pot and say that pot is 600k then 150k would be tax free and the balance would taxed partly at 40 and 45 percent less allowance etc but roughly 40% of 450k in tax . So 270k to add to the 150k making 420k to invest in a property . If I said that property on average over 25years rents out at 60% occupancy and the average monthly rent is 2k then over 25 years the income from the property would be 360k plus of course the value of the property would almost certainly have doubled making the property worth circa 900k . If we assume tax on the income and 40% CGT this would still mean I would have the property plus have gained over 550k in income and property value . Of course if I die after 5 years of retirement my pension stops and the total paid out is only 132k ( 2.2k month ) whereas if I took the lump sum my estate would be quids in !

JoeCrystal

Well, for your own sake, I hope that you will stick with the final salary pensions. You are already in an envious position of expecting such guaranteed income and it is no wonder no IFAs would touch them. At least you will not lift a finger to get such incomes compared to renting a property out.

maximumgardener

so...in effect you are gambling the certainty of the payouts from your final salary pensions versus the uncertainty of what may happen in the property market / rental market etc over several decades.
mmmmmm. (also any Government legislation which may come to pass....who knows!!)
imagine if property market does not pan out how you see it ......then you may wish to sue your IFA for poor advice.? Interesting dilemma.

sandsy

You've forgotten about inflationary increases on your guaranteed pension. If you live for 25 years and inflation averages 2.5%pa, your £32k pa will be over £59k pa by the time you die.