Transferring a Final Salary pension

Sepoy

I’m considering moving my deferred DB, Final Salary, pension away from the current administrators.

With the current high CETV’s available, now seems a good time to do it, albeit that I know very few advisor’s would actually recommend it.

I’m divorced, kids are over 25 and no dependants, and have other funds to use for my immediate retirement, so the new flexibility would suit me and enable me to pass the final fund on to my kids free of IHT. I’m financially aware and used to managing my own investments.

Yes, I know I need to take advice, but charges vary wildly, some as much as 7.5%, and will anyone actually recommend it? My current broker is insisting on favourable advice before accepting the transfer.

Any help or advice would be gratefully appreciated.

jamesd

You appear to have sufficient reasons to recommend doing it, notably given no value for spousal death benefits, inheritance objective and other funds to meet your income needs. Assuming that the transfer value makes sense.

Depending on value you may also find that state pension deferral will provide a higher income for the money than your DB scheme would provide, assuming deferral for up to say ten years. You might even be able to get both matching the DB level of income and substantial lump sum.

dunstonh

Yes, I know I need to take advice, but charges vary wildly, some as much as 7.5%,

7.5% means nothing without context.

My current broker is insisting on favourable advice before accepting the transfer.

Whilst that is not a legal requirement is not an uncommon and firms are allowed to make such a requirement if they wish. Many just want an adviser to say they have given advice and do not require to be told what the advice was.

Sepoy

"7.5% means nothing without context."



Sorry. I meant 7.5% of the CETV transfer value.

£22,500 charges on a £300k transfer, that's good work if you can get it.

Silvertabby

"7.5% means nothing without context."



Sorry. I meant 7.5% of the CETV transfer value.

£22,500 charges on a £300k transfer, that's good work if you can get it.

Some of that £22,500 will go towards an insurance policy, to cover the IFA, should you go back in the years to come complaining that you've lost money because you were advised to transfer out of a fully guaranteed final salary pension payable for life.

bigfreddiel

Sepoy wrote: »

"7.5% means nothing without context."
Sorry. I meant 7.5% of the CETV transfer value.

£22,500 charges on a £300k transfer, that's good work if you can get it.

Certainly is nice work if you can get it.

Be nice if it was just a fixed fee, say £1k.

Surely the work involved to do this type of transfer is independent of the value?

To take this to its simplest level if I use a cash machine that charges a fee, it's usually fixed regardless of the amount I transfer into my wallet!

No doubt transferring a pension is a little bit harder, costs a little bit. But I can't see how it's related to the value.

fj

dunstonh

£22,500 charges on a £300k transfer, that's good work if you can get it.

Probably priced that way on purpose as they didnt want to do it. A passive blocker. Many firms will do that with business they do not want.

Surely the work involved to do this type of transfer is independent of the value?

Work or liability?

To take this to its simplest level if I use a cash machine that charges a fee, it's usually fixed regardless of the amount I transfer into my wallet!

Not comparable. If it goes wrong, the cost is capped. That is not the case with pension transfers. The higher the transfer value, the higher the liability. Also, a transaction like a cash machine can have action statute barred. That is not the case with pension transfers. It is a liability forever.

quotememiserable

Once you've taken advice from the IFA, why do you need to involve them in the transfer at all? Open a private pension plan, have your DB scheme transfer the funds into it.

Sepoy

Yes, I will, quotem..., as I've already got a private SIPP running with Hargreaves Lansdown.

But HL insist the IFA recommends the transfer with favourable advice, so I could spend several thousand pounds and then not being able to transfer into my SIPP.

dunstonh

But HL insist the IFA recommends the transfer with favourable advice, so I could spend several thousand pounds and then not being able to transfer into my SIPP.

There is a flaw in that as an IFA is not going to recommend a transfer into the HL SIPP. HL is too expensive and IFAs can get cheaper.

So, it is possible you could find a marginal case where using an IFA product gives a cost/benefit that just about makes sense to transfer. However, if you were to use HL charging it may not. So, the IFA recommendation maybe that it is ok to transfer as long as it is via xyz company/platform and the transaction takes place via their agency (a common disclosure on suitability reports now). If you take that to HL and transact via them, the IFA won't carry the liability as you have not followed their advice. So, HL is in the same situation as if no advice was given in the first place.