Transfer of FS pension to SIPP

CFrog

Post university, I was a salaried employee for c. 30 years and in this time I was lucky (I guess) to have been a member of 2 final salary (FS) pension schemes. For the last 5 years, I have been working freelance and have saved regularly into a SIPP and also my ISA. Both the SIPP and the ISA are with Hargreaves Lansdown (HL).

As someone who regularly monitors his investments, I consider myself to be financially literate; my investments have generated a decent return over the years. I have looked at the projected income from the larger FS pension plus the income generated from my other SIPP / ISA investments and feel this will be sufficient to cover my outgoings. The smaller of the FS schemes has a CETV of c. £300k.

I have spoken to an IFA and also HL about my moving the smaller FS scheme across to my HL SIPP. With the help of a consultant at Liverpool Victoria, my IFA has ‘crunched the numbers’ on the smaller FS scheme and concluded that should I invest the £300k in my SIPP, I would have to generate a return of c. 10% per annum to match the benefits offered by the FS pension provider. As a result the IFA is unwilling to support my moving the FS pension to my HL SIPP. In turn, the FS pension provider won’t release the £300k without a recommendation from the IFA and HL won’t accept the £300k without a recommendation either.

My issue is this. As I feel I am relatively financially secure, I am interested in transferring the smaller of my FS schemes across to my SIPP as I would like to be a ‘master of my own destiny’ and although my wife would get a smaller pension (should I die), I feel grieved that leaving the smaller FS scheme with the pension provider would leave nothing for my children.

I feel frustrated and trapped and am looking for some help.

bigadaj

Why are Liverpool Victoria involved, are you dealing it's an ifa or an fa?

Notwithstanding the above a critical yield of 10% seems far too high to be able to justify a transfer. However the criteria for transferring a defined benefit scheme are that you need to take advice, you don't necessarily have to accept the advice. Most places won't accept a transfer against advice, though hl might be one that did, otherwise it may be a case of just contacting providers and see if they are prepared to accept a transfer.

Simplistically there was never any guarantee that the db pension would provide a pot of gold for you or your decedents, it was a commitment to pay a particular level of income at a point in the future until your death, with spousal benefits.

soulsaver

For info: HL wouldn't accept a CETV for DB scheme recommended or not, except in the circumstances I was immediately buying an annuity - HL policy they said, October 2016.
We didn't get any further as I was not in the market for an annuity, but I suspect that had the conversation progressed it may well have been only in the event of an impaired health annuity.

So it's clear you need to find an(other) suitably qualified pension specialist IFA with a different view, preferably without incurring (more?)cost which may be achievable at preliminaries.
I used 'Bark' & found 7 (or 8) prepared to recommend on prima facie background.. plus one from an 'Unbiased' enquiry - and made my decision from 3 that after negotiation, would do the work on a fixed fee (£2.5k) equivalent of 0.8% in my case - most started higher... a lot higher.

See here: #13 https://forums.moneysavingexpert.com/discussion/5554142

Consider: Do you have any health impairment that may work in your favour in these circumstances?

dunstonh

concluded that should I invest the £300k in my SIPP, I would have to generate a return of c. 10% per annum to match the benefits offered by the FS pension provider. As a result the IFA is unwilling to support my moving the FS pension to my HL SIPP.

That makes sense. 10% p.a. is too high to justify really. Whilst the IFA will have cheaper options than HL available, it still wont be enough to bring that down to a level that is considered ideal for transfer.

In turn, the FS pension provider won’t release the £300k without a recommendation from the IFA and HL won’t accept the £300k without a recommendation either.

The existing scheme administrator does not care about whether the advice is positive or negative to transfer. Just that you have had advice. I believe the current position with HL is that it has to be a positive outcome to transfer.

My issue is this. As I feel I am relatively financially secure, I am interested in transferring the smaller of my FS schemes across to my SIPP as I would like to be a ‘master of my own destiny’ and although my wife would get a smaller pension (should I die), I feel grieved that leaving the smaller FS scheme with the pension provider would leave nothing for my children.

If you use the smaller defined benefit scheme as income then the children will get more of the other pensions when you die. So, its not money lost. It is just diverting the source/destination.

I feel frustrated and trapped and am looking for some help.

Use a pension provider that does not require a positive transfer recommendation.

MichelleUK

I recently contacted both HL and Charles Stanley Direct and both of them stated, that to transfer a DB pension, that they would require proof that an IFA had been consulted and that they had given a positive opinion on the transfer. They even require it if the value is below £30k.

I have heard (although I can not remember from where!) that A J Bell will accept a transfer that the IFA has not recommended.

brewerdave

....surely the answer is to use both DB schemes for income but tuck away the maximum amount possible every year into SIPPs/ISAs for your wife and yourself - assuming that you are in your late 50s, you will have put a considerable sum away for your heirs - 20 years worth at current allowed levels would be well over £900k without any growth !!

Kendall80

CFrog wrote: »

I feel frustrated and trapped and am looking for some help.

Same here. I'm trapped by the size of the IFA fees. While I understand the reasons regarding liability it does seem peculiar that an adult of sound mind and judgement cannot do as he/she pleases with his/her own money (without paying 1000s for the privilege!). The system appears set up to stand in the way of personal choice.

Linton

Kendall80 wrote: »

Same here. I'm trapped by the size of the IFA fees. While I understand the reasons regarding liability it does seem peculiar that an adult of sound mind and judgement cannot do as he/she pleases with his/her own money (without paying 1000s for the privilege!). The system appears set up to stand in the way of personal choice.

A pension isnt your own money, it's held in trust for your benefit. So if you were to unreasonably choose to do something that from best advice isnt in your benefit there is justification for stopping you. If you want complete freedom of action, forego the benefits of a pension and just use ISAs.

dunstonh

While I understand the reasons regarding liability it does seem peculiar that an adult of sound mind and judgement cannot do as he/she pleases with his/her own money (without paying 1000s for the privilege!).

4 out 5 of the pensions transfers between 1988 and 1995 were classed as unsuitable. Whilst gilt yields have created this [temporary] situation where that ratio is likely to be wrong on current transfers, there is good reason why this level of consumer protection exists.

The problem is that the onus placed on advisers is far higher and changeable and typically measured by hindsight and the consumer has access to the FOS who generally treats most consumers as incapable of being of sound mind and judgement. Also, many consumers do play the "stupid" card when making complaints even if they knew full well what they were doing and why.

AnotherJoe

Kendall80 wrote: »

Same here. I'm trapped by the size of the IFA fees. While I understand the reasons regarding liability it does seem peculiar that an adult of sound mind and judgement cannot do as he/she pleases with his/her own money (without paying 1000s for the privilege!).

That's what you say now, and in ten years time when it's become apparent it was a terrible decision you'll go crying to the regulator and get compensation.

Well, not you maybe, but that's what's happened in the past "on average" and compensation has been paid even when the IFA said not recommended and a transfer was accepted . So the regulators tread a fine line between do as you want and and damn the consequences and have a bunch of naive / idiotic / careless people fleeced of their money with terrible deals. Maybe the pendulums swung too far but that's the situation.

And as said, you got this money with conditions such as tax relief and this is one of the downsides of that. And as others have said, you can take your money from your DB pensions and build up your SIPP and ISAs and achieve the same effect.

Itsallagame

MichelleUK wrote: »

I recently contacted both HL and Charles Stanley Direct and both of them stated, that to transfer a DB pension, that they would require proof that an IFA had been consulted and that they had given a positive opinion on the transfer. They even require it if the value is below £30k.

I have heard (although I can not remember from where!) that A J Bell will accept a transfer that the IFA has not recommended.

I used A.J. Bell last year and they accepted as I had provided my own detail workings on my plan for the DB scheme proceeds and my specific reasons for wanting to transfer out of the DB e.g. retain the capital for my children whilst generating a similar income from the SIPP as I would from the DB.

With all that supplied they did agree and I save getting on for a 5 figure sum.