Transfer of DB to SIPP

RebTech

I have a small DB pension (under £1800/yr if no lump sum taken) that becomes payable soon and I'm wondering whether I could transfer it into my SIPP.

I looked into this a while back and it quickly became clear that (a) it was almost certainly a bad idea, and (b) if I went ahead I'd probably be forced to pay a substantial sum to be told that by an IFA.

But I'm wondering whether the situation might be different now, either due to rule changes, or because the payable date is so close. Information from the provider states that in SOME circumstances transfers out would require independent financial advice. I've asked whether I fall into that category but don't know whether they'll be able to say.

Any thoughts?

Silvertabby

The notional value (not transfer value) of your DB pension is £1800 x 20 = £36K. That's over the £30K limit so, yes, you would have to take independant financial advice.

How old are you? I ask because some pension schemes may not allow a transfer out once you are within a set time-scale from your normal retirement date. For example, if your Local Government normal pension age is 65, then any transfers out would have to take place before you hit 64.

RebTech

Thanks, that helps. I'm just coming up on 63yr 6mo, which is the date this pension becomes payable, but the info they sent mentions the possibility of a transfer without saying anything about age.

PensionTech

The notional value (not transfer value) of your DB pension is £1800 x 20 = £36K. That's over the £30K limit so, yes, you would have to take independant financial advice.

Just to correct this - it's the CETV, not the crystallisation value, that matters, so the 20x thing isn't relevant here. But the CETV is almost definitely over £30k so it comes to the same thing.

The statutory right to transfer out falls away 1 year prior to Normal Pension Age (usually, but not always, the same as Normal Retirement Age). But some schemes allow you to transfer out after that anyway because transfers are a relatively inexpensive way to derisk.

RebTech

Thanks PensionTech.

Is it possible to give a ballpark sort of idea what an IFA would charge in this scenario? A few years ago I was quoted what seemed like a lot and told that was simply because it was DB->SIPP, would that still be the case?

PensionTech

Hopefully one of the IFAs on here will step in and answer that question, as I am neither an IFA nor a client of an IFA and therefore have no direct experience.

However, "what should my IFA charge for a DB to DC transfer" is a very common question on here, and what I have gleaned is that there can be different charging structures - e.g. a percentage of the fund value or a fixed fee - and members often seem surprised at how high the fees are. The explanation given for this - other than there being more work involved than many appreciate - is that a DB to DC transfer is a high-risk transaction that many advisers are reluctant to even get involved in, as the FCA tend to consider it a mis-sale unless proven otherwise, and IFAs carry lifelong liability for the advice they dispense. Broadly speaking I wouldn't be surprised at something in the low thousands, considering that your transfer value is probably (I'm massively speculating here) somewhere around £40-£70k. But that is just me piecing together lots of second-hand anecdotes from other people on this forum. It may be more useful to know roughly what figure you baulked at a few years ago, so that someone else can step in and tell you whether it's normal or not.

RebTech

Thanks again PensionTech. I seem to remember the previous quote was in the £900-£1k range, from my SIPP provider, HL.