New pension rules force me to seek IFA advice

Sioux18

dunstonh wrote: »

The ones with the "Limited pension transfer activity for the provisio" limitation say that as well. However, if there is no mention of that limitation, then its fine.

Thanks. I've called a few and invariably get 'passed on' or referred to someone else, so this knowledge is really helpful in my pursuit.

atush

Sioux18 wrote: »

They are over 23, hence attraction, or at leat one of, of considering a transfer.

Had to ask, ask as many with DB pensions dont understand them, and dont read the scheme booklet

CFrog

Sioux18. I am going through the process myself. I initially tried putting out a request for help on both bark.com and unbiased.co.uk but both proved a complete waste of time; one response and that was useless. So I then called an IFA that I had been recommended to use and have made some progress thus far in that I've been sent a load of bumph to read. In addition I used the search function on the Unbiased.co.uk to search for IFAs that are qualified to provide advice on pension transfers; there is a filter function that allows you to do this and a helpful map function that allows you to search for ones local to you. You can then get phone numbers and names. However ......

Even if the web site lists them as being qualified to offer advice, their being interested in actually doing it is another matter. Out of the 8 or so I called, only 3 were willing to even consider it. Their main issue is the need (apparently) to pay high indemnity insurance premiums just in case they get sued in the future for offering bad advice.

BTW, although you can search for the IFA by name and the firm they work for on the FCA web site, I didn't find the site of much value; apart from telling you they are registered and give you their registration number, I think the results 'are a clear as mud'.

I have found fees I've been quoted are broadly similar at c. £1k (+VAT) for the advice plus 2-3% of the CETV (no VAT on this) if / when you go ahead.

I'm still mulling things over.

dunstonh

Their main issue is the need (apparently) to pay high indemnity insurance premiums just in case they get sued in the future for offering bad advice.

#
If IFAs transact in this area, the PI insurance premiums do go up (along with other costs.

BTW, although you can search for the IFA by name and the firm they work for on the FCA web site, I didn't find the site of much value; apart from telling you they are registered and give you their registration number, I think the results 'are a clear as mud'.

it was never designed to be a consumer site. Although some consumers do use it nowadays. It is hard enough for those of us that are regulated to follow it sometimes.

Sioux18

CFrog wrote: »

Sioux18. I am going through the process myself. I initially tried putting out a request for help on both bark.com and unbiased.co.uk but both proved a complete waste of time; one response and that was useless. So I then called an IFA that I had been recommended to use and have made some progress thus far in that I've been sent a load of bumph to read. In addition I used the search function on the Unbiased.co.uk to search for IFAs that are qualified to provide advice on pension transfers; there is a filter function that allows you to do this and a helpful map function that allows you to search for ones local to you. You can then get phone numbers and names. However ......

Even if the web site lists them as being qualified to offer advice, their being interested in actually doing it is another matter. Out of the 8 or so I called, only 3 were willing to even consider it. Their main issue is the need (apparently) to pay high indemnity insurance premiums just in case they get sued in the future for offering bad advice.

BTW, although you can search for the IFA by name and the firm they work for on the FCA web site, I didn't find the site of much value; apart from telling you they are registered and give you their registration number, I think the results 'are a clear as mud'.

I have found fees I've been quoted are broadly similar at c. £1k (+VAT) for the advice plus 2-3% of the CETV (no VAT on this) if / when you go ahead.

I'm still mulling things over.

Sounds as though we are in exactly the same position I have had 2 suggest they were willing to talk, one for a £500 fee and both for 4% of CETV, due to risk. I am by no means financially savvy but if getting of the starting block of this process is a bit of a minefield then the work ahead is potentially a difficult one in terms of decisions. Good luck in finding an IFA who can help, my search continues but I am feeling better informed thanks to the information I have had on this thread.

Sioux18

Thanks to all for the information I have gained from such helpful people in this forum, I'm making progress and have some initial meetings lined up with advisors.

I just wanted to ask anyone who has an opinion, if an annuity may be a wiser option being somewhat concerned about the risk of investments and, to be honest, a preference for a stress free retirement! I think I can still use the CETV figure or am i wrong? If i am right i feel i can negate the risk of investments while still offering some degree of potential guarantee, should I choose to build this in, for a dependant adult son so there may be something in the 'pot' to leave. Additionally I think I can achieve a better annual income than from my final salary scheme (or so I am led to believe!)

Is it a good time to buy an annuity?

I'm sure the IFA will go over all of this but I would like to be a bit more informed before we meet. Any thoughts, comments, guidance please?

jamesd

There are few good times to buy an annuity because they usually offer very poor income for the amount spent. Typically in drawdown you could around take twice the initial income that an annuity would provide with no investment performance in the last hundred years being bad enough to cause it to be cut to the level of the annuity.

Transferring out of a final salary pension then buying an annuity is likely to get you significantly lower income than the defined benefit pension unless your life expectancy is lower than for the pension scheme overall. Unless your health is poor you're unlikely to benefit.

For more on drawdown learning see Drawdown: safe withdrawal rates . Hopefully learning more about tools like cfiresim and the way they can use modern drawdown rules like Guyton and Klinger to produce higher income without excessive drops will help you to get comfortable with the options.

Using drawdown, particularly combined with state pension deferral and maybe annuity buying in your 80s, is likely to do well for your son. This is because:

1. You must plan for the longest life you might reasonably live but are likely to die sooner than that. So the money needed for those later years will be available to him.
2. Safe withdrawal rates are calculated to survive some of the worst investment performances seen over the last hundred years. Using the old fashioned 4% rule it turned out that 96% of the time the numeric value of the pot after 30 years would have been higher than at the start. Modern rules let you take more than that one in income and/or increase the potential inheritance.

One worry is that you haven't told us your age or reasons. Often we can come up with better options or explain better what you already can do. It's your choice but please do consider telling us more so we can do a better job.

dunstonh

I just wanted to ask anyone who has an opinion, if an annuity may be a wiser option being somewhat concerned about the risk of investments and, to be honest, a preference for a stress free retirement!

A defined benefit scheme is the safest option. Transferring out of a defined benefit scheme is a high risk option regardless of what you transfer it into. Going the next stage, generically, the annuity rates would not match the income of the defined benefit scheme. So, taking the better income and buying life assurance would often be the best option.

Is it a good time to buy an annuity?

No. We are just off the bottom of the market rates. Recovery of those rates is unlikely any time soon. You would need interest rates to rise but annuity rates are suffering also on the reduced mortality gain through less people buying them. If you have some health conditions it can still be worth it and the death benefits on an annuity were also improved with the pension freedoms. So, you cant rule it out but the figures are unlikely to be attractive.

EarlG

I just wanted to ask anyone who has an opinion, if an annuity may be a wiser option being somewhat concerned about the risk of investments and, to be honest, a preference for a stress free retirement! I think I can still use the CETV figure or am i wrong? If i am right i feel i can negate the risk of investments while still offering some degree of potential guarantee, should I choose to build this in, for a dependant adult son so there may be something in the 'pot' to leave. Additionally I think I can achieve a better annual income than from my final salary scheme (or so I am led to believe!)

Is it a good time to buy an annuity?

This may not be quite right, but as I understand it, if you are transferring out of a DB Scheme (and the CETV is over £30k) the IFA must carry out a Transfer Value Analysis (TVA) calculation to determine the return you need to get from an annuity when compared to the benefits afforded by your DB pension. This calculation results in something called 'critical yield'. Unless your DB pension's benefits are poor and / or the scheme is in poor health, then the on the basis of the TVA calculation alone the IFA will undoubtedly to advise to you stay put. (In my view the need to carry out this TVA calculation whilst helpful should not (as it appears to be) such an important part of the decision making process).

Aside from leaving the 'pot' to your son, there may however be other personal factors that could suggest there's merit in moving your money such as the DB pension isn't a core part of your retirement needs (and you're happy to take the risks), you're getting divorced (doesn't sound like it), you have a serious illness etc. The IFA should take these other factors into account before finalising his advice.

If as a result of your deliberations with the IFA, they advise you to move your money out of the DB Scheme, you have a couple of options, broadly speaking. You either manage the funds yourself (in a SIPP) or you buy an annuity (up to the value of the CETV funds).

Reading between the lines it sounds as though you're not comfortable managing the funds yourself. If you take the money out of the DB scheme, and the IFA is happy to advise this, they may be willing to 'manage' the money for you, but you will pay for this service which may be a further 1-3% (?) per annum. Whilst there are no guarantees about returns (and therefore the level of stress), the IFA should take the load in terms of managing the 'pot' for you.

Is this a good time to buy an annuity? For me personally, 'no'. Even though they can offer a guaranteed income and possibly death benefits to your spouse (?), the returns are currently so low, I wouldn't touch them with a barge pole !.

Sioux18

Thankyou all, I'm happy to give some personal information.

I am 55 & single but have disabled adult son which means I probably will not work again due to caring role.

I have been offered, now, £48k tax free & £7600 pa, or £66k & £10500 pa at 65. CETV though is 360k.

What's important to me is clearing liabilities as I I have no other means to do so and a modest annual income of say £9k pa.

The bigger tax free sum from the CETV would completely clear all liabilities and leave me mortgage free. I like the idea of possibly leaving something to my son for his long term care. I am however cautious and can't take on too much risk and certainly couldn't think about managing my own pension. I'm also wondering if with fees (4% of transfer value & 0.75% pa for the IFA alone) and a low risk investment, am I actually going to see much growth.

Taking my DB now means I will never clear my liabilities hence attraction of transfer. The IFA I spoke to initially mentioned annuities but only as a possible option which is why I thought I would look into it a bit more. I'm a lifelong smoker and apparently in a favourable postcode area!