DB Transfer - Likely outcome of IFA review

BoneyBoy

My partner and I both have deferred DB workplace pensions of similar value (approx 15k per annum) but one has no provision for spouse benefits. The pension administrators has confirmed they will cannot (or will not) convert to a lower annual payment with a standard 50% spouse provision.

We are considering either buying life insurance to cover the 50% spouse benefit or transferring the pension into a SIPP with a view to buying a Joint 3% escalating annuity around the time the benefit would have started.

I understand only about 10% IFA reviews support the DB transfer so I was wondering if any of the wise IFAs on here could give me a view of whether these circumstances would increase the likelihood of a positive review outcome?

Thanks.

kidmugsy

BoneyBoy wrote: »

We are considering ... transferring the pension into a SIPP with a view to buying a Joint 3% escalating annuity around the time the benefit would have started.

You don't strictly need a "positive outcome", the requirement is that you have the review done. I'd have thought, though, that the absence of a widow's benefit is bound to increase the likelihood of a positive outcome. So would any objective evidence of low life expectancy for the scheme member.

Mind you, buying a joint 3% escalating annuity would not be to my taste.

dunstonh

I understand only about 10% IFA reviews support the DB transfer so I was wondering if any of the wise IFAs on here could give me a view of whether these circumstances would increase the likelihood of a positive review outcome?

1 in 10 is the historic position. Currently, with transfer values being higher due to low gilt yields, it is running a bit better than that. Death benefits are a valid consideration for transfers. However, buying life assurance is looked at as an option in the analysis.

An annuity would almost certainly not be a viable option for the transfer value unless health issues exist and you include death benefits better than the DB scheme.

xylophone

You don't strictly need a "positive outcome",

https://forums.moneysavingexpert.com/discussion/comment/72014007#Comment_72014007

http://www.pruadviser.co.uk/content/knowledge/technical-centre/pension_switches_transfers/

PensionTech

My partner and I both have deferred DB workplace pensions of similar value (approx 15k per annum) but one has no provision for spouse benefits.

You sound like you know what you're talking about so I don't mean to sound like a doubting Thomas, but are you sure? Almost all DB schemes provide spouse's pensions in one form or another because it was broadly required to pass contracting-out requirements. Can you give any more detail about what they say on spouse's pensions?

What I'm wondering is whether, given your use of the word "partner", they might not provide unmarried dependant's pensions - in which case the solution might be to get married?

Alternatively perhaps you are in a civil partnership or same-sex marriage and you have the misfortune to be in a scheme that does no more than the statutory minimum when it comes to recognising these unions as equal to opposite-sex marriages, in which case you're stuck and I sympathise. You might find, however, that paying for a private life insurance policy alongside the existing DB could be cheaper than the loss you'll probably make on paying for advice and transferring out to purchase an annuity.

BoneyBoy

We are married. The occupational pension was started in the 80's and then gave the option of lower contributions in return for losing the spouse benefit. I guess beer money was more of a priority at the time :-)

Thanks for the responses. Erring towards a Family Income Benefit policy to cover off the bereavement risk but it's very hard to turn your back on the huge sums on offer. Probably a pension freedom too far to be honest.

jamesd

As mentioned earlier, you don't need a positive recommendation to do a transfer. There is no shortage of schemes which will accept a transfer if the advice is not to transfer.

However, I'm very concerned that you might waste so much of the money on a 3% escalating joint life annuity.

Are you familiar with state pension deferral? 5.8% increase in state pension for each year that you defer claiming it, increases with CPI for life, no inheritance or spousal benefit. You'd probably find that you could fund deferring for both of you at comparable or lower cost than such an annuity, giving you twice the income level before death and possibly substantially more after.

Dark_Sunday

jamesd wrote: »

There is no shortage of schemes which will accept a transfer if the advice is not to transfer.

Is there a list of such schemes ? The ones I contacted thus far won't accept DB transfer unless IFA outcome is in the minority 10% of "YES" to transfer.

This makes a mockery of the 3% IFA fee. You have a DB pension, decide to transfer, legislation stipulates you must have IFA assessment, IFA says "NO", takes the 3% fee & you transfer anyway. Doesn't make any logical sense. Before anyone jumps down my throat, I'm not impying it's the fault of the IFA.

dunstonh

Is there a list of such schemes ? The ones I contacted thus far won't accept DB transfer unless IFA outcome is in the minority 10% of "YES" to transfer.

This makes a mockery of the 3% IFA fee.

The IFA giving advice will have access to schemes that will accept it. The key thing is whether the IFA will transact the application if the advice is not to transfer. Something you should find out in advance.

davieg11

My IFA will have my report next week. If it is a recommendation not to transfer, he said I can still transfer with an 'insistent client transfer' if I still want to proceed.

CFrog

Davieg11. I'd be intertested to know how you get on.:j