IFA Pension advice

Dasa

Hi

I have a small pension fund with Aviva which is a defined benefits scheme. If I stay with them I will only get an annual pension of around £870.
.

I am thinking about transferring it to a scheme where I can take out
lump sums so got a transfer value of £39,000.They say I have to get a letter from an IFA before I can transfer out.


How much is this likely to cost?

dunstonh

how much is this likely to cost?

£1000-£5000.

bostonerimus

dunstonh wrote: »

£1000-£5000.

Looking at this from the USA that looks outrageous. That you need a letter from someone to access your own money and that you also have to pay for it sounds like another investor rip off.

dunstonh

Looking at this from the USA that looks outrageous.

Why?

What you need a letter from someone to access your own money and that you also have to pay for it sounds like another investor rip off.

It is a transaction that is wrong, historically, for people around 95% of the time. it is one of the highest risk advice transactions going and carries a lifetime of liability to the adviser with no stop gap. To do it requires a higher qualification and increased regulatory permissions and increased costs.

The regulator considers it mis-sold unless proven otherwise.

So, what price would you put on that then?

AnotherJoe

bostonerimus wrote: »

Looking at this from the USA that looks outrageous. That you need a letter from someone to access your own money and that you also have to pay for it sounds like another investor rip off.

The main issue is (and you should appreciate this being in the USofA) the insurance costs to protect against the OP claiming that he was ripped off and badly advised because he foolishly (or perhaps just unluckily) blew his lump sum a few years later. This can happen even if the advice is not to take the transfer but the OP goes ahead against advice. Effectively the adviser is still potentially liable merely for entertaining the idea it might be doable.

And that liability lasts for many years. Even (AIUI) after the adviser has retired.

dunstonh

And that liability lasts for many years. Even (AIUI) after the adviser has retired.

There was a case where the widow of an IFA was being chased to pay a liability claim some 20 years after he retired.

bostonerimus

dunstonh wrote: »

Why?



It is a transaction that is wrong, historically, for people around 95% of the time. it is one of the highest risk advice transactions going and carries a lifetime of liability to the adviser with no stop gap. To do it requires a higher qualification and increased regulatory permissions and increased costs.

The regulator considers it mis-sold unless proven otherwise.

So, what price would you put on that then?

If people want to pay for advice on a transfer all well and good, but the fees seem high and it should not be a requirement. I took the cash value of a small DB pension several years ago. I confirmed the amount using the requited IRS segmented interest rates and had the company roll the amount over into my Vanguard account. There was no cost what so ever and no need for any intermediaries. This is an example of extra costs being mandated on the investor because of legacy attitudes in the UK. The fact that the OP could lose between 3 % and 13% of their pension to what seems like a pretty unnecessary overhead for anyone with a modest amount of common sense might just be one reason why people in the UK are cynical about pensions.

xylophone

They say I have to get a letter from an IFA before I can transfer out.

https://www.fca.org.uk/consumers/pension-transfer

If the value of your pension assets in a defined benefit scheme is more than £30,000, Government rules require your pension provider to ensure that you have taken regulated financial advice before allowing the transfer to proceed.


https://www.fca.org.uk/news/news-stories/advising-pension-transfers-our-expectations

You will need a Pension Transfer Specialist.

https://www.moneymarketing.co.uk/how-much-are-advisers-charging-for-pension-transfers/

bostonerimus

xylophone wrote: »

https://www.fca.org.uk/consumers/pension-transfer

If the value of your pension assets in a defined benefit scheme is more than £30,000, Government rules require your pension provider to ensure that you have taken regulated financial advice before allowing the transfer to proceed.


https://www.fca.org.uk/news/news-stories/advising-pension-transfers-our-expectations

You will need a Pension Transfer Specialist.

https://www.moneymarketing.co.uk/how-much-are-advisers-charging-for-pension-transfers/

If people have questions they should be encouraged to ask for advice and pay a fair price for it, but the mandating of such advice seems like the Nanny State to me. I'd far rather see the Government spend more on consumer education than requiring the investor to pay for what should be a simple transfer. I'm sure politicians will describe the mandate as a safety net, but it could equally well be described as a result of the financial industry lobbying the powerful to throw a few more quid their way.

dunstonh

bostonerimus wrote: »

If people want to pay for advice on a transfer all well and good, but the fees seem high and it should not be a requirement. I took the cash value of a small DB pension several years ago. I confirmed the amount using the requited IRS segmented interest rates and had the company roll the amount over into my Vanguard account. There was no cost what so ever and no need for any intermediaries. This is an example of extra costs being mandated on the investor because of legacy attitudes in the UK. The fact that the OP could lose between 3 % and 13% of their pension to what seems like a pretty unnecessary overhead for anyone with a modest amount of common sense might just be one reason why people in the UK are cynical about pensions.

So, you think there should be no consumer protection to stop people losing money on around 95% of the cases over the last 30 years?

bostonerimus

dunstonh wrote: »

So, you think there should be no consumer protection to stop people losing money on around 95% of the cases over the last 30 years?

There should be protection against fraud. Of course requiring someone to get a letter costing 5k to access their own money sounds pretty dubious to me. Instead of charging the investor maybe the transfer system could be better regulated and made simpler. What about mandating that everyone attend a Government regulated financial training course paid for by the financial services industry before they do a pension transfer rather than having to pay an IFA.