Conversation with IFA about DB transfer

bostonerimus

Do not work with this adviser. You are in charge and if they insist on managing the money after the transfer analysis then they are not listening to you....the client. Also whatever the arguments about trackers vs active funds I think everyone will agree that the comments about trackers are just wrong; a tracker portfolio can be as risky or as conservative as you want depending on how it's constructed. Did the IFA do a budget with you so you know how much income you require......that combined with your risk tolerance and whether or not you want to leave a legacy are vital in the planning. And those fees are ridiculous.

However, you are jumping the gun a bit. Are you sure the DB to DC conversion is the way to go? Can you give us some numbers about your age: when the DB pensions would start; the death benefits; your current ages; the amount of the annual pension, is it index linked? What about doing a transfer with just one of the pensions.....a DB pension, state pensions and a DC pot of say 900k would be a very nice mix in many circumstances. Did your adviser look into that options?

jamesd

normanna wrote: »

He said we could explore other options if we wanted to increase risk. He also said that we would find it difficult to find an IFA to sign off on the transfer if we wanted to self manage a personal pension or SIPP - I'm not too sure what the difference between the two is.... He also said it is worthless to consider tracker funds as they are a waste of time with such a large investment as there would be too much risk.

Would be good to hear others thoughts on what he's said along with the charges please

He's lying to you. Find someone else who won't treat you like a sucker on charges and what you are or aren't allowed to do.

The legal requirement to do a transfer from a defined benefit scheme is to have received financial advice. The DB scheme is required by law to ensure you have. You are not required to act according to the advice but this adviser has told you about the rules from two years ago before pension freedoms where that usually was needed. So any adviser who will give you advice for or against the transfer is sufficient and you can transfer even if they say it's a bad idea.

A SIPP is a self-invested personal pension. Just a personal pension that allows more investment choices. The better known personal pensions for individuals are also SIPPs just because it's a bit more flexible in what you can do. Being able to invest in shares, investment trusts and exchange traded funds is where the difference usually shows up.

Tracker funds vary in risk, depending on what they are tracking. A bond tracker has bond risk, an equity tracker has equity risk for whatever market or type of investment it's tracking. Managed funds can be managed to reduce or increase risk compared to what their underlying investments are. The adviser may have thought that you would be more inclined to take advice about managed funds than trackers.

username12345678

IF you decide to go ahead then you could give the IFA a year or two while you take advantage of the information overload that is the internet.

I was/am in a similar situation and tbf I moved from a mindset before transferring of definitely self-managing to eventually going with the IFA/WM for the first year.

Will I be ready in another 6 months to manage what for me (and you) is your families future? I intend to be.

But if i'm not my view is it's better to pay someone a fee to avoid mistakes that could cost you many times that charge.

Best of luck!

bostonerimus

username12345678 wrote: »

IF you decide to go ahead then you could give the IFA a year or two while you take advantage of the information overload that is the internet.

!

This could well be a terrible move. Why compromise when we are talking about life savings. Do the due diligence to get it right the first time because getting it wrong could be very expensive, The adviser sound very dubious.

username12345678

bostonerimus wrote: »

This could well be a terrible move. Why compromise when we are talking about life savings. Do the due diligence to get it right the first time because getting it wrong could be very expensive, The adviser sound very dubious.

My reply was in a general sense rather than specifically about the OP's choice of FA/IFA.

I do get your point though.

C_Mababejive

Just a side issue rather than starting yet another pension discussion but if a functioning DB scheme has a rush of transfers out, what measures can they and do they put in place to protect the scheme and those choosing to remain?

martin1959

I am interested in this subject as going through process currently. Interested to hear thoughts on our proposal....

Currently have a DB pension that would now give me £1000 pm pension, or £44k and reduced pension of £660 pm. If we went down this route I would take the cash and reduced pension.

Offered CETV of £290k.

My plan is to take max tax free cash £75k and use as deposit for Buy to Let flat PP £200k. Each year take make lower tax wdl from pension fund £35k (I earn £5k pa from part time job - and yes I know there will be a £6k tax liability) and pay £30k off of mortgage.

Flats in our area sell very quickly and are always in demand, and would currently produce £1000pm rent. Once mortgage is cleared after 3-4 years, will own flat outright, producing £300 more per month than DB pension would (after taking lump sum), and should still have £75-100k in pension fund.

Longer term value of flat will rise, rent will rise (as DB pension payment would have) but MOST importantly, on death, the flat will pass to children, unlike pension which is a lottery as to how long you will live....

Just interested to hear thoughts......

Linton

martin1959 wrote: »

I am interested in this subject as going through process currently. Interested to hear thoughts on our proposal....

Currently have a DB pension that would now give me £1000 pm pension, or £44k and reduced pension of £660 pm. If we went down this route I would take the cash and reduced pension.

Why?

Assuming the numbers stay the same until you take your pension, you are giving up £340/month=£4080/year of index linked income for £44K. On a crude calculation ignoring tax and inflation linking you would be worse off after 11 years. Your life expectancy in your mid 60's is around 20 years.

Offered CETV of £290k.

My plan is to take max tax free cash £75k and use as deposit for Buy to Let flat PP £200k. Each year take make lower tax wdl from pension fund £35k (I earn £5k pa from part time job - and yes I know there will be a £6k tax liability) and pay £30k off of mortgage.

Flats in our area sell very quickly and are always in demand, and would currently produce £1000pm rent. Once mortgage is cleared after 3-4 years, will own flat outright, producing £300 more per month than DB pension would (after taking lump sum), and should still have £75-100k in pension fund.

Longer term value of flat will rise, rent will rise (as DB pension payment would have) but MOST importantly, on death, the flat will pass to children, unlike pension which is a lottery as to how long you will live....

Just interested to hear thoughts......

Looks very high risk to me. Your DB pension is guaranteed and index linked no matter what for as long as you live. The possible flat is a single point of failure. What if you have problems evicting a non-paying tenant? What if flat prices dont rise? What if rents dont rise? Have you accounted for costs? What if something catastrophic happens to the flat?

kidmugsy

martin1959 wrote: »

Currently have a DB pension that would now give me £1000 pm pension, or £44k and reduced pension of £660 pm. If we went down this route I would take the cash and reduced pension.

Just as well you're not going down that route then.

martin1959

The DB scheme is fine if you live long enough!

Without taking the cash lump sum the pension would be £12k pa. Assuming my wife survives me, she would have to live until around 83 until she had used up the equivalent of the CETV. Should she die at any point after me (unless within 5 years of drawing her pension), there would be nothing to leave.

There is minimal risk from bad tenants assuming we use an agent with rent guarantee policy. Yes the value of property may fall, but in the longer term property has never been a been a poor investment vehicle, unless you HAVE to sell in a depressed market. Rent for property will almost certainly rise with inflation due to the constant demand outstripping supply.

So at age 83 my wife will have had constant rent for the 23 years, of a similar amount to what her monthly pension would have been, but allowing for even moderate price increases, the £200k flat would be worth £300k plus to leave as part of her estate.

I agree, without children, we would probably just leave the DB pension alone, but as the true value of the DB pension is dependent on how long you live for, this too is a considerable gamble.