Still got Pensions Dilemma....

happyandcontented

I have posted before about IFA/Pension advice and I took the advice of forum members and shopped around after it appeared that the first IFA we saw would levy charges that were deemed excessive. We really liked the chap though and trusted him to look after our interests, with a reservation that I will explain later.

Yesterday, we saw another chap who was recommended by a local non pension specialist IFA. He seemed to know what he was doing and it all accorded with what I had learned about the subject on here and from reading info elsewhere.He appeared to have creative ideas and was enthusiastic. However, he is a small one man band business, the premises were odd ( quiet and not busy) and he appeared very nervous during our meeting. I have researched him on the IFA registered site (using a link from his own website) and his name does not come up, is this a red flag?

His charges were lower (which is now becoming less of an issue for us as we feel we need to be sure we choose wisely) However, he came highly recommended by an IFA we know. She was upfront that she would receive a commission if we used him.

The pension pot involved is £1.2m split between a DB CETV and 3 DC pots.

The first chap almost dismissed the need to look at the DB CETV saying it should be left there.That is our reservation with him.

The second said as the transfer value was so good v the 26k it would produce at 65 it should be looked at and actively considered.

So, two specialist pension IFA's, two very different approaches and fee levels. Leaving us confused and uncertain where to go from here.

We have just set up a Ltd company and our accountants also have a financial arm who do this kind of thing too so we have agreed to meet with them for a 3rd opinion. My reservation with that is that all our eggs would be in one basket....

Any advice on what are the key questions we should be asking to aid our decision?

Thrugelmir

happyandcontented wrote: »

The first chap almost dismissed the need to look at the DB CETV saying it should be left there.That is our reservation with him.

The second said as the transfer value was so good v the 26k it would produce at 65 it should be looked at and actively considered.

No one is definately going to provide you with the answer. At some point it is your choice to make. Investment returns will be totally unpredictable. Whereas a guaranteed income for life linked to inflation provides a solid foundation for retirement.

pip895

Personally I wouldn't rule out the first guy because of his view on the DB CETV - It would probably be to his benefit to move it, so if he is saying leave it alone he probably has your best interests at heart.

There is also something to be said for keeping one DB in your mix of pensions.

The cost aspect is another matter - as I don't know how much we are talking about I wont comment.

PeacefulWaters

You have a decent size of pot, a good balance between guaranteed income and non-guaranteed potential income.

What have they said about lifetime allowance and taxation?

happyandcontented

Well, neither seemed to be aware (until I pointed it out) that the DB pension would not count as 800k towards the LTA whilst it was in situ ( it states on the paperwork that it is approx 39% of the LTA) so the CETV is clearly an enhanced sum. I know that if moved out it will then fully count.

They both mentioned the protection for LTA, but the first guy only in passing as he didn't want to discuss that pension.

I agree about the incentive to move it from a fee aspect but rather suspected that the first guy didn't want that responsibility or burden, whilst the second may just have wanted the fee.

Who knows whether their advice is coloured by their own positions or by our best course of action!!

crv1963

happyandcontented wrote: »

I have posted before about IFA/Pension advice and I took the advice of forum members and shopped around after it appeared that the first IFA we saw would levy charges that were deemed excessive. We really liked the chap though and trusted him to look after our interests, with a reservation that I will explain later.

Yesterday, we saw another chap who was recommended by a local non pension specialist IFA. He seemed to know what he was doing and it all accorded with what I had learned about the subject on here and from reading info elsewhere.He appeared to have creative ideas and was enthusiastic. However, he is a small one man band business, the premises were odd ( quiet and not busy) and he appeared very nervous during our meeting. I have researched him on the IFA registered site (using a link from his own website) and his name does not come up, is this a red flag?

His charges were lower (which is now becoming less of an issue for us as we feel we need to be sure we choose wisely) However, he came highly recommended by an IFA we know. She was upfront that she would receive a commission if we used him.

The pension pot involved is £1.2m split between a DB CETV and 3 DC pots.

The first chap almost dismissed the need to look at the DB CETV saying it should be left there.That is our reservation with him.

The second said as the transfer value was so good v the 26k it would produce at 65 it should be looked at and actively considered.

So, two specialist pension IFA's, two very different approaches and fee levels. Leaving us confused and uncertain where to go from here.

We have just set up a Ltd company and our accountants also have a financial arm who do this kind of thing too so we have agreed to meet with them for a 3rd opinion. My reservation with that is that all our eggs would be in one basket....

Any advice on what are the key questions we should be asking to aid our decision?

I am not an IFA but like you are researching for our future, it does seem to be a large sum of money and for an individual it is but in the scheme of things it probably isn't.


There are a couple of things that I would ask myself first-


1) What are the options before I try to move the DB monies? Larger pension/ smaller lump sum vs smaller pension/ larger lump sum?
2) Survivor pension from the DB scheme if any?
3) Do I want to sacrifice certain index linked income for risk of adding this pot to monies already at the vagaries of the market that I am already or planning to be in, as in eggs all in one basket?
4) How risk averse am I when the chips are down?


Then I would think about keeping a certain income and utilising the remainder of my monies to achieve my goals. After all if you transfer out and the markets drop by 40% would I still be able to draw an income level I want now or will I have to drop this?


As for different approaches by the IFAs that you have seen each will have a different view no doubt the third will also have a 3rd view. Don't necessarily dismiss a "one man band" he may have cleared his diary for a no interruption meeting? I would think why and how much commission/ finders fee he is paying to the IFA you know and recommended him and others may know if this is a market norm- I am not qualified to answer this but I would ask it!


Costs are important but so is confidence in your own decisions and choices and the relationship that you have with your chosen IFA. Freezing in the headlights of making the decision may mean you are not ready to decide but maybe no decision is worse than the wrong one, as in stay with the status quo until you are ready?


But you could end up going round and round and never making a decision until events/ age overtake!

pip895

Ultimately the decision on what you do with those pensions is down to you. There are a range of reasons the first guy might not want to talk about the DB CETV - it may just be that his experience leads him to believe that he wouldn't be able to justify touching it, and why spend time on something that's not going to happen. The other guy might just be less experienced.

If converting the DB CETV could result in you being hit with a tax bill for breaching your LTA then that would be another very good reason for leaving well alone wouldn't it?

If you start by moving the 3 x DB's you could always revisit the other pension at a later date - it wouldn't however be possible to reverse the decision if you move it now.

happyandcontented

crv1963 wrote: »

I am not an IFA but like you are researching for our future, it does seem to be a large sum of money and for an individual it is but in the scheme of things it probably isn't.


There are a couple of things that I would ask myself first-


1) What are the options before I try to move the DB monies? Larger pension/ smaller lump sum vs smaller pension/ larger lump sum?
2) Survivor pension from the DB scheme if any?
3) Do I want to sacrifice certain index linked income for risk of adding this pot to monies already at the vagaries of the market that I am already or planning to be in, as in eggs all in one basket?
4) How risk averse am I when the chips are down?


Then I would think about keeping a certain income and utilising the remainder of my monies to achieve my goals. After all if you transfer out and the markets drop by 40% would I still be able to draw an income level I want now or will I have to drop this?


As for different approaches by the IFAs that you have seen each will have a different view no doubt the third will also have a 3rd view. Don't necessarily dismiss a "one man band" he may have cleared his diary for a no interruption meeting? I would think why and how much commission/ finders fee he is paying to the IFA you know and recommended him and others may know if this is a market norm- I am not qualified to answer this but I would ask it!


Costs are important but so is confidence in your own decisions and choices and the relationship that you have with your chosen IFA. Freezing in the headlights of making the decision may mean you are not ready to decide but maybe no decision is worse than the wrong one, as in stay with the status quo until you are ready?


But you could end up going round and round and never making a decision until events/ age overtake!

There are 8 options for taking the DB pension! different permutations of TFLS and pension amount, indexing and non indexing, survivor 50% and non.

I think we would put the larger sum into cautious funds and the other 400k into medium risk.

We plan on running the Ltd company for contracting purposes for approx 3 years and then retiring at 60 and either closing it or just running down the monies left in there. On a fag packet calc after living expenses/tax for those 3 years we should have around 150k left in there.

pip895 wrote: »

Ultimately the decision on what you do with those pensions is down to you. There are a range of reasons the first guy might not want to talk about the DB CETV - it may just be that his experience leads him to believe that he wouldn't be able to justify touching it, and why spend time on something that's not going to happen. The other guy might just be less experienced.

If converting the DB CETV could result in you being hit with a tax bill for breaching your LTA then that would be another very good reason for leaving well alone wouldn't it?

If you start by moving the 3 x DB's you could always revisit the other pension at a later date - it wouldn't however be possible to reverse the decision if you move it now.

Good point re the LTA but the 2nd IFA suggested we should be ok on that front if;protections were in place, nothing more was paid in and a TFLS was taken. He suggested paying the monies from the Ltd company into a spousal pension for tax purposes although he suggested we see our accountant about that aspect.

I think your suggestion is a good one re taking things a step at a time, but we would still want to choose an IFA we could go forward with if we decided to do the large transfer.

I think we have decided to contact the first IFA and ask whether he is wholly opposed to DB transfer and get his reasons.

Alexland

Are you absoloutley sure you need an IFA on an ongoing basis? You seem clued up enough to be able to manage your own money using resources such as this forum to help where required. Would it be better to keep your use of an IFA down to transactional things where you definitely need their help?

Like mortgage brokers sometimes I wonder if getting help adds a layer of unnecessary complexity onto the situation that reinforces the conclusion that you need help when you might not if the situation was simpler.

Alex

happyandcontented

Alexland wrote: »

Are you absoloutley sure you need an IFA on an ongoing basis? You seem clued up enough to be able to manage your own money using resources such as this forum to help where required. Would it be better to keep your use of an IFA down to transactional things where you definitely need their help?

Like mortgage brokers sometimes I wonder if getting help adds a layer of unnecessary complexity onto the situation that reinforces the conclusion that you need help when you might not if the situation was simpler.

Alex

Thanks for the vote of confidence in me but it is something I don't share:T The thought of being personally responsible for "balancing" a portfolio is terrifying and my other half is similarly diffident.

I do know what you mean though re layers of advice, I suppose ultimately, it comes down to whom you feel at ease with and have confidence in?

However, we are (now) leaning towards removing the DB pension, but the IFA we would otherwise have gone with (higher fees notwithstanding) didn't seem to like the idea. That leaves us wondering if;; A) he is a good fit for us and are we doing the right thing and C) if it is personal liabilities that are driving his inclinations or our best interest.

Alexland

If it's the rebalancing that worries you there are low cost funds that will do the lifestyle balancing for you such as Vanguard Target Retirement. Like anything there is no perfect answer and it's unlikely that the IFA is any better at the job than the world's biggest fund managers who are under constant public scrutiny.

Ok the IFA can tailor it slightly to your risk appetite but the benefit of that might be outweighed by the drag of their compounding fees in the long term.