CETV IFA Advice Costs

Pursuit

£5-10k Would be taken from emergency fund in easy access savings account.

I was under the impression that there was quite a bit of work/analysis etc for the IFA in dealing with transfer. Is the fee really for PI insurance e.g £1k+ for initial analysis on whether to transfer or not. £5-10k more if transfer gets green light and this is basically just to cover PI.

kidmugsy

My instinct is that messing around with a DB pension to solve your son's housing problem is taking unnecessary risks.

No doubt we were lucky but I looked on our DB pensions as the solution to keeping us, and then my widow, in comfort and security in old age. Our capital for the Bank of Mum and Dad we took from other sources, namely TFLSs and life savings. I am therefore sympathetic to badmemory's suggestion that you find other funding for your son. Perhaps a bigger mortgage on your BTLs, perhaps a mortgage on your owner-occupied house, perhaps TFLSs from your DC pensions?

Perhaps set up one of those family mortgages where your money is kept in a semi-separate pot that subsidises his monthly payments for the first few years. Perhaps the two of you gift him and his wife/gf enough every year to fill a LISA each and so accumulate a deposit helped by a cheery gift from the taxpayer?

The best argument for transferring the DB pension may be your fear of an early death. How much would it cost to insure against that?

Steven_Robinson

Am I alone in thinking the DB transfer arrangements opinion in the U.K. are just totally unacceptable?
I am 55 and retiring from corporate life. I have 3 other businesses which provide substantial income and fortunately I have considerable assets. I’ve worked in finance all my life and am a qualified chartered accountant. So, I have 4 DB schemes and with annuity rates being what they are I’ve decided to transfer one of my schemes into SIPP drawdown. - value £500k and 45x annual pension. I would like the 25% TF element to expand my property development business. I fully understand the risks involved but in my fortunate circs am equally comfortable that I can absorb the risk. I understand the work that IFAs must do to comply with the regs (regs uncalibrated to the individual applicant!) and would simply like to either pay them an hourly rate or a fixed fee to fairly pay them for their work. I’ve been chasing around the country for 2 weeks with no results - it’s a closed shop with all IFAs insisting that I pay them 2-3% of the CETV for their services. What possible justification is there for this basis of feeing i.e. entitlement to a % of my pension value!!!!!
In my case I have little use for the advice but understand that the regs require it - but £10k - 15k for the privilege - really!!!
Any help from anyone would be appreciated - particularly if you know an IFA who will charge on an hourly or fixed fee basis.

dunstonh

I’ve worked in finance all my life and am a qualified chartered accountant.

I deal with many accountants, including some very senior ones, and in general, their knowledge on pensions is weak and nearly non-existent on investments. Whilst your profession and qualification means you should have a higher ability of understanding and comprehension, it doesn't make you an expert in areas that are not part of your business.

You may have self taught yourself but the rules take into account the majority of the public. And that can be frustrating for those that feel it is unnecessary for them.

IFAs must do to comply with the regs (regs uncalibrated to the individual applicant!) and would simply like to either pay them an hourly rate or a fixed fee to fairly pay them for their work. I’ve been chasing around the country for 2 weeks with no results - it’s a closed shop with all IFAs insisting that I pay them 2-3% of the CETV for their services.

The problem is that this is not an ordinary piece of work. The biggest overall cost to an adviser in a DB transfer is regulatory risk and liability risk. It would be wrong to charge an hourly rate at the same rate as it would be for setting up an ISA.

What possible justification is there for this basis of feeing i.e. entitlement to a % of my pension value!!!!!

It is a transaction that is deemed to be wrong unless proven otherwise. It is one of the most expensive transactions for an adviser due to it requiring higher qualifications, increased checks (usually by third party companies), increased regulatory reporting and a direct invite to the FCA to investigate your cases.

Unlike accountants where you can pass the buck when something is done wrong, advisers do not have that luxury. Accountants can say that you are not sure if something is allowed but it can be tried and we will see what HMRC say. Advisers cannot do that because they have to pay compensation if it is deemed to be wrong. And there is no long stop on that liability. It is for life. A self employed adviser could be retired for over 20 years and carry liability to the grave. Not only that, the spouse can carry the liability as well.

Accountants are not cheap either. I have several limited companies and pay more to our accountants a year than our capped charge. A simple form that took minutes for completion by a lowly clerk cost me £60. That equates to £720 an hour. There is more than 20 hours work in a DB transfer. So, at the accountant rate that is £14,400

What do you think is a fair charge for a piece of business that can close your firm down if it goes wrong? A piece of business that the ombudsman are more likely to rule against you even if you feel you have done everything right? A piece of business you will be on the hook for throughout the rest of your life? A piece of business that genuine IFAs will go through with a toothpick and get second checked and third checked (pre and post application by third parties that charge a similar rate for their time)

xylophone

Any help from anyone would be appreciated - particularly if you know an IFA who will charge on an hourly or fixed fee basis

See post 16.

Googling produced this ( I assume the firm in question)?

https://www.first-equitable.co.uk/2018/08/28/fixed-fee-fca-regulated-pension-transfer-advice/

Steven_Robinson

Not sure my means should justify an otherwise unjustifiable fee arrangement - it’s a bit of a non-sequitur ...

Steven_Robinson

Thanks - you make some valid points that the liability of the IFA is correlated to the value transferring and therefore there is some relationship to the value of the scheme transferring but I’m not sure that I see this as a simple % of the transfer value. I guess the main problem I have is that the regs make no distinction between someone who is entirely reliant on their DB scheme and someone who is fortunately able to shoulder a great risk burden. I don’t pretend to have an IFA’s knowledge of the variables that make up a valuation but I do understand my overall circs very well. This somewhat blunt approach to the regs gives me no opportunity to accept that risk which is unduly restrictive and very nanny state which is irritating... the advice ultimately given will no doubt be very sensible but it’s simply of no particular value to ME and there is no means of avoiding it - all in all a waste of everyone’s time and my money. Steven

Aegis

Steven_Robinson wrote: »

Am I alone in thinking the DB transfer arrangements opinion in the U.K. are just totally unacceptable?
I am 55 and retiring from corporate life. I have 3 other businesses which provide substantial income and fortunately I have considerable assets. I’ve worked in finance all my life and am a qualified chartered accountant. So, I have 4 DB schemes and with annuity rates being what they are I’ve decided to transfer one of my schemes into SIPP drawdown. - value £500k and 45x annual pension. I would like the 25% TF element to expand my property development business. I fully understand the risks involved but in my fortunate circs am equally comfortable that I can absorb the risk. I understand the work that IFAs must do to comply with the regs (regs uncalibrated to the individual applicant!) and would simply like to either pay them an hourly rate or a fixed fee to fairly pay them for their work. I’ve been chasing around the country for 2 weeks with no results - it’s a closed shop with all IFAs insisting that I pay them 2-3% of the CETV for their services. What possible justification is there for this basis of feeing i.e. entitlement to a % of my pension value!!!!!
In my case I have little use for the advice but understand that the regs require it - but £10k - 15k for the privilege - really!!!
Any help from anyone would be appreciated - particularly if you know an IFA who will charge on an hourly or fixed fee basis.

There are a fair few of us that operate DB analysis on a fixed fee basis, so it should be possible to find IFAs that will do it in your area. In less populated areas you may find fewer advisers with the right qualifications, but if you're happy to travel to the nearest city to meet an adviser for an initial discussion you should open up a decent range of firms.

Steven_Robinson

Thanks v much - useful. Steven

Pursuit

After 12 weeks CETV finally arrived. A grand total of £293K, so 15 times my deferred pension figure of 19K from 2016. So it would be a no go at this point.


Asked for assumptions used and they sent me this but for the life of me I still cant get the figures to equate to £293k.... Am I missing some element?

Financial Assumptions


Discount rate
Gilt yield derived from Bank of England data at Scheme specific duration years plus 2.5 p.a. (in line with the long-term expected rate of return on scheme assets)


RPI inflation
Difference between the yields on fixed- interest and index-linked gilts using Bank of England data at Scheme specific duration less 0.25%


CPI inflation RPI inflation less 1.0% p.a.


Deferred pension Equal to CPI inflation increases


Pension increases:

Pre October 2014 Linked to RPI assumption

Post October 2014 Linked to CPI assumption


Demographic Assumptions Recommendation

Post-retirement
mortality


Base mortality table: 110% of standard tables S1PM/FA adjusted to allow for individual years of birth with allowance for improvements in line with the CMI_2011 core projections assuming a long-term annual rate of improvement in mortality rates of 1.00% per annum.

Pre-retirement mortality Males: Standard table AM92 Ultimate.

Females: Standard table AF92 Ultimate.

Assumed retirement age Age 65.

Family Details A man is assumed to be three years older than his wife. 80% of males and 70% of females are assumed to be married at retirement or earlier death.