Cost of moving DB pension fund

number9

Hi,
It's my understanding that if I have a pension pot of over £30k then I HAVE TO appoint an FSA to oversee the transfer of my pension to another fund.
I have a pot worth approx. £185k. I've been quoted a fee of £7.5k (this is the minimum fee) to do this work. I feel that this is a license to print money. I was advised that the fees are now so high due to the indemnity taken out by the FSA/accountancy firm.
I think something has to be done about the cost of this type of work.
In my case, a recently retired FSA advised me to move my pot to a certain fund (the same as he had done when retiring within the las 18 months). He gave me projections as an example of how this may do versus the current scheme. The FSA I've approached (as the successor to my relation) has said that he agrees with the recommendation and has suggested doing the same and discussed the formalities about income and risk - just as I had already done privately. Only because I'm essentially forced to use an FSA I now have to pay for something I could have done myself/been aided for free. Just because there are people who don't provide adequately for their own future seems to mean we all have no choice but to pay excessive fees and follow legal rules.

Hoping MSE can look into this and see if anything can be done to protect the consumer from being fleeced by something they have no choice in. It would be great to see some regulation on this issue. It's a license to print money. My hard earned money and using a couple of years' worth of pension contributions to do so!

kidmugsy

What's an "FSA"?

p00hsticks

number9 wrote: »

It would be great to see some regulation on this issue.

Don't you mean removal of regulation on this issue ?
The regulations have specifically been put in place to ensure that people take proper advice.

sandsy

You don't have a pension pot. You have a promise from a pension scheme to pay you a specific income in retirement. You've been offered an amount to give that up.

When the amount offered exceeds £30k, the government requires you to take regulated advice as they consider that the promise you are giving up is valuable - it's generally an inflation linked lifetime income, payable at no risk to you. The alternative means you carry all the risk - investment returns, mortality, charges.

The regulator has certain rules regulated advisers have to meet. These mean that advice needs to be through and takes a good few hours to complete which is costly. When they've checked what advisers are doing, they've found that a good proportion of people like you have been advised to transfer when they shouldn't have been so are entitled to compensation. So professional indemnity insurers are nervous and putting up premiums to make sure they can pay out in the event of bad advice.

A lot HAS been done about this sort of work. The government aren't going to change the rules for you to get advice and the regulator is unlikely to slacken off, given the poor advice people have been receiving.

Maybe you should think twice about giving up something so valuable?

Alibert

There are loads of threads on the board about this . It's a tricky issue , especially with smaller pots where the cost of the advice is high compared to the value of the fund

Have you considered the possibility that when you get proper advice from a qualified IFA it may well be to NOT switch, and the regulation may have saved you from a costly mistake ?

One thing I notice here on the board is that the posters complaining the most about this regulation are those who seem to know the least about pensions, and are the most needing of some advice.

number9

kidmugsy wrote: »

What's an "FSA"?

Sorry. IFA.

number9

The IFA has is following the work I presented to him which was done by the recently retired IFA (family member) whom he succeeded in his post after the former's retirement. He has taken the projections/groundwork papers from me to add to his file to show that evidence of "due diligence and understanding of risk" has been considered. So yes, in the circumstances, £7.5k does seem very high.
The decision to move away from the DB fund is due to the fact that it is in deficit, has been helped by significant employer contributions for years which are unlikely to be sustained in the future and I'm also looking at the best options for my dependents.

Alibert

My advice would be to seek INDEPENDENT financial advice. Neither of your two advisors are really independent from you. Too much baggage there , go to someone with whom yo have no family link

AnotherJoe

number9 wrote: »

The IFA has is following the work I presented to him which was done by the recently retired IFA (family member) whom he succeeded in his post after the former's retirement. He has taken the projections/groundwork papers from me to add to his file to show that evidence of "due diligence and understanding of risk" has been considered. So yes, in the circumstances, £7.5k does seem very high.
The decision to move away from the DB fund is due to the fact that it is in deficit, has been helped by significant employer contributions for years which are unlikely to be sustained in the future and I'm also looking at the best options for my dependents.

The cost is not really for the work done at all. It's mostly to cover the indemnity insurance when you complain in twenty years time that the adevice was poor because you've now spent all that money and the adviser should have realised yiu would mess it up.
There have been some bananas decions by the authorities with regards to advice even as far as awarding compensation when advisers have said don't do it and the person went ahead and did it anyway (on the grounds by even giving negative advice they facilitated a transfer) . And there are certainly many people who are incompetent and susceptible to fraud and will lose the money.
So, people who have good cases tend to get caught in the crossfire of giving protection to the incompetent or niaive.
From anecdotal reports here there are some advisers who will still give low cost advice but uts hard to find them.

kwame41

7.5k to manage a transfer!


How much work is involved 3 months worth?

Alibert

A shrewd guess .. this IFA doesn't really want number9 as a client .
From his perspective he is being asked to provide advice , which the recipient doesn't think he needs, to someone who is a family member of his ex partner. Any advice that contradicts the view of the ex partner will be met with suspicion . The recipient of the advice seems likely to be an insistent client.

I suspect the £7.5 k is intended to make number9 look for advice elsewhere