Defined Benefits Pension Transfer Rip-Off

ghoworth

Hello, like many people who want to maximise small defined benfits pensions by putting them into other investment vehicles such as SIPPs, the charges for doing this seem to be astronomical and shows how quickly the financial institutions and advisors see this legislation as another way to fleece joe public. I have a small pension of £55,000 that I want to transfer and have been quoted £4,000 to £10,000 to do so. Is there anyone out there that has manager to get the 'legal advice' without being ripped-off?


Here's hoping.

Dazed_and_confused

I have a small pension of £55,000

You are confused. Or confusing others.

£55,000 is a pension most can only ever dream of.

Do you mean you have a pension pot of £55,000?

If so it is defined contribution and should not attract significant fees.

Or do you actually mean you have a defined benefit pension (amount not disclosed) which has been valued at £55,000?

Silvertabby

ghoworth wrote: »

Hello, like many people who want to maximise small defined benfits pensions by putting them into other investment vehicles such as SIPPs, the charges for doing this seem to be astronomical and shows how quickly the financial institutions and advisors see this legislation as another way to fleece joe public. I have a small pension of £55,000 that I want to transfer and have been quoted £4,000 to £10,000 to do so. Is there anyone out there that has manager to get the 'legal advice' without being ripped-off?

Here's hoping.

That one (bolded) sentence is the very reason these laws have been introduced - ie, to save the pensioner from their own possible foolishness. How much DB pension/lump sum would you be giving up in return for this £55K? Which pension scheme is it? How old are you?

The fees you have been quoted are indeed high - but this tells me that these IFAs don't want your business because they don't want the hassle to trying to tell you that a transfer may not be in your best interests.

Triumph13

More to the point the adviser doesn't want to be sued 10 or 20 years down the track when you suddenly decide it wasn't a good idea after all. There are already companies constantly advertising to help people sue their pension providers for mis-selling.

AnotherJoe

ghoworth wrote: »

Hello, like many people who want to maximise small defined benfits pensions by putting them into other investment vehicles such as SIPPs, the charges for doing this seem to be astronomical and shows how quickly the financial institutions and advisors see this legislation as another way to fleece joe public. I have a small pension of £55,000 that I want to transfer and have been quoted £4,000 to £10,000 to do so. Is there anyone out there that has manager to get the 'legal advice' without being ripped-off?


Here's hoping.

yeh, its such an easy way to fleece the public that firms are pulling out of this business like crazy. Was only one in ten would do it probably only 1 in 20 now.


They dont want the business and charge crazy prices (a) to cover the astronomical insurance from people saying they were badly advised in 10,20 30 years time (using hindsight on their stock selections) and (b) its probably as much work as to analyse a £50k transfer as a £500k pension, so yours is disproportionately small and gets charged more.

Albermarle

Although normally transferring out of DB schemes is not a good idea, and I understand the legal need to take full advice is to protect people from them selves, and is also a reaction to pension scams in the past .

Having said that I can sympathise with the OP's position. He has a relatively modest sum he wants to transfer ,and he is being hit with proposed IFA bills way out of proportion to the money involved . To the extent it would make the transfer untenable.
Maybe the cutoff point at £30K is too sharp and there should be some kind of different/lower hurdle to jump if the sum involved was say between £30 K and £75K .

Although even then there would still be the problem of finding a provider to accept the transfer, especially if the IFA advice was not to transfer.

JillyC8

I totally understand where the OP is coming from. I don't know why posters are so negative towards people wanting to transfer a DB pension. There may be very legitimate reasons for doing so, and I think it would be far more helpful to stick to answering the question than insinuating the poster is 'foolish'.
I also have a small DB deferred pension valued at £34000, which I would like to access so I can transfer and begin paying down my mortgage, but I can't because of the ridiculous cost of doing so, just because the value tips over £30000. And no, I'm not a fool, I have other pension provisions in place.

bowlhead99

JillyC8 wrote: »

I think it would be far more helpful to stick to answering the question than insinuating the poster is 'foolish'.

I also have a small DB deferred pension valued at £34000, which I would like to access so I can transfer and begin paying down my mortgage, but I can't because of the ridiculous cost of doing so, just because the value tips over £30000. And no, I'm not a fool, I have other pension provisions in place.

In the interest of looking at the question rather than implying you are foolish...

It's only really the distortion of really low interest rates compared to historic levels which are driving relatively high CETVs. If you simply wait a few years until gilt interest rates rise, your DB pension trustees will run the numbers and realise it will not cost them as much as £34k to provide you with the pension of £x per year, and they will revise the CETV downwards to a little under £30k instead of a little over £30k, and then you can move it to a personal pension.

Your 25% lump sum on £29.999k is 7.5k rather than 8.5k on £34k so the difference available to pay off your mortgage is only £1k which is probably comfortably less than the amount that an advisor would charge to give you regulated advice on the transfer...

AnotherJoe

JillyC8 wrote: »

I totally understand where the OP is coming from. I don't know why posters are so negative towards people wanting to transfer a DB pension. There may be very legitimate reasons for doing so, and I think it would be far more helpful to stick to answering the question than insinuating the poster is 'foolish'.
I also have a small DB deferred pension valued at £34000, which I would like to access so I can transfer and begin paying down my mortgage, but I can't because of the ridiculous cost of doing so, just because the value tips over £30000. And no, I'm not a fool, I have other pension provisions in place.

Why do you think it's a"ridiculous" cost? I guess you are thinking it's an hours work?
What do you think it would cost an IFA to insure against being sued and having to pay damages for giving advice even if that advice was not to transfer? Insurance to cover them even after 30 or more years ? Bearing in mind that currently people are being compensated for transferring even if the advice was not to transfer Even if they signed that they understood what they were doing and took responsibility for their investment actions.
Blame the nanny state. And note of course that if it was made easier there would be a flood of crooks persuading the naive to switch into unsuitable investments and then there would be a raft of complaints here about why aren't there tougher rules to prevent those who have no idea about investing being ripped off.

FIRSTTIMER

.kmdc buffsldf lm

Thrugelmir

JillyC8 wrote: »

I totally understand where the OP is coming from. I don't know why posters are so negative towards people wanting to transfer a DB pension. There may be very legitimate reasons for doing so

It's not the reasons for doing so that matter though. The issue is the reflection in years to come when it's decided that it wasn't a good thing to do. As a financial loss has been incurred.

Endowment policies were all the rage in the 70's and 80's. No one foresaw the crash in the Nikkei index. As a consequence investment funds could never recover. A bull market breeds overconfidence and complancency in investors. If making money were easy , we'd all be librarians.