Defined Benefits Pension Transfer Rip-Off

JillyC8

AnotherJoe wrote: »

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.

My point was about being less negative towards the original poster rather than my own situation.

I don't imagine it is an hour's work, but how much work is it that warrants a charge of several thousand pounds? What's the hourly rate? I doubt there would be much come back on the Adviser later on for taking such a small amount but understand it if the value is a lot more than £30000.

JillyC8

bowlhead99 wrote: »

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...

Fingers crossed this will be the case!

dunstonh

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.

If you do not understand the concept of risk, then perhaps you should not be considering transferring your guaranteed pension into a risk-based solution.

My point was about being less negative towards the original poster rather than my own situation.

The first post in the thread will often set the tone of the responses.

I don't imagine it is an hour's work, but how much work is it that warrants a charge of several thousand pounds? What's the hourly rate? I doubt there would be much come back on the Adviser later on for taking such a small amount but understand it if the value is a lot more than £30000.

A firm that does DB transfers will be paying for those DB transfers every year for the rest of their lifetime. The more they do, the greater the cost. Every single year.

It is a transaction that the FCA consider missold unless proven otherwise. It is the current hot potato and PI insurers are pulling out of offering cover left right and centre. Firms are having to close down because they have done DB transfers. It is pretty much the highest risk transaction that an advisory firm can carry out.

The excess on DB transfers tends to be a minimum of £5,000.

In fact, often the lower the CETV, the riskier it is. Especially, if they are limited other income providing assets.

How much would you charge for doing a transaction that puts you in the spotlight of the regulator and is going to increase your annual costs by thousands or even tens of thousands every single year for the rest of the firm life? Even when things have returned to normal and barely any DB transfers are taking place, that firm will suffer the annual cost of doing them in the past.

Malthusian

JillyC8 wrote: »

What's the hourly rate?

Virtually irrelevant.

The fee mostly reflects regulatory levies, risk and the cost of insurance.

I doubt there would be much come back on the Adviser later on for taking such a small amount

The come back would be however much it would cost to reinstate the benefits the OP gave up whenever the OP complained. It wouldn't take much for that to be substantially more than the 55k CETV. Maybe even a six figure sum.

And he will complain as he thinks IFAs are ripping him off for charging a commercial rate. Whenever the markets go down, he will say to himself that he has been ripped off again and go see an ambulance chaser.

AnotherJoe

JillyC8 wrote: »

My point was about being less negative towards the original poster rather than my own situation.

I don't imagine it is an hour's work, but how much work is it that warrants a charge of several thousand pounds? What's the hourly rate? I doubt there would be much come back on the Adviser later on for taking such a small amount but understand it if the value is a lot more than £30000.

Maybe I didn't explain well enough. It's not about the work. .its about the liability and the cost of insuring that. The insurance for which went up massively start of this month. Caused by the regulators approach which essentially is, if someone complains, they are very likelly to win. Even if they go against advice.
Your doubts about "not much come comeback" are way off base.
If it is so lucrative, why do you think only 1 in 10 will do it and that % is falling faster than MP's supporting Theresa May ?

Dox

JillyC8 wrote: »

I doubt there would be much come back on the Adviser later on for taking such a small amount but understand it if the value is a lot more than £30000.

You really haven't a clue, have you?

JillyC8

Dox wrote: »

You really haven't a clue, have you?

No need to be nasty.

I don't claim to be 'clued up' about this (although clearly you are an expert of the snuggest kind, given your virulent comment).

Given how utterly horrifying the consequences appear to be for advising a DB transfer, it's a wonder anyone is doing it at all. Yet isn't it the case that even if advised to stay put, the pension holder can transfer anyway? (I have read quite a few threads on these boards in relation to this, where the transfer has taken place anyway). How is there comeback in these circumstances?

dunstonh

Given how utterly horrifying the consequences appear to be for advising a DB transfer, it's a wonder anyone is doing it at all.

It was around 1 in 10 only were doing it. With the PI insurers pulling out and those remaining to charge a lot more, the number is probably closer to 1 in 20 now. There will always be a market as those that are left can charge more to cover the higher risk.

Yet isn't it the case that even if advised to stay put, the pension holder can transfer anyway?

Theoretically yes. However, many providers will not accept advice to remain cases. Some will.

How is there comeback in these circumstances?

You would like to think none. However, insistent client cases have come back on advisers before. Such as being accused of not being strong enough in the advice not to do it.

There is also a conflict that never seems to get answered by the FCA. One the one hand they say advisers can do insistent clients. On the other, they say advisers shouldn't do what they know not to suitable for clients.

The main issue is the PPI companies go looking for new cases. They drum up complaints where none exist. However, if they throw enough mud at enough cases, then some will stick due to technicalities or a different perception by the case handler. The compensation culture means firms look to protect their backsides more. This sees high risk cases get priced higher or refused to do them.

JillyC8

DunstonH: thank you for your helpful response.

AnotherJoe

JillyC8 wrote: »

No need to be nasty.

I don't claim to be 'clued up' about this (although clearly you are an expert of the snuggest kind, given your virulent comment).

Given how utterly horrifying the consequences appear to be for advising a DB transfer, it's a wonder anyone is doing it at all. Yet isn't it the case that even if advised to stay put, the pension holder can transfer anyway? (I have read quite a few threads on these boards in relation to this, where the transfer has taken place anyway). How is there comeback in these circumstances?

Well, the cases I read, the arguments went as such;

Yes the person signed that they accepted the risk. However since they are not a pension specialist they couldn't be expected to understand the risk, therefore that agreement was invalid and it was the advisers fault.

Or, yes the adviser recommended not to transfer but didn't make the advice "stronger" and again, since the client is not a specialist they couldn't be expected to know that "dont transfer" means err, "dont transfer" and therefore it was the advisers fault
This is nanny state gone mad* and is why it was 1 in 10 and by all accounts falling rapidly probably 1 in 15 now. There'sa reason people post here asking hwo they can find one as theyve rung round halfa dozen and none of them are interested.


If these reasons / the situation has not persuaded you yet, or you just dont find this believeable then ask yourself, if it is as lucrative as people like the OP seem to think why aren't 100% of advisers doing it, after all its money for old rope?

* To be fair, the downside is, without this then many will be seduced by the money make a mess of it and be left in the lurch, so the regulator is protecting many inept people from themselves. However IMO the pendulum has swung too far towards not letting people make mistakes.

But then again look at what happens when the regulator is a laggard and fools rush with their life savings into "guaranteed" investments like vineyards, wine, parking spaces student flats and 8% "guaranteed" "bonds".