DB to DC help please!

elbows123

Appreciate all the comments, it would be great to hear from people who have been in a similar position and how they approached the advice process.

MarkCarnage

elbows123 wrote: »

Hi,

So hypothetically you are 40 years old, your pension pays you 1k p.a at 60 linked to rpi, your employer will give you a 40k transfer value today, would this be good insurance to keep?

If it's uncapped RPI with spouse benefits, it does sound like good insurance to keep for many. Where else would you get a guaranteed real yield of 2.5%?

Having said that, I did transfer two small DB pensions to my SIPP, after paying about £4k in total for advice (this was about 2 years ago when CETV quotes arguably were near their peak) and before the adviser PI became as deeply unattractive as it is now.

However, I did keep my main DB as DB, as I place a very high value on that guaranteed partially index linked annuity. Besides, it's also more favourably treated for LTA purposes.

In the case of the other two DB schemes I got CETVs of c£260k in total for giving up a pensions totalling about £6.5-£7k p.a. Late 50s. Given the flexibility I have in how and when I take income for tax purposes, plus other advantages it was a no brainer.

Despite that, the second transfer nearly didn't happen because some meddling jobsworth at the FCA decided that there were some administrative flaws in my adviser's process (I was happy with it) and tried to put it on hold. The only reason it hadn't happened by this point was the admin incompetence of the administrator of the transferring scheme. I faced being in limbo with it for an indefinite period, but I got the name of the person dealing with it at the FCA, called them, emailed them, threatened them with legal action for NOT doing their job properly and after a couple of weeks they changed their tune and said that it could proceed. I think the guy was worn down by my daily emails and calls.....I even threatened to turn up at his Edinburgh office.....

elbows123

Thanks Mark,

I am happy to take onboard investment risk, I don't need the return guaranteeing and am not dependent upon the pension. It seems crazy as what adviser would in any other conversation tell their client with a balanced approach to risk to place their funds in an investment like the above.

Glad to hear you got your money out in the end.

MarkCarnage

On the face of it you tick the boxes for suitability then. However, it would appear that some IFAs advising on transfers have still been on the hook for compensation claims even when they advised against transferring......you could not make it up.....

Thrugelmir

elbows123 wrote: »

For me the investment side has alot to do with it, I am calculating a guaranteed income stream vs long term market average returns.

There's no certainty that the future will produce "an average return". With the greatest respect. Overconfidence in ones own abilities is the downfall of many an investor. Making money in an extended bull market is easy.

elbows123

I appreciate that. What do you think Warren Buffet would invest in for the next 20 years?

elbows123

Any other DB pension transfer experiences would be very much appreciated.

elbows123

MarkCarnage wrote: »

On the face of it you tick the boxes for suitability then. However, it would appear that some IFAs advising on transfers have still been on the hook for compensation claims even when they advised against transferring......you could not make it up.....

I've spoken to a few firms now and they seemed nervous, when I told them I was 40 this turned to terror.

sandsy

elbows123 wrote: »

I've spoken to a few firms now and they seemed nervous, when I told them I was 40 this turned to terror.

Because they need to demonstrate where this DB scheme fits into your retirement income plans. And that's harder to do the further someone is from retirement as most people in their 40s have no idea what they'll have or need in 20 years time.

You'd get a better reception from advisers by leaving it as is for a few years until you're over 50. If they haven't got professional indemnity insurance for advising anyone under 50, then their hands are tied. They're be committing commercial suicide by advising you.

And as an aside, just because you're an experienced investor doesn't mean you know everything there is to know about DB schemes. DB scheme benefit tranches are complex.

FatherAbraham

elbows123 wrote: »

I appreciate that. What do you think Warren Buffet would invest in for the next 20 years?

Warren Buffett would advise the average person to keep the defined-benefit income stream.

That's because there will be few opportunities to acquire such stable income payers in the future. It's a fabulous diversifier, and allows you to take a little more risk with the rest of your portfolio.

I doubt that you yourself have the investment skills of Warren Buffett.