Transfer valuation from DB Pension - advice

jamesd

ManMadeWays wrote: »

James D Can I lend directly from the SIPP ? It's with Nucleus. Rather than take money out and get caught up in LTA/Crystalisation issues ?

Unlikely for the homes of children. A SIPP is prohibited by law from directly owning basic residential properties and if you were to repossess that's what would happen until the property was sold. And doing it without the building as security would be unwise and probably unacceptable to the SIPP provider. Unwise because umpteen deaths and divorces later the risk could change a lot. Unacceptable because telling them that they don't need to repay would likely be regarded as an unauthorised payment from the pension that would make the scheme as well as you liable to penalties. The scheme is unlikely to be willing to take the risk.

There might conceivably be some workaround involving a company in the middle that would hold the security to protect the SIPP. Might, not likely IMO.

One potential route might be via a peer to peer lending firm like HNW Lending. P2P is permitted in a pension and a security trustee firm is used to hold the property security so the SIPP won't ever own it directly. Naturally they would want some profit. If this interests you, best to phone them. The owner is a HNW person and you can expect a friendly and frank discussion about whether it appears worthwhile. There are other firms but I happen to know that the owner of this one has an open mind.

It's routine to do it for commercial buildings. Often a business owner owning the premises from which their business operates in their SIPP and paying their rent to it. Mortgage borrowing by the SIPP for this is also routine.

Mick70

The financial advisor our works use (I mentioned he south based whereas we are up north ��), he has asked me to ring him Monday evening so that my wife can sit in also , for a 30min chat .
I will ask if he has done such transfers before and the costs involved with all of this , I also want to ask if annual growth of say 2% (after any fees) is realistic for the pot and when drawdown occurs going forward (I’ve used 2% growth annual on my own spreadsheet on both the pot and the amount I drawdown , to try work out the pot would last ).
I want to ask how exactly drawdown works .
To ask if this would transfer into our Royal London DC scheme at work - I would want lowish risk
Profile to try protect my investment . He may say it should go in some other scheme though ?

Basically - What sort of things should I be asking him ?

Many Thanks for your time in contributing and helping out, Mick

Albermarle

I also want to ask if annual growth of say 2% (after any fees) is realistic for the pot

2% on its own is rather low, but 2% after inflation ( so 4 to 5 % ) would normally be realistic/pessimistic over a long time frame .

He may say it should go in some other scheme though ?

It will depend to some extent on what basis he is charging.
If he/she is charging a flat fee for the specialised pension transfer advice that is legally necessary, and for some general drawdown/investment advice, then should be up to you if you prefer to stay with your current Royal London DC pension .
However it seems from other threads that they often want to link the statutory advice to a % ongoing investment advice fee. In which case they may push you to their preferred pension provider.
One point is that Royal London normally only work through advisors so would they accept such a large transfer from an individual directly , even though you are already a customer ? Worth checking .

Mick70

He did a colleagues transfer from
One Dc pot (old employer) into our new Dc pot with Royal London , much smaller amount and DC to DC , But evenso it suggests he probably can ?

jamesd

DB and DC are different because of the mandatory advice for DB. But after the advice has been given he can probably do whats needed even if he isn't able to do the advice part.

Mick70

Spoke to the guy our company uses tonight on conference call with my wife sitting in also.
He was swaying me towards the DC option due to the large offer . Mentioned putting it into a SIPP ?? But also said he could put it into Royal London where my current works DC pot that have just started is , said he manages this fund also for us..
Now he quoted 2% upfront costs (34k!) which would come out of fund and then an annual fee of 0.75% but said that maybe able to come down.
Said I would get back to him before end of week as if want to press ahead there’s a lot for him to do .
When I said I would want low risk he said even with low risk from his experience a pot should grow at 3% after fees .
Big big decision for me now I know (and thanks to the helpful posts on here ) , does his assumptions and importantly his fees seem right ?

jamesd

His assumptions seem fine. He may well have available a SIPP offering that's cheaper and more flexible than the current work one. Advisers should really comment on the fees, not me, though transfer advice is quite costly and some of the risk is related to the amount being moved.

For the ongoing work the 0.75% is 12.75k and it'll be better to ask about and pay an hourly rate, almost certainly.

Mick70

Thanks yet again .
I was mainly concerned about the initial fees as it comes to 34k in this scenario , but possibly that is the norm .
When he mentioned the 0.75% he did say could possibly get that down - I guess I could ask if can do 0.5%?
I mainly asked Royal London as that is what work use and it’s a large established company , less likely to collapse than a smaller company say ?

jamesd

34k is high but I don't know enough about things like current PI insurance costs to know whether it's fair.

Ask him about hourly rate, not percentage, for the ongoing work. If he's an IFA he's required to provide an hourly rate option.

Plenty of firms are safe and you could express your concern and ask him to use two firms independent of each other. Though they might not stay that way, there's lots of consolidation going on.

sandsy

He shouldn't be pointing you one way or the other after just an initial chat - that's a big no-no as far as the regulator is concerned.

And those fees, good grief! £34k and £1k a month thereafter - no wonder he thinks you should transfer into something he can manage for you! That's nearly half your DB pension each year.