Combine pensions or sipp or what?

Albermarle

It looks to me like I'm way better of taking the CETV - is there anything I'm missing?

Yes - currently there is no risk to the annual payments you will receive as they are guaranteed for life ( your average life expectancy means that from 55 you have a more than 50% chance of living for another 30 years) When/if you transfer you immediately expose your self to investment risk and who knows what might happen in that time .
It might be the right decision for you but it is a very big financial decision to take .
Have a look at this link:
https://www.royallondon.com/siteassets/site-docs/media-centre/good-with-your-money-guides/five-good-reasons-good-with-your-money-guide-2018-edition.pdf

savingholmes

I've had one quote for 3% and another for 2% so far. Any good defined benefit transfer specialists out there that would charge less?

Albermarle

This thread might be of general interest:

https://forums.moneysavingexpert.com/discussion/6091489/possible-transfer-value-and-advice

Dox

savingholmes wrote: »

It looks to me like I'm way better of taking the CETV - is there anything I'm missing?

Quite a lot, I'm afraid - but your IFA will cover all this when you seek advice (no point trying to cover everything here in the absence of full details of the scheme, your attitude to risk, health, other savings etc etc).

savingholmes

I have read the other thread and some others too. I have spoken to or messaged 4 IFAs so far:

No 1 - wants to meet me and would charge 3% - and seems to think there's a reasonable chance it would go ahead
No 2 - wants to charge 3% on the first #250K and then 2% on the rest - rang me today - very rarely say no
No 3 - said wait until 55 or close to it so take less risk. What's irritating to me is that they ignore any growth I am potentially missing out on and that my cetv could also fall significantly. They were willing to let me speak to one of their people in more detail though before they made a final decision. They appeared to charge a flat fee - #1K for initial advice - another #3K if proceeding and then I think 0.7% on-going advice fee for them to manage my sipp for me... Would be reluctant to do it without the 'on-going relationship'. Suggested getting annual cetv number and reviewing
No 4 - said wait until 55 or close to it so take less risk but we will help you with your other sipp plans for a fee - can't remember if it was 0.7% or higher. Again want 'on-going relationship'

A relative is going to ask whether any of his contacts in the industry would do the transfer - but said lots running scared because of insurance / claims risk.

I still want to do it at the moment... Frustrated that I am being charged an arm and a leg to get to manage my own money!

savingholmes

I spoke to another 2-3 IFAs. The final tally. Most said their insurance wouldn't cover me below age 55. I could then have picked a transfer company that would have been below 2%. One IFA claimed there were only about 70 transfer specialists in the country - hence the rate. Two 'introducers'/IFAs did use the same company. One IFA told me that they share the money with the pension transfer specialist - 40% of the fee goes to the IFA and 60% to the pension transfer specialist.

2 said they could speak to me from age 50 ie when within 5 years of planned retirement. I got 1 of those from Unbiased and 1 from a personal recommendation. Vouched 4 gave me someone that charged 3% to speak to - TBF to their Customer Services they checked someone had been in touch by email, asked me if I wanted anyone else and rang me up to find out why I hadn't proceeded.

I managed to get someone down to 2% but only because he too read the rates wrong on the pension transfer specialists page. I do think their rates are misleading - it was a page that said 3% for £250K , 2% for above but below another figure etc... Either way they agreed to honour the 2% I had been quoted by the IFA.

I do think the FCA have created a 'racket' or monopoly in their desire to protect those with DB pensions. If I pay 2% - that is equivalent to a year's pension at 60. The FCA say the fee should be around £4K - I haven't found any provider yet that is willing to do it for that. By prosecuting companies where they didn't like the advice given - even where it was an insistent client - they have driven up insurance premiums and created a bigger monopoly. Someone I work with - who is the kind of person the FCA are trying to protect - got his DB transfer through. He was aware of paying 1% a year for advice - but unaware that he had also paid a transfer fee - he told me 'I think I got it for free'. I worked out based on the figures he gave me - he had paid £5K!!! plus an on-going 1%. Fortunately for him - he too needed a second CETV and it went up £30K.

I still want to transfer my £ but now have to wait until my 50th birthday. I am potentially losing out on 4 months stock market earning potential as a minimum. Yes I am also protected from the stock market but I have no control over what my cetv will be then. (I am told the 'gilt' 10 year market yields are likely to have the biggest impact on my CETV - that or a change of the view of risk by individual actuaries). I will have to pay for another CETV - costing me £120+ (I've heard of others paying far more). I have to hope and pray that next time they offer me a cetv that it is no worse than this one or I could end up very disappointed.

Hope that helps some of those looking into DB transfers. I will let you know how I get on after I am 50!! Interestingly the FCA also takes a dim view of triage services - I would say they have all triaged me to some degree - I spent 40 minutes on the phone with the first IFA I spoke to.... It's been an interesting 10 days.... and I've learned a lot. I do now have a copy of all the main paperwork I would need to fill in - at least I can review that at my leisure.

savingholmes

Well I got a new CETV in May and it went up to £355K a £30K improvement. I turned 50 - and tried to use one route who turned me down but wouldn't explain why. I am now trying a second route which if I go ahead with requesting the advice would charge me £500 for the advice and then 3% on the first £50K, and then 2.5% thereafter - giving me an eyewatering fee of 9.6K if I proceed. With the increase in CETV that feels more okay now. The DB pension would otherwise pay around £7.8K at 65 or around £6K at 60. Survivor benefits are half. It can go up by inflation RPI upto 5% a year until I am 60 and 3% thereafter. We are still really keen on the option to retire or semi-retire early so I still really want to take it.

I think I probably got turned down by the first provider for:

• Ironically being too risk averse
• Possibly disclosing recent ASD diagnosis - but this  makes me not want to disclose it again
• Talking about wanting to transfer into a SIPP. 

The new pension transfer company say they don't take insistent clients, won't sign my paperwork if they recommend against transfer and won't touch self investors - only those who transfer into 'reputable' pension plans. Ironically for my IFA - I don't think he would count even though he has a so-called track record of market beating returns. I'm due to submit the forms Monday for the initial report. Any further thoughts?

I have a different career average pension on top of this that I am currently contributing to which is worth £8.8K per year from age 67 and a small DC pension pot of £2.8K total. I don't know how DH's pensions are doing but earlier in the year they were worth £112K. We both are due to reach full SP contributions by age 55 according to the government checker.

gm0

Transfer

DB to DC transfer has a high "fixed cost" for people above 30k value or guaranteed benefits - the mandatory advice threshold.  This has been done to death on here on other threads (About adviser insurance for "misselling" cover the why of expensive and "i don't want the business quotes").  FCA is trying hard to put the brakes on this after scandals like British Steel. 
Smaller pots the transaction fee is high and there is little to be done about it.  Insistent clients can get it done but not cheaply.

Drawdown

My take as a DC drawdown pensioner in waiting. (No DB other than State Pension).

Before concluding on DB to DC in your adviser conversation or better yet prior to it - think through what you will do to manage the DC pot in drawdown (if DIY) or what you will tell the adviser if not - and what "sustainable" indexed income this needs to/can deliver for you based on your risk appetite (which from actions elsewhere is undefined or low to date).   Look at what typical returns would be (for a given asset allocation - long term equities, bonds/cash).  Look at what cost drag would be.

Then compare that projected drawdown income (which is variable and not guaranteed at all) with the existing DB benefit.  How much more is it along the way or in terms of capital retained - in return for the extra risks you are now taking on solo. 

If you want this to cover you and spouse for an up to 40 year retirement then as a first go - guess 3.5% of pot as a "safe" income level (indexed). Go and read monevator on drawdown.  And learn why this number can be argued down (or up by 1%) based on changing other assumptions and speculations.  Plenty on the web about it. Perhaps even have a play with FlexibleRetirement Planner which will vary return and inflation assumptions for runs of random returns to see what volatility could do to you in terms of income shortfall or failure. 

From this research take a view on what *you *would do and still sleep at night.  Maybe DIY is not for you.  Adjust assumptions on fee drag by +0.5% fund value pa for the IFA.  Whether you adjust "speculative risk taken" and asset allocation and positive returns for the IFA route is another decision for you to take a view on.  Costs are guaranteed. Sustainable Alpha (returns over market) isn't. And you get the value of not having to do it competently yourself.

As a comparison - age 55 level, joint life annuity, 100% spouse, £3216 per 100k of fund unindexed - so only 3.2%. Horrid. You can likely beat that but you now own sequence of return risk in the first half of retirement, and longevity risk at the end instead of pooling it. And you probably want indexation for a 40 year retirement.  SP cutting in later will help make the drawdown sums add up better for a given income level.  Tolerance of variable income especially early on will help.

Regulated protection

Another detailed point - consolidating into occupational pension is likely into an insured scheme.  A SIPP isn't with 85k protection only. Until the SIPP can do something you need which the occupational doesn't I don't see why you would jump across.  Look at the costs and funds available in both and any other issues - digital access, terms and conditions - and then decide on the tradeoff.

In short - understand what is waiting on the other side of the transfer and assess the benefits of the managed DC lump sum vs existing income stream very carefully in mix of overall assets.   Then if the tradeoff is worth it - *for you* - you will be better equipped for the adviser discussion required to move it.

Working out running drawdown yourself requires you to establish "must have" and "nice to have" income levels over the years so that your tolerance for variable income can be established.  This leads to a view on how well this is supported i.e. "required" and nice if they turn up "expected" returns, asset allocation, cash buffers and other sleep at night risk mitigations etc. 

It can get complex - or you lower the extraction to a very safe level and set and forget.  Likely then to not fail and your heirs get lucky most of the time.  Or you manage with a view to depletion in your mid 90s. Entirely up to you.

And guess what it is people look for to materially manage drawdown risk down - Guranteed Income floor via appropriate sources not correlated to portfolio asset return.  State pension, DB pensions, bond ladders (US) etc.

gm0

I see you have moved on a bit from what I read before commenting but much of it still stands. 

As you are discovering people really don't want this "likely to be found to be missold later" business without the fat fee up front (to pay the PI insurance) and ideally ongoing service.  May be finessable by using a DC occupational for same individual as the target perhaps (hard to argue not reputable).  Also stakeholders can't reject transfer in.

If you are ultimately an insistent + determined client then you will need to avoid "committing" to fees without a written contractual commitment back they will sign papers for you having received regulated advice - whether or not they are the transfer agent or target operator.  You won't find a queue forming for this misselling risk forever no ongoing revenue role.  Some dubious smaller players that the FCA is playing whack a mole with who planned to make a few bob and then cycle the ltd company before the tail risk turns up - their PI insurers understandably not keen on this game. 

This is another topic with many threads where people have found that their selection of receiving scheme won't play without something the mandatory advisor won't do.  Or the CETV times out. Or some other bureaucratic hole in the ground opens where it all stops and starts again at further cost, complaint loops, FOS etc.   You will need to be very determined and detail focused.

The sense of my input was to be careful and to look at how the other version will be run before deciding to go on this difficult journey.  Good luck whatever you decide in the end.

AnotherJoe

savingholmes said:

The new pension transfer company say they don't take insistent clients, won't sign my paperwork if they recommend against transfer and won't touch self investors - only those who transfer into 'reputable' pension plans. Ironically for my IFA - I don't think he would count even though he has a so-called track record of market beating returns. I'm due to submit the forms Monday for the initial report. Any further thoughts?

I have a different career average pension on top of this that I am currently contributing to which is worth £8.8K per year from age 67 and a small DC pension pot of £2.8K total. I don't know how DH's pensions are doing but earlier in the year they were worth £112K. We both are due to reach full SP contributions by age 55 according to the government checker.

Dont forget once you've transferred via them / to them and they are managng your funds (and charging a pretty penny for it) you can then move it out to a SIPP if you want.

I suspect one reason they want to manage the investments, other than the income to them, is they are then more protected against an individual who messes up their own investments and went direct to a SIPP. The FCA will tell them "well you shoudl have known this innocent person woudl screw it up and not allowed a transfer".

In the case where you transfer to them and then transfer out and mess up, theyve then got a defence which is that you ignored their investment advice and messed it up yourself.

You'll i think be in a similar position to me and others, you'll have a solid "core" DB pension (two in fact) plus later SP,  which will pay for basics, and then you can drawdown from your investments at a rate and timing that works for you.