Final Salary Pension Cash Transfer and IFA charges

Happymonday

Hi all. I am a competent and confident investor with good ISA and pension fund performance. Recently I had one of my final salary schemes valued for its transfer value and the result was £198,000 which equates to 47 years of the forecasted annuity payments. This appears attractive to me at the grand old age of 57. However, having met with a couple of IFA's charges to transfer this amount into another pension for me appear to be very high. I dont want them to invest this for me (something they appeared keen on) and I felt suspicious of their promises on potential returns - I have been investing for some time now, know that returns cant be promised and am happy of my own returns @6%+ p/a with good balance of risk. I do appreciate the risks and costs of indemnity insurance but the charges of 3-5% do appear to be particularly high. If anyone is aware of FCA registered IFA's wh have done a good transfer job for them at a lower cost I would be grateful if you could message me.

JoeCrystal

Only 1 in 10 IFAs have permission to do this kind of work and the fact the premiums for the indemnity insurance is much higher along with the insurance companies withdrawing from the market offering such insurance on this kind of work meant that the fees would be high. So what is the range of fees you have been quoted on? Several thousand pounds would be cheap for this kind of work.

EDIT: I missed that you said 3% to 5%, sorry about that. So between £5,940 to £9,900 then. That sounds what I would expect, to be honest. You have to keep looking if you want it cheaper then.

SonOf

Recently I had one of my final salary schemes valued for its transfer value and the result was £198,000 which equates to 47 years of the forecasted annuity payments.

Final salary schemes dont buy an annuity.
Did you factor in the annual increases in the DB scheme income?

However, having met with a couple of IFA's charges to transfer this amount into another pension for me appear to be very high.

They will be for what has become a bit of an FAQ topic on here.

I dont want them to invest this for me (something they appeared keen on)

Which increases the risk for an adviser transacting in this area.

and I felt suspicious of their promises on potential returns - I have been investing for some time now, know that returns cant be promised and am happy of my own returns @6%+ p/a with good balance of risk.

What promises have they given? No adviser is going to promise a return. The best you will get is an expectation using reasonable assumptions. You may get some past performance indications but you shouldn't be suspicious of that as you have been investing and have seen the returns you have got.

Did you invest prior to 2008 or have you only invested in the good years?

I do appreciate the risks and costs of indemnity insurance but the charges of 3-5% do appear to be particularly high.

You have contradicted yourself there. You cannot appreciate the costs if you think 3-5% is high.

DB transfers are just about the highest risk transaction an IFA can have. It is also a current hot potato with the FCA. They will be paying for your transfer for the rest of their lives (or the life of the company). Long after you paid your fee. And only 1 in 10 advisers did DB transfers and that figure was before the recent PI issues that saw a number of insurers pull mid policy because of the new FOS limits.

I think if you realised the liability, you would not consider 3%-5% expensive.

midlandsimon

DB transfers are the next PPI scandal. You see claims management firms popping up already.


Advisers class this as super high risk work and charge accordingly to account for provisions such as regulatory insurance etc.


A lot of advisers wont get involved in 'insistent client' transfers and wont sign them off so I would be very wary of any adviser who would.

Happymonday

Thanks for these very useful responses folks. One last question. One of the IFA companies that approached me is EEA Authorised rather than EEA Authorised on the FCA website. Is there any increased risk as a result of this type of company being employed to carry out a review and transfer that you are aware of.

Dazed_and_confused

One of the IFA companies that approached me

Is that not a concern?

Happymonday

Apologies - it was actually a referral from a linkdin contact who then spoke to them.

SonOf

One of the IFA companies that approached me is EEA Authorised rather than EEA Authorised on the FCA website.

I would be concerned. Only on the basis that passporting is ending with Brexit and you dont want to find yourself half way through a transaction.

Also, I do have to say that it is very unusual to have an IFA based outside of the UK trading within the UK. It would be more likely to be an FA/sales rep. Or one of the expensive firms that deals with expats.

Malthusian

Happymonday wrote: »

Thanks for these very useful responses folks. One last question. One of the IFA companies that approached me is EEA Authorised rather than EEA Authorised on the FCA website. Is there any increased risk as a result of this type of company being employed to carry out a review and transfer that you are aware of.

I think there is a typo in this paragraph. But yes. Numerous people have been scammed by dodgy advisers working out of dodgy EU countries like the Czech Republic. If you are in the UK there is absolutely no good reason to use an adviser outside the UK. If I was living outside the UK I wouldn't consult a non-UK adviser either.

Which adviser is it?

If you are unconfident enough about transferring that a 3-5% initial cost seems like it could make a difference, then you shouldn't do it. If the case for taking the CETV is good enough then a 3-5% initial charge will be lost in the noise of the stockmarket after a few years.

sandsy

For a transfer, you have to use an FCA authorised adviser. If you did end up transferring, the trustees of your DB scheme won't release the money unless they can see the firm is listed on the FCA's website and is able to advise on pension transfers (on the FCA register, for any firm, this will be under the permissions section and will say something like 'advising on conversion or transfer of pension benefits').