Pension pot

SonOf

I have used an IFA and a pension transfer specialist. They supplied contradictory recommendations.

All your recent criticisms have been about HL. A restricted FA.

As far as helping the OP goes, it looks as if the couple have weighed the benefits of a £30 per week pension for life against the cost of servicing their mortgage and found the idea of paying off the mortgage more attractive.

It is unlikely that paying off the mortgage is the most suitable action for them.

If they decide the pension is the better option, don't buy an IFA, just leave the pension intact.

But unless they contribute more to this thread and allow others to help them, are they likely to change their mind?

If they decide paying off their mortgage is still the better option, choose the cheapest IFA available after ensuring at the outset that the IFA is willing to sign a declaration (whatever his recommendation) to the fact that he has provided financial advice.

Advisers are required to sign the declaration irrespective of the advice. Providing that actual regulated advice has been given.

[Deleted User]

"All your recent criticisms have been about HL. A restricted FA."

I used an IFA to transfer that pension afterwards. You really don't know enough about it.


"It is unlikely that paying off the mortgage is the most suitable action for them."

You don't know what their debt repayments are, they do. Much better for them to arrive at their own conclusion.


"But unless they contribute more to this thread and allow others to help them, are they likely to change their mind?"

They are asking for practical help in how to proceed.
I would urge the couple not to get too sidetracked with advice from all directions.
The FCA has found financial advisers offer the wrong recommendation more than half the time! Besides, any IFA who has the gall to charge £5k for advice on a £47k pension is probably himself the chief cause of making a transfer untenable.


"Advisers are required to sign the declaration irrespective of the advice. Providing that actual regulated advice has been given."

Wrong. They are not required to sign a declaration on the application form of a provider (although they should be) so anyone buying the services of an IFA needs that undertaking from him before he employs him, as it is likely to prove a sticking point.

SonOf

"All your recent criticisms have been about HL. A restricted FA."

I used an IFA to transfer that pension afterwards. You really don't know enough about it.

And that IFA signed the forms required.

You don't know what their debt repayments are, they do. Much better for them to arrive at their own conclusion.

We don't know enough but unlike you, I would rather they didnt make a mistake whilst they still have a chance to do something about it.

In the majority of cases, pre-retirement clearing of the mortgage would not be considered a suitable use of a full withdrawal of the pension.

The FCA has found financial advisers offer the wrong recommendation more than half the time!

That is not correct.

The FCA intentionally focused on 18 companies with a disproportionately high level of defined benefit transfers. They were picked because of the higher risk of poor advice that would likely exist. A term that is often used for that sort of company is factory lining. i.e. they pump out the same thing again and again quickly and using templated methods and reasons rather than personalised advice. These companies were targetted on purpose. With those companies, it found the advice may not have been suitable on the first level check in around half of the cases (some later went on to be classed as suitable after clarification as is normal as adviser firms point out mistakes by the checker or clarify some of the unclear points that existed). 18 companies with a particular model out of over 10,000 are not reflective of the wider market.

"Advisers are required to sign the declaration irrespective of the advice. Providing that actual regulated advice has been given."

Wrong. They are not required to sign a declaration on the application form of a provider (although they should be) so anyone buying the services of an IFA needs that undertaking from him before he employs him, as it is likely to prove a sticking point.

Wrong. Yes they are. This was clarified by the pensions regulator around a year ago. Prior to that, advisers could refuse.

Technically, there is still a conflict. The FCA say that insistent clients are allowed and there is a process for it. However, it also says that advisers should not carry out transactions that are known to be wrong.

We are here to help people do the right thing. Not to help them jump off a cliff.

[Deleted User]

"This was clarified by the pensions regulator around a year ago. Prior to that, advisers could refuse."

Link, please.

SonOf

ZingPowZing wrote: »

"This was clarified by the pensions regulator around a year ago. Prior to that, advisers could refuse."

Link, please.

The moneybox article from 17:46 to 22:00 on DB transfers
https://www.bbc.co.uk/programmes/b09vwzg4

It was actually the pensions advisory service. Compliance companies offered guidance in their bulletins following that media article. Mainly on the basis that an adviser operating on contingency pricing could find themselves having to sign the form and taking on advice liability but not receiving payment for the advice.

[Deleted User]

Thank you for the link, Son Of.

I thought that a financial adviser is compelled to provide a declaration yet free to refuse to sign such a declaration on the transfer form of the receiving provider. Which is wholly illogical. But you're saying that your profession has been guided by the pensions advisory service - in the wake of the Moneybox interest - to sign a declaration on the transfer form of the receiving scheme too?

Ken-b

We have other pensions to cash in, just a query about this one.
I am actually receiving my state pension and working part time.
There are lots of personal reasons for cashing in the pension, the main one being no one on each side of the family has lived past 66.
My wife’s pension on death would pay 5 times the yearly payment to me.
Just for the record I am 67 this year but all sorts of health problems are occurring.

jamesd

Ken-b wrote: »

My wife has just requested the value of a deferred pension from her employer

"deferred pension" is the pension term for a defined benefit pension, like final or average salary. These don't have a normal pot value but instead an optional lump sum and ongoing income, some of which may increase with inflation, usually capped at 2.5% or 5% outside the public sector.

Except for many public sector schemes there is also the option to transfer to a personal pension. The value for this is called the cash equivalent transfer value (CETV). If the value is no higher than 30k the transfer can be one without advice. If more, the law requires the scheme to see proof that financial advice has been taken before transferring. It isn't necessary to follow that advice, just get and pay for it. If the advice is not to transfer, a transfer can still be done.

Ken-b wrote: »

Transfer value £47k
Lump sum £6.5k and a yearly pension of £971 per year.
Full pension of £1521 per year.

It's usually a bad idea to take the lump sum and income option from a pension like this because the amount of lump per Pound of income given up tends to be poor. In this case it's 6500 lump sum for giving up 550 of annual income, a ratio of 11.8:1, on the worst end of such deals. Best thought of as a sucker bet for those desperate for cash. It's like giving up 8.5% interest a year on the lump sum money every year for life. Few mortgages are as expensive as 8.5% and they are seldom for life. Better to take all of the income and use much of that towards mortgage payments.

But she can do better. You're both in your sixties so fairly close to state pension age. A person who reaches their state pension age from 6 April 2016 can defer it and get an increase of 5.8% per year of deferring. This increases with inflation, without a cap. A person who has claimed their state pension can still start deferring once.

Say her state pension is to be 8500 a year. After say 5k in advice cost she could defer for 42000 / 8500 = 4.94 years. Call it 4.9. 4.9 * 5.8% * 8500 = 2415 a year of extra state pension plus the increases while deferring.

That 2415 is a good deal higher than the 1521.

What 2415 doesn't include is a spousal pension for you if she dies first. That could be arranged by doing some deferring for you so you get payments even while she's alive. Usually it's better for it to be all for the woman because men tend to have more left after first death than women.

She could use some of the higher income for mortgage overpaying.

There are some other opportunities to consider. If she's still working we can explain how to increase her after tax income by 6.25% by paying in to a pension then taking money out. For someone not working there's between 180 and 720 a year to make by paying 2880 in to a pension and withdrawing the 3600 it becomes after tax relief.

jamesd

The health issues might make state pension deferring a bad idea. Depends on life expectancy.

One thing to check is what a single life enhanced annuity would pay. It could well be more than state pension deferring.

Reduced life expectancy is a major reason for transferring out of a defined benefit pension to be a good move. Substantially higher payments are possible.

DairyQueen

ZingPowZing wrote: »

1) An IFA is unlikely to recommend such a course of action, not because it is a bad idea for the client but because it is safer for the IFA to recommend that the client do nothing..

An IFA is unlikely to recommend because in 90% of cases it is a bad idea.

ZingPowZing wrote: »

2) It doesn't matter what the IFA recommends, it only matters that the IFA is willing to sign the transfer form of the receiving provider. A simple courtesy, the layman may think, but IFAs are quite shy of doing so, for the same reason as 1)

It very much matters what the IFA recommends. Would you consider it 'a simple courtesy' if a solicitor or accountant signed a form saying that you had received their advice but had chosen to ignore it?

ZingPowZing wrote: »

3) If you're sure of what you want to do, just find the cheapest IFA willing to comply with 2)

I expect you wrote your own Will having ignored the (cheapest) solicitor's advice.

ZingPowZing wrote: »

There's no justification in charging £5,000 on a £47,000 pension.

Which suggests that you have zero understanding of the time and expertise required to provide this type of independent professional advice, nor of the nature of indemnity insurance. And this despite many contributors explaining ad nauseam why you lost your case.

You have yet to learn that hubris is the biggest danger in financial decisions.