Pension Transfer Cooling off?.

Rob459

Hi - hoping someone can help out on this one.

My father in law is 60 and on Tuesday (3/12) had a financial adviser visit him to look at his pensions and has made some recommendations that he has signed for that I think do not look beneficial for him.

He has a DB pension pot of c£350k which will pay out £10k when he is 65. Cut a long story short he has recommended that he move this out (transfer value £186k) and put into into a prudential account. Without going into all the details this really doesn’t look good for him, as whilst this gives him flexibility that isn’t really a big priority for him (although he may have indicated it was). He said he wanted some money to pay off some debts, but from what I can see he could achieve this by taking his pension early at 61 and a tax free lump sum of £45k - which is the only flexibility he needs.

He signed the paperwork on 3/12 can he cancel this?
Will the transfer have already of been started? I have read you may be able to stop it from being completed but the DB fund may not allow it to go back in?
If he can cancel will he be liable for the full fees of transfer? Or what fees would he be liable for

Any advice greatly appreciated. He is not financially savvy and I think he may have made a mistake, so hoping to get some advice so he can try and sort Monday

232607

Yes he can cancel it.
I’m a bit confused. You say the DB has a pot of £350K but a transfer value of £186K.
DB’s don’t have a pot, they are a commitment to pay a set amount as a monthly pension. What is this £350K that you are referring too?

Rob459

Sorry was rushing getting all on.

So the £350k is “the estimated current replacement cost of your pension income.”

Thats great he can cancel, will there be fees / charges for what he has done so far?

Silvertabby

A cetv of £186K in return for pension of £10K (even 5 years hence) doesn't sound like good value. Is it LGPS by any chance?

If your fil is sure that he wants to cancel, then I would get him to ring his current pension provider on Monday morning to tell them that he has signed a transfer form but that he no longer wishes to go ahead. They may ask him to confirm that by e-mail/letter, but they should put a 'hold' onto his account.

Then tell the FA that he wishes to reconsider.

Are you sure that this was a FA (possibly linked with the Pru) or an IFA? And is he/she a pension transfer specialist?

Rob459

Thanks I’ll speak to him.

Think he is an IFA as he isn’t tied to the pru. I don’t know too much about pensions I just think the flexibility that he is going to get from this he fundamentally won’t use, and the guaranteed income from the DB scheme and not ongoing charges/decisions to make is more inkeeping with him.

Is he likely to be charged anything for reconsidering/cancelling? I have tried to find this on the internet but can’t find anything conclusive. Like I say he is a non-financial person, and want to arm him with as much fact based info I can before he has the conversation on Monday.

Silvertabby

Can't help with the charges question, I'm afraid. It is possible that the IFA may charge for the work they have actually carried out.

Albermarle

He has a DB pension pot of c£350k which will pay out £10k when he is 65. Cut a long story short he has recommended that he move this out (transfer value £186k) and put into into a prudential account.

It is still a bit confusing >
A DB pension means you have a guaranteed income for life from the retirement date , usually linked with inflation and usually with some provision for a spouse in case the pensioner dies.
Many DB pensions try to buy out the future pensioners to rid themselves of the potentially expensive liability of paying a guaranteed pension.
If he was offered £350K this MAY be a good deal. if he was offered £186K it is a very bad deal and no IFA should have recommended he took it.

Rob459

Thanks. The transfer value is definitely £186k, and they have illustrated that to receive the same income from an annuity in a private pension would need an equivalent pot of money to the tune of £350k.

I’m no pensions expert, but it seems to have the guarantee of the DB scheme would outweigh the flexibility he will get - which I don’t think he actually needs in reality.

Also the annual charges for the fund and adviser are around £3.5k per annum and the fact he will need to be mindful that he will be asked to make decisions on this throughout the period, all add up to leaving it well alone.

Thanks for taking the time to respond

Dazed_and_confused

If he still unsure what is the best option you could point out that if stocks fell by about 20% his defined benefit pension would still be paying him £10k.

But his defined contribution pot could drop from £186k to £150k. And the charges would still be payable albeit they may be less to reflect the reduction in fund size

Brynsam

Rob459 wrote: »

Thanks. The transfer value is definitely £186k, and they have illustrated that to receive the same income from an annuity in a private pension would need an equivalent pot of money to the tune of £350k.

The figures you are quoting suggests you are looking at something called a Transfer Value Analysis. The adviser will have carried out the necessary advice process (and probably outsourced the TVA), so your father may well be looking at fees of at least £3K + VAT. The adviser can only go on what your father has told him, so if dad was adamant that flexibility was a priority, you can't blame the adviser for accepting what he was told - or for expecting to be paid for what will have been a substantial amount of work. Check the terms of engagement he signed up to.

Brilley

..that seems like a really poor CETV, I have just completed this excercise with our FA, (CETV about £100k for a pension of under £5k). They also provided me with a 20+ page report / risk analysis that went into all the considerations looking at all other details etc.