Pension Transfer Cooling off?.

Albermarle

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.

The idea of a DB scheme is to provide a guaranteed income and for most people the best option is to just to stay with this. For a minority it can be a good idea to transfer out if:
1) The transfer offer is very generous
2) You have a life limiting illness
3) You are financially savvy
Your Dad's position fails on all three points:

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.

IN this case surely the IFA would have to recommend NOT to transfer ?

SonOf

Is he likely to be charged anything for reconsidering/cancelling?

Yes. The adviser is paid to provide advice. So, your father has had that advice and you would expect to be billed irrespective of outcome.

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.

Ignore the £350k. Its hypothetical figure for using an annuity to match the benefits of the DB scheme.

which will pay out £10k when he is 65.

Is that in addition to a tax free lump sum or is the figure reduced if the tax free lump sum is taken?

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.

What are the penalties for taking the pension at 61 instead of 65? Clearly he wont be getting £10k in that scenario. So, what will he be getting instead?

IN this case surely the IFA would have to recommend NOT to transfer ?

£186k for a 10k income does suggest that leaving it where it is would be the best option. However, this early access scenario the OP mentions may well be in play here. Is the 10k based on remaining a contributing member or deferred member for example.

Rob459

Is that in addition to a tax free lump sum or is the figure reduced if the tax free lump sum is taken?

- the £10k figure is pre any lump sum. If he takes out the max lump sum of £48k the it reduces the pension to c£7.5k - he also has the option of taking it next year when he is 61 for a reduction. Without taking a lump sum it reduces to £8.9k and with the same lump sum goes down to £6.4k

He is a deferred member and hasn’t paid anything into it since 2003.

In all honesty I don’t think the adviser has done anything wrong, just the father in law has made a big deal about being worried about if he dies the pension dies with him, and he wants to leave it to his wife. I think it’s only now though when he has seen the difference in what he would have to sacrifice in order to gain this that it looks like a poor choice.

He was given a booklet of 50/60 pages showing the risks of doing this and what the personal pension would need to perform at to match the DB scheme, but he says he was only given this once he had signed - which feels a little underhand as this highlights all the risks clearly. In addition the form he signed he hasn’t got a copy of, which again doesn’t feel right as presumably that details all the fees and cancellation rights. Ther are details in the pack about cancellation in general, but it refers more about once it’s all set up rather than cancelling from the initial transfer option.

All in all he has been naive and hasnt really understood the impact of what he is doing, and whilst I totally acknowledge ther is blame on him for this, some of the things the adviser had done doesn’t quite seem to be totally transparent

Thank you all for your comments. I have spoken to him and he is going to give them a call tomorrow, but he is worried that the feels will be the full 5% fee that is quoted as the adviser fee - c.£10k

Rob459

You would think so, but looking at what the father in law has said, his high priorities was having flexibility and control over his pension and leaving it to his wife should he die. So I think it’s on this basis the adviser has recommended he move it out. So I don’t blame the adviser, just don’t think the FIL really understood how much of a financial impact this would be compared to staying in the DB scheme until he saw it in black and white - which he says was only handed the document after he had signed up, before it was all figures written on paper in front of him.

sandsy

Rob459 wrote: »

You would think so, but looking at what the father in law has said, his high priorities was having flexibility and control over his pension and leaving it to his wife should he die. So I think it’s on this basis the adviser has recommended he move it out. So I don’t blame the adviser, just don’t think the FIL really understood how much of a financial impact this would be compared to staying in the DB scheme until he saw it in black and white - which he says was only handed the document after he had signed up, before it was all figures written on paper in front of him.

It all sounds shocking. The regulator is finding that a lot of pension transfer advice is pretty bad. Take a look at:

https://www.fca.org.uk/publications/multi-firm-reviews/key-findings-our-recent-work-pension-transfer-advice

Scroll down about half-way to the first bullet under "We observed firms.....

....Using generic objectives in fact finds, such as 'flexibility' or 'increase pension' without exploring what these mean to the client, whether the client is able or willing to take the risk required to achieve those objectives, or why they were prioritised ahead of the other needs and objectives of the client.

.... Prioritising the provision of ‘death benefits’ for spouses and dependants in the event of the client’s untimely death without exploring alternative options

So it sounds like this adviser has done exactly what the FCA says they shouldn't be doing.

p00hsticks

Rob459 wrote: »

In all honesty I don’t think the adviser has done anything wrong, just the father in law has made a big deal about being worried about if he dies the pension dies with him, and he wants to leave it to his wife.

Many DB schemes include a residual pension - often 50% of the main pension - for a surviving spouse. Are you sure your FILs does not have this as that might address some of his fears ?

Rob459 wrote: »

He was given a booklet of 50/60 pages showing the risks of doing this and what the personal pension would need to perform at to match the DB scheme, but he says he was only given this once he had signed - which feels a little underhand as this highlights all the risks clearly.

As Brysnam and SonOf say, the advisor should have done a considerable amount of work to come up with his report and tadvice, and his intial charge will be cover this work. Are you sure that the signature was for permission to proceed with the transfer and not just as an acknowledgement that the advice had been given? One could understand why the adviser would not want to hand over his work prior to getting some sort of consent for payment.

Rob459

p00hsticks wrote: »

Many DB schemes include a residual pension - often 50% of the main pension - for a surviving spouse. Are you sure your FILs does not have this as that might address some of his fears ?

He does have this within his DB scheme - 50% for 5 years from what I can see. Trouble is he is clueless and not really looked into it fully.


As Brysnam and SonOf say, the advisor should have done a considerable amount of work to come up with his report and tadvice, and his intial charge will be cover this work. Are you sure that the signature was for permission to proceed with the transfer and not just as an acknowledgement that the advice had been given? One could understand why the adviser would not want to hand over his work prior to getting some sort of consent for payment.

Possibly - as its all third hand i am not sure exactly what was done/said/signed for. He is going to give them a call tomorrow to ask that everything is put on hold and then understand what the costs of pulling out will be.