Stunned at high IFA costs for DB transfer

IBunduli

An IFA has just quoted fees of £22,500 + 0.75% per annum ongoing fees to transfer my 3 defined benefit pension pots into a SIPP (of their choosing, not mine). The transfer values amount to just over £500k for the 3 DB pensions.
How can I find a cheaper IFA?
I am so stunned at these astronomical costs that I am thinking it would be cheaper to take the IFA exams and advise myself. If I advise myself then I don’t need insurance because I won’t sue myself. Does anybody know if this would be allowed or has anybody actually done it?

[Deleted User]

Scandalous.

The market is broken.

MallyGirl

Find another IFA who is a pension transfer specialist. The more typical costs people have mentioned have been 1-2% of value or £5k.

SonOf

£22500 is ridiculous. Something closer to £5k is more reasonable.

However, with 3 DB schemes, you do have three times the work and liability. They cant copy and paste much across the other plans. So, it would likely be more. Perhaps a little towards £7500.

The fee you mention seems to be around 4.5%. That is more typical of FAs and Wealth Management companies. Yours doesnt happen to have wealth management in the name or tag line does it?
The average tends to be around 1.8%. It really shouldnt be difficult to find one charging around that or less.

How can I find a cheaper IFA?

By asking other IFAs what they charge.

I am so stunned at these astronomical costs that I am thinking it would be cheaper to take the IFA exams and advise myself

It would take you 3-5 years and cost you more.

If I advise myself then I don’t need insurance because I won’t sue myself.

Incorrect as you would need to become regulated and a requirement is to buy PI Insurance. PI insurance for a newly qualified adviser doing 100% DB transfers would see a PI premium probably in excess of £10,000. Costs of setting up would be several thousand pounds. The FCA would need you to put aside £20k and you would need to buy software which is on an annual licence. And there would be the regulatory, FOS, FSCS, MAS levies etc.

Mick70

I replied to your other post as didn’t see this.
My transfer ,if happens , is a lot higher value and I am paying 0.75% and then annual fee 0.35% .
Your fee I would think should be 5k max to transfer and advice
I know there are high insurance costs but it’s a farce really these costs
Find another IFA

Albermarle

https://forums.moneysavingexpert.com/discussion/6092082/fca-db-transfer-advice-shouldnt-cost-more-than-3-500

happyandcontented

Mick70 wrote: »

I replied to your other post as didn’t see this.
My transfer ,if happens , is a lot higher value and I am paying 0.75% and then annual fee 0.35% .
Your fee I would think should be 5k max to transfer and advice
I know there are high insurance costs but it’s a farce really these costs
Find another IFA

We have been quoted 18k for an 800k transfer.

Would you mind sharing your IFA details?

[Deleted User]

happyandcontented wrote: »

We have been quoted 18k for an 800k transfer.

Sounds about right.

Your adviser can make some assumptions on your risk profiles, run a critical yield on the basis that you do take25% as a lump sum, , and arrive at a recommendation NOT to transfer.

Great business.

IBunduli

Thanks all, I am contacting a few IFAs to try to understand their fees before they give me their gold cufflinked handshake.
It still appears cheaper to become an IFA than to use the first one I met, but I will try to find a cheaper one that already exists.
I am astonished that the government created this racket in the first place. It allows IFAs ample opportunity to get their hands on your hard earned pension money and all their forms and fees are aimed at indemnifying them, not helping you.
The choice to leave the DB schemes in a no-brainer. They would pay me 1-2% of my pot per year when I reach 67 assuming they don’t go bust in the meantime. Even a risk adverse SIPP realises 5% growth per year and you can pass it on in your will, unlike a DB pension that “disappears” when you die.

Albermarle

The choice to leave the DB schemes in a no-brainer.

It very much is a brainer and many people quite rightly do not take the money .

Firstly there is no 'pot' as such . You have a right to a guaranteed income for life and the scheme is trying to buy you out . In another scenario in the financial markets the transfer values could change significantly , it is not a fixed figure so your 1 to 2% calculation is not valid.
Have you ever considered why they want you to transfer out? - well it is because some clever actuary has calculated that it is cheaper to buy you out than pay you an inflation linked income for a number of decades.

Even a risk adverse SIPP realises 5% growth per year

If only that could be guaranteed in future ……...

JoeCrystal

IBunduli wrote: »

I am astonished that the government created this racket in the first place. It allows IFAs ample opportunity to get their hands on your hard earned pension money and all their forms and fees are aimed at indemnifying them, not helping you

As far as I am aware, and I may be wrong, but it was not the government's fault. Still, instead, it was the MP's committees who were understandably very concerned about people be able to transfer money out willy-nilly, so a safeguard was introduced and for an excellent reason too.

Frankly, you more than likely paid peanuts for such benefits and as so I would not consider them as your so-called hard-earned pension money, it was mostly the employers or the Treasury that bore the majority of the cost.
.

IBunduli wrote: »

The choice to leave the DB schemes in a no-brainer. They would pay me 1-2% of my pot per year when I reach 67 assuming they don’t go bust in the meantime. Even a risk adverse SIPP realises 5% growth per year and you can pass it on in your will, unlike a DB pension that “disappears” when you die.

Ah, so you are giving up the combined annual pension between £5,000 to £10,000 a year then? A multiple of 50 to 100 of the annual, in this case, is extraordinary high! Again, it is not your pot; the money is there to pay you and all the active and deferred pensioners the promised pension. It may not be a no-brainer but if it is true that you are offered 50+ multiplier of the annual pension scheme then yes, it might as well be.

IBunduli wrote: »

Even a risk adverse SIPP realises 5% growth per year and you can pass it on in your will, unlike a DB pension that “disappears” when you die.

Not necessary, It might do on average over a long period, but it may rise and drop more than 5% depending on how good the stock market it but you should not expect a guaranteed growth of 5%.

IBunduli wrote: »

A DB pension that “disappears” when you die.

Ah, I see, so you do not have any spouses, partners or young children then. Yes, that would make sense.