DB pension transfer - IFA thought yes But his boss says NO - Stuck.

Mick70

Have posted about my scenario before, but just a quick recap for any new posters or those in similar scenario.
Made redundant to get me out of the final salary scheme and then immediately re-employed and now joined the new DC scheme through work.  I am paying in 13% and the employer 16%  (I could reduce my conts to 8% and still get employer 16%).

Age 49.5 with full protected pension rights .  My pension triggers in 3 months time when age 50 (no penalties already confirmed) - my final salary pension will be an £80k lump sum  And  £26.7k pa rising annually with rpi (capped at 5%) .  On death, spouse would get 58% of my pension.  Spouse has no pension provision , except an old SIPP of £12k, she is now age 52.  

I was offered a CETV of  £1.7M , this offer expires in 3 weeks  (pension triggers mid May 2020 so no idea if they would still do transfer up to that date, or not).   
I am new to DC pensions and how they work but have tried to learn over past few months.
I contacted local IFA and went through questionnaires etc etc ,  IFA seems to agree that the cetv would be best move for me.
However his superior has now said NO .

The argument being about security a DB brings , and that I am still hoping to work another 8-9 year (retire 58/59 - ideally 58 when spouse turns 60), so therefore I can use my triggered DB pension to pay into my new works DC pot (although taxman will take 40% of it away - I am 40% taxpayer. He argues that doing this will be my best option.  I have tried to argue case that spouse has no pension and the cetv would give us a higher income , possibly £50k per year pension.  I am aware the risk of market crash but was using pessimistic 2% growth on my cetv and felt it would be £2m+ by time I retire.  I am also aware of the LTA  an political risks regarding this .

I Just feel that the advisor management are simply looking after their own interests for Insurance and not necessarily best for me - I think anyway - and wonder if the final answer was going to be No regardless. I am aware that many DB transfers should not be happening , and there is a possible scandal in years to come , similar to endowments and ppi and house equity release,  however , the multiple of the figures in my case seem very high. (1.7m / 26.7 = 63 multiple) .

The cetv seems very high , prob because I get pension from 50 where in most scenarios it would have been frozen until 60, in many ways its an ideal scenario for a high cetv.

Does this mean I am stuck now and just accept the decision ?

Just wondering peoples thoughts on this ?

Many thanks in advance, always appreciated
Mick

eskbanker

Ultimately the difference of opinion between individual employees of the IFA company doesn't really make a difference if their corporate response is negative - it sounds like you've given it your best shot but come up short for whatever reason (no doubt the usual suspects will be along to speculate about the IFA's motives for failing to recommend the transfer).  You could always approach other IFAs if you still believe you have a strong enough case, but there's always the danger of throwing good money after bad, and it sounds like time constraints may preclude that anyway....

Edit: there is also the 'insistent client' route too, if you transfer to one of the providers who'll accept transfers where you've received advice but choose to act against it.

Thrugelmir

Mick70 said:

  I am aware the risk of market crash but was using pessimistic 2% growth on my cetv and felt it would be £2m+ by time I retire.  I am also aware of the LTA  an political risks regarding this .

Where did you derive 2% compound growth from? 

xylophone

Has the firm you approached told you that it will not take you on as a client as its "triage" indicates that it would advise against transfer and therefore will not advise you at all?

CSL0183

Not understanding pensions all that great but won’t you be heavily penalised having a pension pot over £1.05m? How do you protect the £650k additional? 

Why is it so high in the first place and how are you managing to get a pension at 50? I thought minimum age was 55? Are you military? 

Why would you continue to contribute into a pension scheme when you are already way over your lifetime allowance? Surely you would be better off filling up ISA’s now? 

xylophone

Made redundant 

With a redundancy lump sum?

Is there any reason why your wife (self employed) should not start contributing to her SIPP?

It seems that you could well afford to have her contribute up to her full relevant earnings?

Has she obtained a State Pension Forecast? Have you?

Do you want to give up the security of the DB pension which provides a bedrock for your retirement?

And as I keep saying, I have now known a number of people who were drawing an index linked DB pension well into their nineties.

And in my relative's quarterly Pensioners' Bulletin, which lists all the old sweats who have been gathered to Abraham's bosom,  I notice a few centenarians.........

Dox

Ultimately it is your decision. The legal requirement is that you have received advice from a suitably qualified person with the right 'permissions' to advise; you don't have to follow it. Your DB scheme will require confirmation from the IFA that you have received such advice, but will neither need, nor wish, to see it. 

SonOf

Adviser firms are structured in different ways.
Small local firms (usually made up of 1-6 advisers) tend to use third party compliance companies for checking. Those compliance checkers do not consider the business risk but purely focus on compliance and suitability.    It is often argued the compliance checkers are a bit too much rule book and not enough real world but then so is the FCA.  The owner/directors will assess the business risk themselves and not have a manager or third party decide it for them.
Regional/national firms tend to have in-house compliance and they will consider compliance and suitability (as above) but also factor in company instructions on business risk.

I Just feel that the advisor management are simply looking after their own interests for Insurance and not necessarily best for me 
You are certainly a higher business risk than the average (over the LTA, no previous investing history.   Clear cut cases are often easy to justify.  The more wishy washy the case is, the harder it it justify and that is often where the differences in opinion occur.  If the compliance checker is erring on the "no" side then that is likely how the FOS and FCA would view it.
A 1.7m missold DB transfer could bankrupt a company and end careers.

Does this mean I am stuck now and just accept the decision ?
No.  You do not need a positive decision to complete a transfer.   You just need to have sought regulated advice and paid for the formal recommendation.    Your choice of provider will be severely limited but the adviser firm must provide confirmation that they have given you regulated advice.  Choice of provider will be limited as some will only accept positive recommendations and others will try and get the adviser firm to take liability for setting up the new pension as well.   However, there are providers that will not do that and only require the adviser declaration.

Mick70

Thrugelmir said:

Mick70 said:

  I am aware the risk of market crash but was using pessimistic 2% growth on my cetv and felt it would be £2m+ by time I retire.  I am also aware of the LTA  an political risks regarding this .

Where did you derive 2% compound growth from? 

I just spoke with the IFA , indication I got was that 3-4% growth (after fees) would be a realistic norm , so I used 2% to air on side of caution .  If you can’t get a fund to grow 2% and keep up with inflation you may as well put it all in a bank and cut out all risk IMO anyway ? Unsure what others think about this 

Mick70

CSL0183 said:

Not understanding pensions all that great but won’t you be heavily penalised having a pension pot over £1.05m? How do you protect the £650k additional? 

Why is it so high in the first place and how are you managing to get a pension at 50? I thought minimum age was 55? Are you military? 

Why would you continue to contribute into a pension scheme when you are already way over your lifetime allowance? Surely you would be better off filling up ISA’s now? 

Part of the redundancy agreement meant our pensions would be triggered at age 50 (protected persons status ) , I was only one under 50 at time so only one who got a CETV .
yes aware Of LTA impact but it’s still worth paying in IF employer is doubling my contributions .  It’s like somebody earning say 30k pa saying i don’t want to earn 50k pa as I would have to pay more tax .

Mick70

xylophone said:

Has the firm you approached told you that it will not take you on as a client as its "triage" indicates that it would advise against transfer and therefore will not advise you at all?

They took me on as a client (charge £3.5k) to give advice and that advice is No from the manager .