DB Pension Transfer Statutory Advice.

bowlhead99

Colin_1234 said:

I too wish to transfer a DB pension to PensionBee that has a value of over £30,000. I need to be able to access my pension pot now. 

All I want to be able to do is to access my own money.

The problem is that you don't have a 'pot' of money that's yours to play with, and it's not your own money, it belongs to a pension trustee. What you have is an agreement resulting from a previous employment, where you agreed that in exchange for working for them and perhaps putting away some cash contributions into the scheme from your salary, on retirement you would get a certain set of annual benefits for life.

Although you can put a value on that stream of agreed benefits, if it's a very valuable stream of benefits you won't be able to transfer it to a different investment, or cash it in, without advice. This is to protect people from making stupid mistakes. You say you *need* to be able to access it now, but when you originally agreed with the employer to work for them in exchange for this stream of retirement income, back in the day, your decisionmaking presumably didn't include a *need* for a lump sum of cash at this point, otherwise you would have taken a different job where that could be an option, or made some investments of your own.

If I was able to sign a declaration to say I will never sue the IFA in the future I would.

Unfortunately the IFAs have heard all that before, and their insurers know that a portion of the people signing paper to say they wouldn't sue, will be encouraged by an ambulance-chaser to claim all their money back and blame the IFA and sue after all. Because they will pretend they didn't realise what they were signing when they signed to say they couldn't sue, just like they didn't realise what they were doing when they gave up a guaranteed retirement income for buttons and then lost them.

The consumer would claim that they are the poor innocent party who didn't understand finance, while the IFA was the expert who did understand finance, and the IFA would have stopped him if he had his best interests at heart, and the fact that he wasn't stopped meant that the IFA must have agreed with it really, even while giving written advice to say don't do it, there was an imperceptible nod and wink which meant 'go for it mate!'

If the value was below £30,000 the transfer would have been completed by now without any issues.

Yes, if the future benefits were only a pound a year for twenty years they might as well let you release it and give you the cash in hand and let you transfer it.   If the future benefits were a risk free half million including spouse/dependant's pension, representing a reliable household income over the next three or more decades, that's the sort of figure that people could make bad decisions with when they get pound signs behind the eyes and dream of a summer of fast cars and loose whisky. Somewhere in between is a dividing line where the government said people should take advice before giving up their safe pension benefits.

They picked an arbitrary £30k so £30.001k needs advice and 29.999k doesn't. Any other tipping point would still have given complaints, but there has to be some tipping point, if we can see that £1 is fine but understand £500,000 would open up people to getting abused or shaken down if they weren't protected by advice.

If you were lucky enough to find an IFA to sign the transfer form you would still need to pay the person £2,500. This is a ridiculous situation that the FCA needs to change quickly.

Yes, but unfortunately the FCA have indicated to IFAs that they think it is generally wrong for people to give up DB benefits and will come down like a ton of bricks on IFAs who are too keen to sanction it. So, the IFAs don't want to do it, or they want to get paid enough to cover the regulatory risk and higher insurance premiums for life, and also some sort of profit for doing the work.

The FCA have sent out mixed messages on the topic but the concept of needing to get regulated advice before converting lifetime benefits into some other sort of investment or just into cash, doesn't seem entirely ridiculous - though I'm biased because I'm not fortunate enough to have a guaranteed stream of annual payments for life and like most people, think it would be useful to have one.  I can see it might be quite dangerous if any old idiot was allowed to just press a button and give up the guaranteed income to blow it on a big night out without realising the consequences of having to survive without the risk-free income for forty years of retirement, and then ultimately become dependent on the state to keep him in old age.

Mickey666

The system does indeed treat people like children with no financial sense.  Now I'm sure that's the case for some people but those with a bit of savvy are caught up in the dumbing-down of everything these days.

Case in point from personal experience of someone I know.  They had two DB pensions with transfer values of around £750k.  They had been diagnosed with a late-stage cancer that could not be cured and the prognosis was a 5 year survival.  Now we all know that one big uncertainty with pension planning is not knowing how long we will live, so when told you have only five years to live it gives a bit of clarity to such planning.  Even allowing for the docs to be wrong by a factor of 4x, £750k would provide a drawdown pension of £37,500 per year - a pretty decent pension by any standards.  In other words, the 'risk' of tranferring these pensions under such circumstances was verging on zero.   But the trouble they had transferring the two DB pensions to a drawdown pension was, frankly, a disgrace.  It couldn't be done without IFA advice, even though it's an open-and-shut case, and it cost the best part of £20k in IFA fees - when one was finally found who could do the job in less than 4 months!

The pension legislation changes that gave people more control over their pensions was a laudable thing, but the levels of 'protection' subsequently applied treats everyone as financially illiterate.

Mickey666

Perhaps the problem lies in the word 'advice'.  I've always thought of IFAs as people who can advise me of my options.  I regard them as experts at understanding financial matters and regulations etc, so they can advice me of what I can and cannot choose to do, but they don't TELL me what to do.  That is my responsibility.  A bit like solicitors - they advise, their clients instruct.

This whole business of suing someone because they gave 'bad advice' is a big problem because it absolves people from their own responsibility.  But that's the mess the whole financial services industry has created for itself.

Brynsam

Mickey666 said:

The system does indeed treat people like children with no financial sense.  Now I'm sure that's the case for some people but those with a bit of savvy are caught up in the dumbing-down of everything these days.

Case in point from personal experience of someone I know.  They had two DB pensions with transfer values of around £750k.  They had been diagnosed with a late-stage cancer that could not be cured and the prognosis was a 5 year survival.  Now we all know that one big uncertainty with pension planning is not knowing how long we will live, so when told you have only five years to live it gives a bit of clarity to such planning.  Even allowing for the docs to be wrong by a factor of 4x, £750k would provide a drawdown pension of £37,500 per year - a pretty decent pension by any standards.  In other words, the 'risk' of tranferring these pensions under such circumstances was verging on zero.   But the trouble they had transferring the two DB pensions to a drawdown pension was, frankly, a disgrace.  It couldn't be done without IFA advice, even though it's an open-and-shut case, and it cost the best part of £20k in IFA fees - when one was finally found who could do the job in less than 4 months!

The pension legislation changes that gave people more control over their pensions was a laudable thing, but the levels of 'protection' subsequently applied treats everyone as financially illiterate.

You only have to look at some of the comments on this website from people trumpeting that they know what they're talking about to realise pretty quickly that they certainly don't. You can also be sure they'd be first in the queue for compensation when things don't turn out as they confidently envisaged - and in the absence of the proverbial crystal ball, of course they won't.

An IFA has to get through the advice process in no more than 3 months to ensure the transfer value offered is still capable of acceptance, so saying your friend found one who could do it in under 4 months is a good example of a knowledge gap somewhere.  As to whether the transfer was an open and shut case, a diagnosis of terminal illness can enable the suffered to access particularly special terms within the DB plan, so again, specialist input can be very necessary, especially as the poor soul concerned has a lot of other things on their mind.

dunstonh

If I was able to sign a declaration to say I will never sue the IFA in the future I would.

That declaration carries no weight.   People in the past that have said such a thing and signed something have then later go on to complain and the FOS has ruled that people cannot sign away their rights when they are not in a position to know what they are doing.

People will say one thing but then do another.  Unfortunately, people lie when it comes to money.  One phone call from a claims company promising a pot of gold if you put in a fake complaint and your morals go out of the window.

This is a ridiculous situation that the FCA needs to change quickly.

Not going to happen.  The FCA treats the transfer of DB pensions as missold unless proven otherwise and historically, 9 out 10 cases are best left where they are and not transferred.

I too wish to transfer a DB pension to PensionBee that has a value of over £30,000.

That too is not helping your situation as PensionBee is more expensive than similar options that an IFA could utilise. 

you would still need to pay the person £2,500.

The IFA would likely be losing money by only charging £2,500.   Remember that the cost of doing DB transfers is not one off for the IFA.  They will be paying increased costs forevermore.   Unless they are planning on shutting down in the near future, that sort of fee is too low.

Mickey666

Brynsam said:

Mickey666 said:

The system does indeed treat people like children with no financial sense.  Now I'm sure that's the case for some people but those with a bit of savvy are caught up in the dumbing-down of everything these days.

Case in point from personal experience of someone I know.  They had two DB pensions with transfer values of around £750k.  They had been diagnosed with a late-stage cancer that could not be cured and the prognosis was a 5 year survival.  Now we all know that one big uncertainty with pension planning is not knowing how long we will live, so when told you have only five years to live it gives a bit of clarity to such planning.  Even allowing for the docs to be wrong by a factor of 4x, £750k would provide a drawdown pension of £37,500 per year - a pretty decent pension by any standards.  In other words, the 'risk' of tranferring these pensions under such circumstances was verging on zero.   But the trouble they had transferring the two DB pensions to a drawdown pension was, frankly, a disgrace.  It couldn't be done without IFA advice, even though it's an open-and-shut case, and it cost the best part of £20k in IFA fees - when one was finally found who could do the job in less than 4 months!

The pension legislation changes that gave people more control over their pensions was a laudable thing, but the levels of 'protection' subsequently applied treats everyone as financially illiterate.

You only have to look at some of the comments on this website from people trumpeting that they know what they're talking about to realise pretty quickly that they certainly don't. You can also be sure they'd be first in the queue for compensation when things don't turn out as they confidently envisaged - and in the absence of the proverbial crystal ball, of course they won't.

An IFA has to get through the advice process in no more than 3 months to ensure the transfer value offered is still capable of acceptance, so saying your friend found one who could do it in under 4 months is a good example of a knowledge gap somewhere.  As to whether the transfer was an open and shut case, a diagnosis of terminal illness can enable the suffered to access particularly special terms within the DB plan, so again, specialist input can be very necessary, especially as the poor soul concerned has a lot of other things on their mind.

I don't pretend to know all the intricate details of all financial rules and regulations, but I generally know what I want to do and I'm happy to take responsibility for my own decisions. 

As for a DB transfer process taking three months, I know for a fact that this was not the case for my friend and indeed they had to get a revised transfer value because of this.  Strangely enough it increased by around £40k, so goodness knows how they work these things out!  One IFA advised it would likely take 6 months.

As for terminal illness provisions, these seem hardly useful.  For a start, my friend was not deemed 'terminal' at the time of wanting to transfer, even though the prognosis was only 5 years.  This is because the cancer was treatable but not curable.  By the time it has progressed into being untreatable, which it will, then the terminal diagnosis will will likely mean only six months or so to live. By this stage, patients are unlikely to be fit enough to travel, and besides most travel insurance explicitly precludes anyone with a terminal diagnosis.

The 'poor soul' as you put it, did not want lots of whatifery from an 'expert' in financial matters wasting their precious remaining time, they just wanted access to THEIR money so that they could enjoy what remaining time they had while their general state of health allowed it.  For anyone to suggest that they might know better about what's best for a person in such circumstances is exactly what is wrong with the system as it stands.  Whatever happened to personal responsibility?

Thrugelmir

Mickey666 said:

Perhaps the problem lies in the word 'advice'.  I've always thought of IFAs as people who can advise me of my options.  I regard them as experts at understanding financial matters and regulations etc, so they can advice me of what I can and cannot choose to do, but they don't TELL me what to do.  That is my responsibility.  A bit like solicitors - they advise, their clients instruct.

Professional people can decide who they wish to act for. Two way street. 

Albermarle

It would seem to make sense that DB transfers below say £100K but above £30K were looked at less stringently.
Certain other guaranteed benefits are treated in this way , so there is a precedent for an area between no advice needed and the full works .

Mickey666

Thrugelmir said:

Mickey666 said:

Perhaps the problem lies in the word 'advice'.  I've always thought of IFAs as people who can advise me of my options.  I regard them as experts at understanding financial matters and regulations etc, so they can advice me of what I can and cannot choose to do, but they don't TELL me what to do.  That is my responsibility.  A bit like solicitors - they advise, their clients instruct.

Professional people can decide who they wish to act for. Two way street. 

Of course.  But if the regulatory framework that they must work within means it becomes too risky or otherwise unfavourable to take on clients wishing to transfer DB pensions, it follows that a system that forces people to take professional advice before they can transfer a DB pension is not really fit for purpose is it?  It's Catch-22.  You need advice to do what you want to do but it's too risky to give you that advice so you can't get any advice so you can;t transfer your DB pension.  A cynic might say this suits the powers that be - give people the appearance of more choice, just don't make it easy for them to exercise it.

Thrugelmir

My gut instinct is that the tide will turn in the months to come. As more conservatively positioned investment portfolios fail to deliver a decent return. Life is cyclical.