Use St James Place for transfer of my Defined Benefit fund ?

cfw1994

fred246 said:

hyperhypo said:

OP i had a  similar set of numbers to your (cetv of c. £430k equating to a £12.5 db pension) and a c. £200k DC pot. I came to accept that the numbers per se re the transfer were somewhat seductive but i'd be happier with a mix of the DB and DC assets. 

I know there are good reasons to transfer but as someone who has retired early on a mix I am sure it is the best way. The DB pays all the bills and essentials. The DC buys all the holidays, meals out, entertainment etc. When the stock market crashed recently I just shrugged my shoulders. If I was 100% DC I am sure that there would have been some fear.

The stock market crash?  

You view that as a crash?

Well, this is far from over, but what happened Feb-Mar was but a mere blip!

Clearly everyone’s funds are different, but 3 months later, my main DC pot is 20% up on the trough of 20th March, and back level with the peak of 21st Feb.  Crash?  Only if I blinked!
If you think that is a stock market crash, you’d best buy annuities like they are going out of fashion!  (oh wait.....they are!)
DBs are great for the majority who would not want to try to juggle funds, and who have them...but they are a dying form of pension: few companies offer them nowadays.  Those who have some in their mix should be grateful, but when CETV numbers are high, the temptation to switch will be equally high.  

If you have DC funds, and are now drawing on them, then I would always want 12+ months of separate accessible funds (the rainy day stuff) to use in precisely these cases.  

Dips like we just had will not be uncommon over a 25-40 year retirement period.

Of course, given the sheer scale of mayhem across the world, none of us know how the markets and finances will hold up...but then again, we never have been blessed with that crystal ball.
Have a nice weekend all!

barnstar2077

cfw1994 said:

fred246 said:

hyperhypo said:

OP i had a  similar set of numbers to your (cetv of c. £430k equating to a £12.5 db pension) and a c. £200k DC pot. I came to accept that the numbers per se re the transfer were somewhat seductive but i'd be happier with a mix of the DB and DC assets. 

I know there are good reasons to transfer but as someone who has retired early on a mix I am sure it is the best way. The DB pays all the bills and essentials. The DC buys all the holidays, meals out, entertainment etc. When the stock market crashed recently I just shrugged my shoulders. If I was 100% DC I am sure that there would have been some fear.

The stock market crash?  

You view that as a crash?

Well, this is far from over, but what happened Feb-Mar was but a mere blip!

Clearly everyone’s funds are different, but 3 months later, my main DC pot is 20% up on the trough of 20th March, and back level with the peak of 21st Feb.  Crash?  Only if I blinked!
If you think that is a stock market crash, you’d best buy annuities like they are going out of fashion!  (oh wait.....they are!)
DBs are great for the majority who would not want to try to juggle funds, and who have them...but they are a dying form of pension: few companies offer them nowadays.  Those who have some in their mix should be grateful, but when CETV numbers are high, the temptation to switch will be equally high.  

If you have DC funds, and are now drawing on them, then I would always want 12+ months of separate accessible funds (the rainy day stuff) to use in precisely these cases.  

Dips like we just had will not be uncommon over a 25-40 year retirement period.

Of course, given the sheer scale of mayhem across the world, none of us know how the markets and finances will hold up...but then again, we never have been blessed with that crystal ball.
Have a nice weekend all!

Calm down mate.  He just meant there was a drop, no need to get excited! : )

fred246

 Those who have some in their mix should be grateful.

That is exactly what I am saying. If you have a DB pension keep it because it is guaranteed income. A guaranteed income plus some variable income is fine. 100% variable is scary when it drops.

Aegis

Joey_Soap said:

Aegis said:

SJP may well be unable to offer DB pension advice now, as there was an FCA release this week which outright banned contingent charging on DB transfers. How they will respond to this, I genuinely do not know, given almost all of their charging at present is contingent.

Thanks, could you elaborate on "contingent charging" please? There's no doubting SJP are voracious money grabbers, something has to stop them one way or another and bring them more in line with the broader industry in typical terms and conditions. They get away with charging account exit fees, simply because they deny they are actually exit fees. But if it waks and quacks like a duck etc.....

JS

Basically what the FCA have said is that they no longer want an adviser's remuneration for advice given in respect of DB schemes to be materially more if they recommend a transfer than if they don't.  As I understand it, there's normally a grey area where the advice on the pension, the advice on the investments and the actual investments themselves are all given and run by the same company (vertical integration), but the most recent statement heavily implies that this model will be incredibly difficult to maintain in this area (rightly so - all DB transfers should be done on an independent basis, and so should most other investment-related advice; all in my biased opinion, of course).  The one thing that they might be able to do to change this is to front-load their fee, but given how many SJP advisers seem to base their model on the idea of only paying if a client proceeds, that may end up very tricky as a whole. Even offering an independent service, it's much harder to win business when you are up front with your fees and explain that they are payable whether you proceed with implementation or not. 

The other issue that SJP will have is that all DB advice will now require the adviser to specifically consider whether one or more of the client's workplace pensions would be more suitable as a transfer recipient than a new scheme or an existing private pension.  As far as I'm aware, SJP salesmen can only provide recommendations for SJP panelled products, so as it currently stands they presumably cannot recommend a transfer into a workplace pension.  I suspect that this is a more tricky issue for them to overcome, as you can't panel all workplace pensions, so this will represent a fundamental shift in their pensions advice process, which may further necessitate a shift in their entire process to ensure similarity of outcome for clients who come with new money vs clients with existing funds.

Overall, if I were a betting man, I'd probably put money on SJP suspending DB transfer business very soon, and ultimately deciding to stop.  For once the FCA seems to have wised up to the idea that a vertically integrated firm cannot possibly be the best route to go down for robust DB advice.  Now I just hope they follow through properly.

Joey_Soap

Thanks Aegis, I understand a lot better. My own opinion is that the whole country would be better off if SJP ceased to exist, but that's not going to happen. What really bothers me is that SJP seem to often use weasel words to deny they are breaking any rules. They still charge withdrawal fees to their unfortunate clients who want to leave. Of which there are many. But SJP insist they aren't really early withdrawal penalties at all. And they get away with it. I am hopeful that with your insight, this horrible (in my opinion) company will have to radically change how it operates if it wants to stay in business. Though I fear, the culture of "free cruises and gold cuff links" for the salesmen culture will be hard to get away from. Why would any of the SJP sales people want such a lucrative lifestyle model to change? And without the sales force, there's no business. As has been said before, if you are unfortunate enough to have an SJP sales rep turn up at your house in typically, his new Mercedes E class, ask him where the client's yachts are? Thanks.

JS

jamesd

Secondly, quoting a high CETV is a very poor reason to give up life long final salary pension benefits.

It's a better reason than a lower CETV would be and should be considered even by someone who wants guaranteed income because transferring and buying an annuity may provide higher income, greater death benefits or both. That's more likely for:
1. single people
2. those with medical or lifestyle factors qualifying them for an enhanced annuity, around half the population.

Others may prefer the flexibility to retire earlier on a higher likely overall income from a combination of drawdown and guaranteed income.

It's not an always yes or always no choice even for someone interested only in guaranteed income.

jamesd

ovenglove55 said:

Hi, just to update. I questioned SJP whether it was worth delaying the DB transfer until say next year, as it may mean an increase in the currently offered 43x multiple value. They feel this is unlikely as the valuation is dependent on gilts, which may well increase soon due to all the government Covid related borrowing. Anybody feel this is not a valid point please?  

There's a catch: the UK government sold gilts with a negative yield (interest rate) for the first time for some coronavirus related borrowing. People's desire for safety was a bigger effect than the increased borrowing. It's arguable either way but so far those betting on increased desire for safety have been right. I suspect that SJP decided they would be better off not telling you about this.

SJP simply want your signature on their dotted line as soon as possible because the more you learn, the less likely you are to sign their line. Your best interest is better served by learning more then recognising for yourself that SJP isn't your best choice.

jamesd

fred246 said:

hyperhypo said:

OP i had a  similar set of numbers to your (cetv of c. £430k equating to a £12.5 db pension) and a c. £200k DC pot. I came to accept that the numbers per se re the transfer were somewhat seductive but i'd be happier with a mix of the DB and DC assets. 

I know there are good reasons to transfer but as someone who has retired early on a mix I am sure it is the best way. The DB pays all the bills and essentials. The DC buys all the holidays, meals out, entertainment etc. When the stock market crashed recently I just shrugged my shoulders. If I was 100% DC I am sure that there would have been some fear.

Flexibility to build a personal mixture of guaranteed and higher but variable incomes is a possible reason for transferring. Some people start out with a mixture of pensions that makes keeping some of their DB best.

I am 100% DC so all I felt was some minor unease because I know that big drops are normal, understand safe withdrawal rate theory and have plenty of money in cash and fixed interest investments.I had no reason to change my lower than safe spending and haven't.

fred246

I prefer a guarantee to a theory. Call me old fashioned.

bigadaj

fred246 said:

I prefer a guarantee to a theory. Call me old fashioned.

depends on the guarantee.....