Transfer Defined Benefit Pension & the great suitability report ripoff

NottinghamKnight

garmeg said:

NottinghamKnight said:

garmeg said:

NottinghamKnight said:

garmeg said:

NottinghamKnight said:

garmeg said:

Cus said:

The odd thing is that if the CETV was £55k or £45k the poster would still feel outraged to pay £5k for the transfer.  This is probably daft, but why not enforce the pension companies to build the transfer cost into the cetv.  So there system pops out a £55k cetv, the rules ensure that the number reported to the individual is £50k. Force the transfer advice and process to be given to a regulated official entity and with no transfer costs ( 5k goes to them without client caring)
Most people wouldn't even know they were paying £5k for the transfer and so not get all upset. Even call it a pension tax 😁

So you decide not to transfer and your DB gets reduced proportionately to, say DB x (CETV - Fee) / CETV to pay the charge.

Not sure that is a good idea really.

Presumably not, even if it could be construed as a form of contingent charging. It's an answer to the whine that advisers are taking 'my money', the charges should be looked upon as a cost of the transfer, far more rational.

Not contingent as you pay it whether you transfer or not.

Not necessarily, if the transfer didn't occur then no fee may be paid, which would make sense as there wouldn't be a liability.

But the fee still needs paying if the transfer does not happen - presumably by the DB scheme which could reduce the member's pension to reflect the cost. Not fair that the scheme should have to pay, so it must be the member? Either by reduced benefits or by paying the fee.

Anyway this isn't going to happen anyway, so irrelevant.

Pointless having this discussion as it is a suggestion made by one individual, but why is there a fee when no action is taken? A cetv would be generated and then reduced by projected fees, no transfer and no fee would be charged as there would be no report and no risk.

Because the adviser would need paying for his advice (whether or not) to transfer.

Anyway it doesn't matter, we may be at cross purposes and it won't happen anyway.

Adviser wouldn't be involved at that stage - cetv reduced by (typical?) fees quoted, scheme member declines to transfer, no cost incurred. Scheme member progresses to transfer, cetv could then be transferred minus fees, fees paid to adviser, seems fairly simple. 

Malthusian

The fundamental problem with Cus' idea is that adviser fees are for the client to negotiate with the adviser, not for the pension scheme to decide. 

People transferring safeguarded rights are required to take "independent" advice - meaning independent of the scheme - and if the scheme is paying for the advice it's not independent.

So it runs contrary to both the 2012 Retail Distribution Review by bringing back commission and the 2015 Pensions Act by making the adviser work for the pension scheme rather than the client (they who pay the piper call the tune).

I am not saying that building the cost of advice into the CETV it is a bad idea, its problem is that it belongs to a different era.

Even if you did rewrite pension legislation to effectively re-legalise commission for defined benefit transfers, I suspect the reputable IFAs and tied advisers would refuse to operate on that basis and would carry on negotiating individual fees. (I.e. "My advice fee for a DB transfer of this size is £6,000, of which £5,000 will be paid by your DB scheme advice allowance and the remainder will be collected by the receiving pension on arrival / invoiced to you directly.")

Only the rather disreputable end of the market would be happy to tell clients with a straight face in 2020 "You won't be charged for my advice because your DB scheme will pay me". So clients who are averse to advisers being upfront and honest with them about how much they would be paying would be funnelled towards the disreputable ones. I am guessing that is not what you are intending.

Also, what if the CETV before the advice deduction works out as £30,001? After deducting the cost of advice the CETV is now £25,001 which means you don't need advice anymore.

Force the transfer advice and process to be given to a regulated official entity and with no transfer costs ( 5k goes to them without client caring)
Most people wouldn't even know they were paying £5k for the transfer and so not get all upset.

Aha, I have spotted the false premise. The answer to the question "How do we stop people getting upset about paying £5,000" is that we shouldn't. If a measly £5,000 upsets you and puts you off transferring out of a defined benefit scheme then it was a stupid idea in the first place. The presumption against transferring out of a DB pension is so strong, and the guarantees so valuable, that the case for doing so should be overwhelming. So overwhelming that the advice fee is neither here nor there. The £5,000 should be a drop in the ocean compared to all the extra money you are going to be spending in retirement or passing to your heirs.

If you don't want to pay £5,000 for advice that is no problem, you can just stay in the DB scheme.

[Deleted User]

Malthusian said

Force the transfer advice and process to be given to a regulated official entity and with no transfer costs ( 5k goes to them without client caring)
Most people wouldn't even know they were paying £5k for the transfer and so not get all upset.

The answer to the question "How do we stop people getting upset about paying £5,000" is that we shouldn't. If a measly £5,000 upsets you and puts you off transferring out of a defined benefit scheme then it was a stupid idea in the first place. The presumption against transferring out of a DB pension is so strong, and the guarantees so valuable, that the case for doing so should be overwhelming. So overwhelming that the advice fee is neither here nor there. The £5,000 should be a drop in the ocean compared to all the extra money you are going to be spending in retirement or passing to your heirs.

If you don't want to pay £5,000 for advice that is no problem, you can just stay in the DB scheme.

One of the more blatant attempts to "normalise" exorbitant fees from a member of this board's Financial Adviser Apologist Squad.

garmeg

ZingPowZing said:

Malthusian said

Force the transfer advice and process to be given to a regulated official entity and with no transfer costs ( 5k goes to them without client caring)
Most people wouldn't even know they were paying £5k for the transfer and so not get all upset.

The answer to the question "How do we stop people getting upset about paying £5,000" is that we shouldn't. If a measly £5,000 upsets you and puts you off transferring out of a defined benefit scheme then it was a stupid idea in the first place. The presumption against transferring out of a DB pension is so strong, and the guarantees so valuable, that the case for doing so should be overwhelming. So overwhelming that the advice fee is neither here nor there. The £5,000 should be a drop in the ocean compared to all the extra money you are going to be spending in retirement or passing to your heirs.

If you don't want to pay £5,000 for advice that is no problem, you can just stay in the DB scheme.

One of the more blatant attempts to "normalise" exorbitant fees from a member of this board's Financial Adviser Apologist Squad.

No he, or she, isn't.

[Deleted User]

garmeg said:

ZingPowZing said:

Malthusian said

Force the transfer advice and process to be given to a regulated official entity and with no transfer costs ( 5k goes to them without client caring)
Most people wouldn't even know they were paying £5k for the transfer and so not get all upset.

The answer to the question "How do we stop people getting upset about paying £5,000" is that we shouldn't. If a measly £5,000 upsets you and puts you off transferring out of a defined benefit scheme then it was a stupid idea in the first place. The presumption against transferring out of a DB pension is so strong, and the guarantees so valuable, that the case for doing so should be overwhelming. So overwhelming that the advice fee is neither here nor there. The £5,000 should be a drop in the ocean compared to all the extra money you are going to be spending in retirement or passing to your heirs.

If you don't want to pay £5,000 for advice that is no problem, you can just stay in the DB scheme.

One of the more blatant attempts to "normalise" exorbitant fees from a member of this board's Financial Adviser Apologist Squad.

No he, or she, isn't.

Readers can make up their own minds. 
Here's what the FCA have to say on the subject:
https://citywire.co.uk/new-model-adviser/news/fca-db-transfer-advice-shouldnt-cost-more-than-3500/a1254565

dunstonh

ZingPowZing said:

garmeg said:

ZingPowZing said:

Malthusian said

Force the transfer advice and process to be given to a regulated official entity and with no transfer costs ( 5k goes to them without client caring)
Most people wouldn't even know they were paying £5k for the transfer and so not get all upset.

The answer to the question "How do we stop people getting upset about paying £5,000" is that we shouldn't. If a measly £5,000 upsets you and puts you off transferring out of a defined benefit scheme then it was a stupid idea in the first place. The presumption against transferring out of a DB pension is so strong, and the guarantees so valuable, that the case for doing so should be overwhelming. So overwhelming that the advice fee is neither here nor there. The £5,000 should be a drop in the ocean compared to all the extra money you are going to be spending in retirement or passing to your heirs.

If you don't want to pay £5,000 for advice that is no problem, you can just stay in the DB scheme.

One of the more blatant attempts to "normalise" exorbitant fees from a member of this board's Financial Adviser Apologist Squad.

No he, or she, isn't.

Readers can make up their own minds. 
Here's what the FCA have to say on the subject:
https://citywire.co.uk/new-model-adviser/news/fca-db-transfer-advice-shouldnt-cost-more-than-3500/a1254565

That article was written before the PI market went hard on DB pension transfers and was an opinion piece without any qualification other than some firms are charging that so it should be possible for others.    
We know that some of the firms charging low figures were doing cases on an industrial scale using templates and are now under FCA investigation.  

As it happens £3500-£5000 per scheme is the sort of ballpark figure that you will usually see mentioned by those you accuse of being "Financial Adviser Apologist Squad".    So, thank you for siding with the Financial Adviser Apologist Squad.

[Deleted User]

dunstonh said:

ZingPowZing said:

garmeg said:

ZingPowZing said:

Malthusian said

Force the transfer advice and process to be given to a regulated official entity and with no transfer costs ( 5k goes to them without client caring)
Most people wouldn't even know they were paying £5k for the transfer and so not get all upset.

The answer to the question "How do we stop people getting upset about paying £5,000" is that we shouldn't. If a measly £5,000 upsets you and puts you off transferring out of a defined benefit scheme then it was a stupid idea in the first place. The presumption against transferring out of a DB pension is so strong, and the guarantees so valuable, that the case for doing so should be overwhelming. So overwhelming that the advice fee is neither here nor there. The £5,000 should be a drop in the ocean compared to all the extra money you are going to be spending in retirement or passing to your heirs.

If you don't want to pay £5,000 for advice that is no problem, you can just stay in the DB scheme.

One of the more blatant attempts to "normalise" exorbitant fees from a member of this board's Financial Adviser Apologist Squad.

No he, or she, isn't.

Readers can make up their own minds. 
Here's what the FCA have to say on the subject:
https://citywire.co.uk/new-model-adviser/news/fca-db-transfer-advice-shouldnt-cost-more-than-3500/a1254565

That article was written before the PI market went hard on DB pension transfers and was an opinion piece without any qualification other than some firms are charging that so it should be possible for others.    
We know that some of the firms charging low figures were doing cases on an industrial scale using templates and are now under FCA investigation.  

As it happens £3500-£5000 per scheme is the sort of ballpark figure that you will usually see mentioned by those you accuse of being "Financial Adviser Apologist Squad".    So, thank you for siding with the Financial Adviser Apologist Squad.

Just a bit concerned that when you say "opinion piece", readers may think it the view of a commentator, say someone from Talk Radio. 
This is actually the opinion of the FCA. Please let the board know when it raises the figure to £5,000, especially on a £31,000 transfer. 

Malthusian

Please let us know when you can ring the FCA and get them to provide full advice on transferring out of a DB scheme for £3,500. Then people might have a reason to care about their opinion.

(Previous post withdrawn as I misread ZPZ's article.)

eskbanker

The FCA reference to £3,500 was in a consultation paper (in the specific context of addressing the conflict of interest in contingent charging rather than a standalone attempt to limit charges) and they backed away from the idea of capping prices after the consultation, hence https://www.fca.org.uk/publication/policy/ps20-06.pdf

Price capping:
We do not think price capping would be a proportionate way to protect carve-out consumers from unscrupulous advisers. Combining a price cap with a contingent charging ban could lead to a higher number of firms leaving the market. To be clear, in CP19/25 we did not intend to imply that £3,000-£3,500 was a price cap. This CBA assumption was based on data available to us at the time of publication.

[Deleted User]

Malthusian said:

Please let us know when you can ring the FCA and get them to provide full advice on transferring out of a DB scheme for £3,500. Then people might have a reason to care about their opinion.

(Previous post withdrawn as I misread ZPZ's article.)

Are you saying the FCA should supply that service?
So am I.
Then, at least, you would get an impartial, honest report. 
It doesn't even have to be subsidised; if PensionWise can provide free impartial advice on DC pensions, no reason it cannot supply paid impartial advice on DB pensions.

Everyone's happy, financial advisers excepted.