Transferring out of Defined Benefit pension

wiimixer

My pension scheme is offering a generous CETV if I transfer out, approx £800k in lieu of £14k pa income from 55.

Personal circumstances make this appealing to me, and initial discussions with a FCA registered Pension Transfer Advisor support my thinking that it may well be the most sensible option.

NOTE: whilst I appreciate people taking the trouble to reply, before doing so, remember I'm not looking for opinions about DB pension and the risks of leaving - just advice on how to approach it if I decide to. I am aware of the risks & responsibilities taken on by IFAs when advising on transferring out of DB schemes. In the spirit of these forums, I'm looking for a fair price, not bad advice on the cheap!

As I see it, there are two components: 

1) Transferring out 
I’ve been quoted £8k (1%) for the advisor to take me through to completion of the transfer - and gather this is not unreasonable - but would be interested to know if forum members are aware of other (maybe flat rate?) options.

2) Investing the Proceeds
The advisor I approached charges 0.75% pa to act as my ongoing advisor. On top of that the investment funds he’s proposing charge approx. 0.75% - 1% fund management fees. The fund providers I’ve been advised to consider are Prestige Portfolio Management and True Potential - both have funds to suit a range of risk profiles.


I’d appreciate any advice on typical fees I should expect to pay for these professional services. 

Thanks in advance.
wiimixer

zagfles

From what I've read, 1) sounds reasonable, but 2) most definitely does not - for that sort of amount you should be looking at 0.5% max advice fees, and the funds sound expensive, far higher than typical. There might also be platform charges on top!

Also worth checking https://www.financial-ombudsman.org.uk/decisions-case-studies/ombudsman-decisions for the IFA in case they have a history of claims against them, apparently the vast majority have no FO complaints as discussed here: https://forums.moneysavingexpert.com/discussion/6228557/ifa-charges/p3

BritishInvestor

wiimixer said:

My pension scheme is offering a generous CETV if I transfer out, approx £800k in lieu of £14k pa income from 55.

Personal circumstances make this appealing to me, and initial discussions with a FCA registered Pension Transfer Advisor support my thinking that it may well be the most sensible option.

NOTE: whilst I appreciate people taking the trouble to reply, before doing so, remember I'm not looking for opinions about DB pension and the risks of leaving - just advice on how to approach it if I decide to. I am aware of the risks & responsibilities taken on by IFAs when advising on transferring out of DB schemes. In the spirit of these forums, I'm looking for a fair price, not bad advice on the cheap!

As I see it, there are two components: 

1) Transferring out 
I’ve been quoted £8k (1%) for the advisor to take me through to completion of the transfer - and gather this is not unreasonable - but would be interested to know if forum members are aware of other (maybe flat rate?) options.

2) Investing the Proceeds
The advisor I approached charges 0.75% pa to act as my ongoing advisor. On top of that the investment funds he’s proposing charge approx. 0.75% - 1% fund management fees. The fund providers I’ve been advised to consider are Prestige Portfolio Management and True Potential - both have funds to suit a range of risk profiles.


I’d appreciate any advice on typical fees I should expect to pay for these professional services. 

Thanks in advance.
wiimixer

~6.5k initial and 1%pa all-in ongoing costs (adviser, platform, fund and fund transaction charges) should be achievable on a pot of that size. What are the platform charges or are they included in the fund fees?

dunstonh

1) Transferring out 
I’ve been quoted £8k (1%) for the advisor to take me through to completion of the transfer - and gather this is not unreasonable - but would be interested to know if forum members are aware of other (maybe flat rate?) options.

Cica £5k is your ballpark target.  So, you are above.

2) Investing the Proceeds
The advisor I approached charges 0.75% pa to act as my ongoing advisor. On top of that the investment funds he’s proposing charge approx. 0.75% - 1% fund management fees. The fund providers I’ve been advised to consider are Prestige Portfolio Management and True Potential - both have funds to suit a range of risk profiles.

It seems you are consulting a wealth management firm at the moment.     This means the adviser is farming out the investment advice to a third party and getting you to pay for it.     Some adviser firms reduce their ongoing charge where a DFM or restricted investment option is used. 
At £800k, you would expect the adviser fee to be at 0.5%.  Not 0.75%.   
So, overall, it looks expensive.   £5k ballpark and 0.5% p.a.and not using DFM restricted wealth management portfolios where you pay the extra. 
Advisory portfolios (where the IFA is in control of the investment selection) tend to be around 0.1 to 0.5% p.a. overall for the funds.  Wealth management portfolios tend to be around 0.75-1.00% or even more.  There are exceptions but the figures you mention indicates yours are at the higher end.    Yet rarely do those wealth management firms offer something that is worth the extra cost.
If the firm is city located and has a prestige reputation then you expect to pay more.  If it's a small localised firm then you expect to pay less.  Boutique firms, often the ones that use wealth management options, tend to cost more.

cloud_dog

Ignoring whether this is the correct thing to do or not, I think the biggest focus should be on ensuring participants can make it happen, i.e. suffer the costs initially.  Secondly, once all complete, the OP could transfer the SIPP to a new (cheaper) IFA/provider.

Albermarle

On such an major financial transaction that will affect your finances ( good or bad ) for maybe another 35 years, then whether you pay £5K or £8K is neither here nor there really = a one off 0.375% .
However ongoing cost difference of 0.75% compared to the usual IFA + platform + funds charges , is significant .

fred246

I would rather pay £5k than £8k to have a few forms filled in for me.

ukdw

The £8k doesn't sound too bad if you have already found an IFA - your transferred pension could easily go up or down by more than that amount in a single day.

Ongoing charges sound very high - I would ask for a cheaper option - targeting <0.4% total ongoing charges.

Elmer_BeFuddled

fred246 said:

I would rather pay £5k than £8k to have a few forms filled in for me.

I'd rather pay zilch than hand out my savings for my retirement! (But that is not a worry I'm going to have!).

wiimixer

To everyone replying - thanks for the genuinely helpful advice. 

The IFA has come back to me with more info., and total on-going cost (inc. IFA fee, Fund management fee, Platform fee) is 1.65% pa.

As cloud_dog says, I would be able to transfer to a cheaper scenario in due course - that said, it would be preferable to get it 'right' first time. 

Thrugelmir

Historical long term returns are 4% - 5% with income reinvested after inflation with no fees taken into account. 1.65% would amount to a sizable cut of the pie.