Transferring old workplace pension into a SIPP

northerngeezer

I have found an IFA that will give advice only for £750, and then AJ Bell (or whoever) will enact the transfer, irrespective of what the advice is.

Any chance of having the name of the advisor? 

Albermarle

Dale72 said:

GingerPrince18 said:

TVAS - are you saying the rule of thumb should be about 35 x pension ? 
I'm in a similar boat, 2785 pension and 80k transfer valuation. going off your rule of thumb, should be nearer 97.5k ? 
I mean, I've been investing for a number of years and am happy to take the risk of taking the transfer pot + topping up monthly myself in a SIPP. I already have a DB pension + state that will pay annually around 50k so this would be on top. 
hell. if I did absolutely nothing but invest it in big caps, a divi yield of 3.5% on the 80k would match what they're offering per year. 
such a shame I can't find anyone to give the advice for a reasonable fee. 

I have found an IFA that will give advice only for £750, and then AJ Bell (or whoever) will enact the transfer, irrespective of what the advice is.

Considering every other mention of IFA DB transfers on this forum are in the £3 to £8K region , a charge of £750 seems hard to believe.
You can get an abridged version that sort of screens out the most unlikely clients , but before transferring you would still have to go for the full version. Maybe that is what the £750 is for ?

JoeCrystal

Albermarle said:

Considering every other mention of IFA DB transfers on this forum are in the £3 to £8K region , a charge of £750 seems hard to believe.

I think you meant £3k there, rather than £3 btw...  

jamesd

TVAS said:

Divide the pension on the transfer statement by 68,000 if the factor is under 35 it is not good value for money if they also provide a pension for your spouse and an increasing pension both which these features cost a fortune to buy on the open market. 

Those features cost £0 on the open market when income drawdown is used because the spouse inherits 100% of the remaining pot and hence 100% of the income. Very expensive if an annuity us sought to deliver those things but that would just be picking the wrong approach for the task (if we ignore FCA mandates).

Whether 35 times is good or bad value depends on the features of the pension like spousal benefit and inflation increases and caps as well as how close the person is to taking it.

A pretty standard income drawdown offer is 3.2% of the pot size for a thirty year plan, increasing with uncapped inflation and with 100% spousal pension. 3.2% includes allowance for 1.5% in total costs (0.5% reduction). 100 / 3.2 = 31.25 and implies that if transferring out of a DB pension with these very generous benefits a 31.25 multiple would match. That's actually pessimistic because 3.2% us the worst case for the last hundred plus years - starting just before WW2. A more normal expectation is 5% and that implies a 20 times multiple is enough to match.

But the most common DB inflation cover is actually capped at 5% and there's commonly some with no inflation increase at all. Spousal benefits are normally lower, often 50% or 60% and the lump sum payment for early death of both is normally minimal.

jamesd

GingerPrince18 said:

TVAS - are you saying the rule of thumb should be about 35 x pension ?  

As little as fifteen to twenty times can work, even lower sometimes, say with reduced life expectancy.

The transfer value depends on the DB benefits, how it invests and how close the person is to the normal pension age of the scheme. Also on interest rates.

In recent years we've seen low interest rates push transfer values from 15-20x fifteen years ago to 30-45x and sometimes more for those close to scheme pension age now, typically, in private sector schemes.

Those are so high that someone using income drawdown can expect higher income and better benefits from transferring. In pure financial terms it now tends to be in the transfer clearly better situation most if the time.

Back when values were lower it took things like reduced life expectancy or strong inheritance motive for it to make sense. That still applies to most public sector schemes that allow transfers out.

The FCA has a very strong opinion against transfers and has regulated to make them more expensive for consumers and more risky for advisers, as well as requiring poor income-producing options like annuity purchase much of the time. This is perhaps best understood as an example of an agency problem: the FCA gets no reward for successful transfers but is blamed for failures, so it's incentivised to reduce its risk by making them harder regardless if consumer harm.

jamesd

Thrugelmir said:

GingerPrince18 said:

I mean, I've been investing for a number of years and am happy to take the risk of taking the transfer pot + topping up monthly myself in a SIPP.

As a general observation that's the greatest danger currently. A combination of factors has seemingly made the stock market a one way bet. The higher it rises. The greater the level of investor complacency.  There's a generation of investors who have never experienced a sizable long term correction. 

And provided safe withdrawal rates are used it doesn't matter, because those rates would have succeeded in the worst cases in the last hundred plus years.

It is a worry for those not using SWRs.

Dale72

Albermarle, I have spoken to so many over the last few weeks it's all merging into one!! But I'm pretty sure he said he could give advise for £750 and then arrange the transfer for a further £2000 if the advice was positive, if not then I would have to arrange the transfer elsewhere (AJ Bell will do that for me, I've checked).

Dale72

I've just checked the wording on an email I received from the IFA, and the £750 is for Abridged advice. I've asked whether this 'Abridged advice' meets the legal requirement for me to take advice, I'll let you know what the reply is.

Marcon

Dale72 said:

I've just checked the wording on an email I received from the IFA, and the £750 is for Abridged advice. I've asked whether this 'Abridged advice' meets the legal requirement for me to take advice, I'll let you know what the reply is.

No, it doesn't. Abridged advice is not sufficient to meet the legal requirement your DB trustees are required to check you have received.

See https://www.aviva.co.uk/retirement/defined-benefit-advice/abridged-advice-article/ for more information.

dunstonh

Dale72 said:

I've just checked the wording on an email I received from the IFA, and the £750 is for Abridged advice. I've asked whether this 'Abridged advice' meets the legal requirement for me to take advice, I'll let you know what the reply is.

It doesn't meet the requirement.  It is basically a cut down process to focus on key areas that could see negative recommendations to allow you to pull out at that stage without incurring the full cost of the advice process.    If you still want to go on to transfer, you would then have the fee of the full advice basis.  This fee would take into account the work done so far up to that point.