DB Transfer query

Gulfv

I'm looking at a DB pension transfer due to medical reasons. My IFA cannot now give DB transfer advice but has a recommended a company who will do this.

Once an advice certificate has been issued can my IFA instigate the transfer? (or does it need to be done by the company who perform the DB transfer advice?)

MTIA

Albermarle

There are literally hundreds of threads on DB transfers on this forum , so some time looking at some of them should keep you informed of the various scenarios.

The issue you will probably find is that you might still get a negative recommendation about the transfer . You can still transfer if you want, but most likely your IFA (or the pension transfer specialists) will not want to be involved and you will have to do it yourself ( all frightened of litigation down the line if it does not work out) 
If you get a positive recommendation than no doubt your IFA will be happy to organise the transfer.

dunstonh

Once an advice certificate has been issued can my IFA instigate the transfer? (or does it need to be done by the company who perform the DB transfer advice?)

It depends on their commercial relationship.  So, you would need to ask them.   Where the company with the PTS authorisations give the advice, they will often ask the introducing IFA who the preferred provider is and what investments and will then use that information in their analysis.

TVAS

You are asking the wrong question. One of the few good reasons to transfer from DB to DC is if you are single no dependants and you have a medical condition that will shorten your life so much so that on death the DB scheme would pay nothing (in terms of pension) because your single no dependant status. If this is the case and the IFA cannot make the case on these grounds he is not a good IFA. 

If on the other hand death is not imminent the argument cannot be made. If it was me I would ask for a medical report from my GP as his prognosis carries weight this will also protect the IFA if your medical condition is serious enough.

If your are in serious ill health which means that a doctor thinks you may not survive 12 months you can request the whole amount to be paid to you tax free. You have to spend every cent by the time you die as any residual sum will be added to your estate.

You do not have to die within 12 months it is only in the doctor's opinion that the prognosis is bad so survival is short.

The person who signs off the transfer is liable. That is the person who gives the advice. 

jamesd

TVAS said:

You are asking the wrong question. One of the few good reasons to transfer from DB to DC is if you are single no dependants and you have a medical condition that will shorten your life so much so that on death the DB scheme would pay nothing (in terms of pension) because your single no dependant status. If this is the case and the IFA cannot make the case on these grounds he is not a good IFA. 

If on the other hand death is not imminent the argument cannot be made. If it was me I would ask for a medical report from my GP as his prognosis carries weight this will also protect the IFA if your medical condition is serious enough.

If your are in serious ill health which means that a doctor thinks you may not survive 12 months you can request the whole amount to be paid to you tax free. You have to spend every cent by the time you die as any residual sum will be added to your estate.

You do not have to die within 12 months it is only in the doctor's opinion that the prognosis is bad so survival is short.

Not a bad answer if the question had been asked fifteen years ago or if we knew a public sector pension was involved. It's consistent with transfer values in that period and the sort of answer I gave back then.

But time has moved on and the "few good reasons" part of the answer has long been obsolete except for the public sector.

Today, private sector transfer values are typically two to three or more times what they were fifteen years ago and that greatly changes the benefit of transferring, since safe withdrawal rates were already based on historic worst cases and haven't changed.

Today, a person who transfers from the private sector will typically see two or more times the income, typically with uncapped inflation increases, starting at 55 and with 100% spousal pension and substantial inheritance likely. Or they could start higher and sacrifice some inflation increases or take extra cuts if they don't live through typical times.

As a result, the key to the decision today tends to rest on the person's experience with investing and risk tolerance, compared to their desire for inheritance, better spousal protection or a higher and possibly earlier income.

The FCA of course has its own clock set to conditions fifteen years ago, though it's at least starting to recognise current reality with evaluation of cash flow model methods.

Sadly the result is that FCA-based recommendations will often be no, while reality-based ones will similarly be yes, and the FCA will probably misleadingly classify such advice as unsafe rather than suitable for current conditions. As a result I now add a very large dose of salt to FCA claims about bad transfer advice, knowing it's likely just to be the FCA keeping its head buried in the sand and not something actually harmful like lots of illiquid investments, foreign property schemes and the like.

jamesd

Gulfv said:

I'm looking at a DB pension transfer due to medical reasons. 

Regrettably, the type of medical reason matters.

If normal life expectancy is anticipated, or life for many decades, DB pensions often have excellent to unbeatable ill-health benefits. Transferring in this case could be unwise, it depends on the medical and pension scheme specifics.

Where life expectancy is in the year or less range it'll normally be best to transfer out because death and spousal benefits in the private sector are often well below what might be expected from DB. But not always, so looking at the specific scheme payments matters.

In between, things like annuities or drawdown could be better, depending on the details of life expectancy and transfer value as well as experience and comfort with investing.

Once transfer advice has been given anyone can carry out the transfer, except that IFAs may be unable or unwilling because of the insurance risks or costs. You could address this by transferring yourself then asking your IFA for investment advice.

Gulfv

Thanks for the replies...Quite a bit to consider there.

Having approached a couple of companies who offer transfer advice, its seems a mixed bag with some offering reasonable fees but with the catch that they perform the transfer and manage the funds going forward!

dunstonh

Having approached a couple of companies who offer transfer advice, its seems a mixed bag with some offering reasonable fees but with the catch that they perform the transfer and manage the funds going forward!

That is in part down to risk.   There are some bizarre outcomes that could see an adviser be on the hook because you blew the money by making poor investment decisions on a DIY basis.  i.e. they allowed you to be placed in that position to make a mess of if yourself.  So, some firms will not take the risk of dealing with people who want to self-select or they are more likely to class you as unsuitable to transfer.

soulsaver

Gulfv said:

I'm looking at a DB pension transfer due to medical reasons. My IFA cannot now give DB transfer advice but has a recommended a company who will do this.

Once an advice certificate has been issued can my IFA instigate the transfer? (or does it need to be done by the company who perform the DB transfer advice?)

MTIA

After getting appropriate advice, it's simpler than you may think - it's essentially just getting (lots of) the right paper to the right people - a shuffling exercise:

The ceding scheme actually transfers the Pension Cash Equiv. to your chosen new provider when they have all the correct paperwork from you. They will provide the pro forma forms they want from you and your Pension Specialist IFA  (PSIFA) to sign to prove you have taken suitable qualified advice.

The receiving scheme provider will issue a transfer pack which will identify what they need. You're not committing to anything by asking, so request one from your likely choice and have a look. Note scheme providers may want to see proof of the PSIFA's certificate of professional competence. 

You yourself can organise to get the paperwork to the right places, or you can get your IFA or PSIFA to do it, it's not difficult.

Be aware that a cetv offer usually has 3 month  expiry after which it will go back to actuaries for recalculation, add to time and may alter the value.

ETA typo correction.

Albermarle

 but with the catch that they perform the transfer and manage the funds going forward!

It is only a 'catch' if you are capable of managing the investments yourself going forward.

If you are lacking knowledge /experience it could well be a better way forward. You can always pull away from the IFA after a couple of years , if you build up more knowledge /experience in the meantime .

martind68

I am currently 54 years and hoping to retire at 55, my main pension is a DB one which I was planning to transfer, I also have a smaller DC one, my wife, same age, will be retiring at the same time, she'll have a reduced teachers pension and an old DC pension. My question is do we live off the DC pensions first, probably for 4 years at current spending and then look to transfer my DB and take the teachers pension, which would be deferred for 4 years?  Rather than transfer now, take the teachers pension and live off that plus the tax free lump sum for approx 6 years, whilst the remainder is invested?