DB Pension Transfer to SIPP Charges

2nd_time_buyer

The OPs question was "what do you get for the extra £5250?" not "whether or not to transfer?"

I must admit I have read a lot of posts on the subject and still have no idea what the (high) transfer/advice charges pay for. Even at an eye watering £200 per hour that is 26 hours work! Really??

In terms of the insurance. I assume IFAs get an annual policy which on a per case basis would be a lot lower than the transfer cost. In any case, more often than not the advice is not to transfer so it is a moot point as it will never be claimed on.

Tying customers into expensive ongoing costs under the guise of ensuring they do not misamanage their fund, also whiffs a bit of profiteering.

In summary, my feeling is they charge that much because they can. 

[Deleted User]

Agreed.

It was incredibly naive to make Financial Advisers gatekeepers to DB pension transfers and not expect them to act in their own interest.

Why are advisers charging £XXXX? Because they can.

HappyHarry

ZingPowZing said:

Agreed.

It was incredibly naive to make Financial Advisers gatekeepers to DB pension transfers and not expect them to act in their own interest.

Why are advisers charging £XXXX? Because they can.

Actually, most of them can't.

ewaste

2nd_time_buyer said:

In terms of the insurance. I assume IFAs get an annual policy which on a per case basis would be a lot lower than the transfer cost. In any case, more often than not the advice is not to transfer so it is a moot point as it will never be claimed on.

In that case I don't think you understand how insurance works...

The insurance is really there for being able to give regulated advice in the first place. There can and likely will be repercussions in future for giving advice even if that advice is not to transfer. The basic legal requirement has been met therefore a transfer as an insistent client is possible. The IFA could then likely be deemed in future of not having done enough to dissuade the client from transferring. 

As also pointed out the Taxman, via VAT and other taxes down the line, takes a healthy slice of the advice charge.

2nd_time_buyer

ewaste said:

2nd_time_buyer said:

In terms of the insurance. I assume IFAs get an annual policy which on a per case basis would be a lot lower than the transfer cost. In any case, more often than not the advice is not to transfer so it is a moot point as it will never be claimed on.

In that case I don't think you understand how insurance works...

The insurance is really there for being able to give regulated advice in the first place. There can and likely will be repercussions in future for giving advice even if that advice is not to transfer. The basic legal requirement has been met therefore a transfer as an insistent client is possible. The IFA could then likely be deemed in future of not having done enough to dissuade the client from transferring. 

As also pointed out the Taxman, via VAT and other taxes down the line, takes a healthy slice of the advice charge.

I am not sure I understand your point of view regarding insurance. In most industries the point of indemnity insurance is to cover against "repercussions in future for giving advice". 

Regarding the high taxes and VAT, that may be the case but surely that is only so because the charge is so high in the first place. Seems a bit of a straw man argument.

I find it interesting that no one has given a full breakdown of the costs involved. If it was my line of work (engineering), I would be more than happy to.

Albermarle

I find it interesting that no one has given a full breakdown of the costs involved. If it was my line of work (engineering), I would be more than happy to.

Even if you could see a breakdown , I am sure the final price would not change , so would not be much point really .
There is a price for the service, if you don't pay it you don't get the service . Like in many parts of life .

dunstonh

I find it interesting that no one has given a full breakdown of the costs involved. If it was my line of work (engineering), I would be more than happy to.

Costs are variable and ongoing.   Adviser firms wont just be paying for the advice in the year it was given. They will be paying for it for the rest of its existence.  And cumulative cases increase the costs further.    And those cumulative costs have caused firms to cease trading because the liability has just got too great.

PI insurers dont like DB transfers.   the FCA do not like DB transfers.  It is one of a few transactions that bankrupt a firm very easily.    People who run businesses would understand the risk element to their business.  Those that do not run businesses tend to have a very poor understanding of business risks, let alone how to price them.

2nd_time_buyer

dunstonh said:

I find it interesting that no one has given a full breakdown of the costs involved. If it was my line of work (engineering), I would be more than happy to.

Costs are variable and ongoing.   Adviser firms wont just be paying for the advice in the year it was given. They will be paying for it for the rest of its existence.  And cumulative cases increase the costs further.    And those cumulative costs have caused firms to cease trading because the liability has just got too great.

PI insurers dont like DB transfers.   the FCA do not like DB transfers.  It is one of a few transactions that bankrupt a firm very easily.    People who run businesses would understand the risk element to their business.  Those that do not run businesses tend to have a very poor understanding of business risks, let alone how to price them.

I am sorry, I don't get it. It seems akin to asking a builder for a quote for an extension. Then when it comes back ridiculously high, them justifying it on the basis that if they build it badly it might fall down in the future. If the job is done to a professional standard, to the relevant guidelines, with the customers interests at the heart, there should be little to fear from litigation.

So in answer to Albermarle's question on why you would want to see a breakdown of costs. My reasoning would be so that you can understand what is involved and assess whether or not the job has been carried out to a suitable standard.

If liability insurance makes up a very high proportion of the cost, why not say exactly how much? 

[Deleted User]

2nd_time_buyer said:

dunstonh said:

I find it interesting that no one has given a full breakdown of the costs involved. If it was my line of work (engineering), I would be more than happy to.

Costs are variable and ongoing.   Adviser firms wont just be paying for the advice in the year it was given. They will be paying for it for the rest of its existence.  And cumulative cases increase the costs further.    And those cumulative costs have caused firms to cease trading because the liability has just got too great.

PI insurers dont like DB transfers.   the FCA do not like DB transfers.  It is one of a few transactions that bankrupt a firm very easily.    People who run businesses would understand the risk element to their business.  Those that do not run businesses tend to have a very poor understanding of business risks, let alone how to price them.

I am sorry, I don't get it. It seems akin to asking a builder for a quote for an extension. Then when it comes back ridiculously high, them justifying it on the basis that if they build it badly it might fall down in the future. If the job is done to a professional standard, to the relevant guidelines, with the customers interests at the heart, there should be little to fear from litigation.

Yes, it is akin to your example.  Like insurance against floods in a floodplain is akin to insurance against meteorites.  One has a high probability of occurrence, thats the difference.  Stats show that people transferring out of DB are likely to litigate.  It might be because the advice was bad.  It might be because there is a system which provides an incentive to litigate.  Regardless, providing advice on such transfers is risky and there is little “competition” (aka few volunteers).  Whatever the cost of insurance, you are paying the market rate.  

Albermarle

It is good point . If it is such a rip off/lucrative exercise , then why do the majority of advisors run a mile when you mention DB transfers?