DB Pension Transfer to SIPP Charges

AlanP_2

ZingPowZing said:

JoeCrystal said:

segovia said:

We were discussing Pensions again at the weekend and my wife mentioned an IFA company that a relative is using to transfer her £900,000 DB scheme. In addition to the initial transfer fee, there is a combined annual charge of 4.5%, not including fund charges, and  requires lock-in 

for a period of 6 years. That's nearly £250,000 in fees over a six-year period. Are there any IFA's would like to break that down into tangible benefits?

Frankly, it is caveat emptor. 

That is a harsh judgement because it is not a free market. If a buyer wants to transfer a DB pension or just weigh up the option, s/he has to buy “advice.” It is a closed shop that the client approaches in the position of supplicant.

Day after day, posters arrive  to complain about the process and day after day the representatives of the financial services industry (and the regulars on the board who seek to ingratiate themselves with them) respond with some version of “We’re not as bad as them.”

It is a broken market and a looming scandal that the industry is bringing down on itself.  

Sorry but that is rubbish. Of course it is caveat emptor, this person dfid not have to choose that FA (if it was SJP it was not an IFA) to cary out the transfer analysis or to manage their investments after they transferred. There are other options as discussed on here many times including I think it was Fidelity at £3.5K.

The fees quoted are ridiculous but how much investigation and shopping around did they do before signing up?

The market is far from perfect but it is what it is and until rules / regulation change we are stuck with it. 

dunstonh

In addition to the initial transfer fee, there is a combined annual charge of 4.5%, not including fund charges, and  requires lock-in 

You shouldn't look at the first-year combined initial and annual charges.  You should separate them out.  It could be a low initial/high ongoing or a vice versa.

IFAs are not allowed to lock-in.   There are a couple of FAs that do that by charging on exit. But IFAs cannot.   What you describe sounds like SJP (one of the few that does lock in).  Not an IFA.

ratechaser

Perhaps we either need legislation that allows potential transferees to waive their rights - "yeah, I get it, totally get the risk, no really, now give me the big pot of cash" with no comeback. Or we just ban DB transfers because they are too inherently risky.

First one won't happen of course, because there's no protection from the political fallout when people complain after blowing their 6-7 figure pots. And second won't happen because the industry is desperate to shift the risk and will lobby like crazy to "preserve people's freedom to choose" - possibly with a straight face...

Where it may all come to a head is if IFAs decide they don't want to be in the middle of this any more and refuse to advise. Insistent transfers are already teetering on the edge with only one broker prepared to accept them...

[Deleted User]

ratechaser said:

Where it may all come to a head is if IFAs decide they don't want to be in the middle of this any more and refuse to advise. Insistent transfers are already teetering on the edge with only one broker prepared to accept them...

No adviser has to provide DB pension advice, every prospective user has to employ one.
Greed and fear, or rather fear of missing out, will ensure continuity of service from advisers.

wjr4

segovia said:

We were discussing Pensions again at the weekend and my wife mentioned an IFA company that a relative is using to transfer her £900,000 DB scheme. In addition to the initial transfer fee, there is a combined annual charge of 4.5%, not including fund charges, and  requires lock-in 

for a period of 6 years. That's nearly £250,000 in fees over a six-year period. Are there any IFA's would like to break that down into tangible benefits?

That’s definitely not an IFA. I’d put money on that being SJP! 

[Deleted User]

wjr4 said:

segovia said:

We were discussing Pensions again at the weekend and my wife mentioned an IFA company that a relative is using to transfer her £900,000 DB scheme. In addition to the initial transfer fee, there is a combined annual charge of 4.5%, not including fund charges, and  requires lock-in 

for a period of 6 years. That's nearly £250,000 in fees over a six-year period. Are there any IFA's would like to break that down into tangible benefits?

That’s definitely not an IFA. I’d put money on that being SJP! 

Beyond the cloisters of the MSE forum, the average client assaying a DB pension transfer approaches an adviser from a position of extreme vulnerability. The first concern in most cases is to avoid losing the lot in a scam. Moreover, my generation went through its working life on the assumption that we would never have to "manage" our pensions; we just assumed - if we put the shifts in -  the "City" would provide an income when we reached retirement age. We certainly never viewed a pension as a means of moving wealth from generation to generation. You know that better than me wjr4.

So, in many respects, Pension Freedom just beat a multitude of grouse for the financial services industry to fill full of buckshot. The person above committed to a quarter-of-a-million pounds of fees is just an extreme example. That would not have happened if s/he had not been compelled to take financial advice on the transfer.

LHW99

ZingPowZing said:

The person above committed to a quarter-of-a-million pounds of fees is just an extreme example. That would not have happened if s/he had not been compelled to take financial advice on the transfer.

True, but (even with SJP if it is) that person is still better off than not being forced to take regulated advice and ending up putting the money in palm plantations or storage units

jimi_man

ZingPowZing said:

wjr4 said:

segovia said:

We were discussing Pensions again at the weekend and my wife mentioned an IFA company that a relative is using to transfer her £900,000 DB scheme. In addition to the initial transfer fee, there is a combined annual charge of 4.5%, not including fund charges, and  requires lock-in 

for a period of 6 years. That's nearly £250,000 in fees over a six-year period. Are there any IFA's would like to break that down into tangible benefits?

That’s definitely not an IFA. I’d put money on that being SJP! 

Beyond the cloisters of the MSE forum, the average client assaying a DB pension transfer approaches an adviser from a position of extreme vulnerability. The first concern in most cases is to avoid losing the lot in a scam. Moreover, my generation went through its working life on the assumption that we would never have to "manage" our pensions; we just assumed - if we put the shifts in -  the "City" would provide an income when we reached retirement age. We certainly never viewed a pension as a means of moving wealth from generation to generation. You know that better than me wjr4.

So, in many respects, Pension Freedom just beat a multitude of grouse for the financial services industry to fill full of buckshot. The person above committed to a quarter-of-a-million pounds of fees is just an extreme example. That would not have happened if s/he had not been compelled to take financial advice on the transfer.

Agreed. Or if they didn't try and transfer out in the first place (Greed). 

2nd_time_buyer

jimi_man said:

ZingPowZing said:

wjr4 said:

segovia said:

We were discussing Pensions again at the weekend and my wife mentioned an IFA company that a relative is using to transfer her £900,000 DB scheme. In addition to the initial transfer fee, there is a combined annual charge of 4.5%, not including fund charges, and  requires lock-in 

for a period of 6 years. That's nearly £250,000 in fees over a six-year period. Are there any IFA's would like to break that down into tangible benefits?

That’s definitely not an IFA. I’d put money on that being SJP! 

Beyond the cloisters of the MSE forum, the average client assaying a DB pension transfer approaches an adviser from a position of extreme vulnerability. The first concern in most cases is to avoid losing the lot in a scam. Moreover, my generation went through its working life on the assumption that we would never have to "manage" our pensions; we just assumed - if we put the shifts in -  the "City" would provide an income when we reached retirement age. We certainly never viewed a pension as a means of moving wealth from generation to generation. You know that better than me wjr4.

So, in many respects, Pension Freedom just beat a multitude of grouse for the financial services industry to fill full of buckshot. The person above committed to a quarter-of-a-million pounds of fees is just an extreme example. That would not have happened if s/he had not been compelled to take financial advice on the transfer.

Agreed. Or if they didn't try and transfer out in the first place (Greed). 

People transfer out for a whole host of reasons e.g. Ill health, wanting to pass on something to family, concern over what happens if the scheme folds, wanting more money up front in retirement to enjoy whilst they are fit. To me these can all be logical and justifiable reasons. I am not sure where greed comes into it. 

I do think people generally undervalue DB pensions benefits (e.g. index linking, spouse benefit, guaranteed income), when transfering. And people would be surprised how much an equivalent annuity would cost. So there may be an issue with a lack of understanding.

However, that does not neccessaily  invalidate their reasons to want to transfer in the first place.

jimi_man

2nd_time_buyer said:

jimi_man said:

ZingPowZing said:

wjr4 said:

segovia said:

We were discussing Pensions again at the weekend and my wife mentioned an IFA company that a relative is using to transfer her £900,000 DB scheme. In addition to the initial transfer fee, there is a combined annual charge of 4.5%, not including fund charges, and  requires lock-in 

for a period of 6 years. That's nearly £250,000 in fees over a six-year period. Are there any IFA's would like to break that down into tangible benefits?

That’s definitely not an IFA. I’d put money on that being SJP! 

Beyond the cloisters of the MSE forum, the average client assaying a DB pension transfer approaches an adviser from a position of extreme vulnerability. The first concern in most cases is to avoid losing the lot in a scam. Moreover, my generation went through its working life on the assumption that we would never have to "manage" our pensions; we just assumed - if we put the shifts in -  the "City" would provide an income when we reached retirement age. We certainly never viewed a pension as a means of moving wealth from generation to generation. You know that better than me wjr4.

So, in many respects, Pension Freedom just beat a multitude of grouse for the financial services industry to fill full of buckshot. The person above committed to a quarter-of-a-million pounds of fees is just an extreme example. That would not have happened if s/he had not been compelled to take financial advice on the transfer.

Agreed. Or if they didn't try and transfer out in the first place (Greed). 

People transfer out for a whole host of reasons e.g. Ill health, wanting to pass on something to family, concern over what happens if the scheme folds, wanting more money up front in retirement to enjoy whilst they are fit. To me these can all be logical and justifiable reasons. I am not sure where greed comes into it. 

I do think people generally undervalue DB pensions benefits (e.g. index linking, spouse benefit, guaranteed income), when transfering. And people would be surprised how much an equivalent annuity would cost. So there may be an issue with a lack of understanding.

However, that does not neccessaily  invalidate their reasons to transfer in the first place.

People transfer out because they want more than they are going to get. I don't think there has ever been a thread on here where someone has said that they want to transfer because are going to get less. They have something that I think virtually everyone suggests is a very valuable commodity, however they want more so they are prepared to swap what they have for less security and more risk for the opportunity to get more money. Simple greed.