DB Pension Transfer to SIPP Charges

2nd_time_buyer

jimi_man said:

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. 

"it’s always appropriate to question another man’s judgment, but never appropriate to question his motives because you simply don't know his motives" Biden, 2015