Defined Benefit / Final Salary Pension

Mistral001

I have a Defined Benefit / Final Salary Pension from a job I was in for under three years nearly 40 years ago.  The fund is just over £30K so I cannot take it as a lump sum.  I have been told by the pension provider that if I want to get a lump sum I have to transfer it.  I have other small pensions and in two years time I will get the state pension, so I can manage without the small income I will get from this final salary pension when I get to state pension age.  The reason for me wanting to get a lump sum, is I want to retire now from self-employment and the lump sum will give me some income over the next two years.

The problem I have is that I cannot find a financial advisor who is interested in transferring the pension.  I know about the miss-selling scandal with the British Steel final salary pensions and can understand why some financial advisors will be reticent about Defined Benefit / Final Salary Pension transfers, but I would have thought that somebody would be interested in doing this type of work.  I accept that I might have to pay a biggish fee to a financial advisor and accept that I will get no, or a greatly reduced pension, from the pension when I transfer it, so I cannot see why they are not interested.  Can anybody point me in the right direction?

Marcon

Mistral001 said:

I have a Defined Benefit / Final Salary Pension from a job I was in for under three years nearly 40 years ago.  The fund is just over £30K so I cannot take it as a lump sum.  

You would't be able to take it as a lump sum direct from your DB scheme on the basis of what's known as 'trivial commutation' because you have other small pensions. These would bring your total private pension provision to over £30,000 - and £30,000 is the limit for 'trivial commutation' taking into account all your non-state pensions.

Mistral001 said:

The problem I have is that I cannot find a financial advisor who is interested in transferring the pension.  I know about the miss-selling scandal with the British Steel final salary pensions and can understand why some financial advisors will be reticent about Defined Benefit / Final Salary Pension transfers, but I would have thought that somebody would be interested in doing this type of work.  I accept that I might have to pay a biggish fee to a financial advisor and accept that I will get no, or a greatly reduced pension, from the pension when I transfer it, so I cannot see why they are not interested.  Can anybody point me in the right direction?

All advisers are reticent about doing DB transfer work because the risk is huge for a relatively small reward for them - it simply isn't worth it, particularly on such a small sum. They aren't likely to get any ongoing work from you to advise on the amount transferred and even if they did, it would be tiny.

Even if you did find someone willing to do the work, you could expect to pay about £5K, which would take a huge bite out of your transfer.

Depending on how much above £30K the current transfer is, it's just possible that it could slip below the £30K mark at some future point and you could transfer without advice being needed. As explained above, you won't be able to take the lot as cash from your DB scheme because you'll still be over the limit for trivial commutation.

JohnWinder

Marcon said:

All advisers are reticent about doing DB transfer work because the risk is huge for a relatively small reward for them - it simply isn't worth it, particularly on such a small sum.

Having been granted what appears to be privileged status in conducting a financial services business it's good to know they're only reticent about a role no one else is allowed to undertake. Some sort of a fix needed there.

xylophone

Have you obtained a State Pension Forecast?

https://www.gov.uk/check-state-pension

Have you now reached Scheme Normal Retirement Age for this deferred pension?

Given when you were a member, there will be a Guaranteed Minimum Pension.

Were you given a statement of deferred benefits on leaving showing the GMP and excess?

Do you know how the GMP revalued in deferment (Fixed Rate/Full Rate/Limited Rate)?

Are you male or female?

Marcon

JohnWinder said:

Marcon said:

All advisers are reticent about doing DB transfer work because the risk is huge for a relatively small reward for them - it simply isn't worth it, particularly on such a small sum.

Having been granted what appears to be privileged status in conducting a financial services business it's good to know they're only reticent about a role no one else is allowed to undertake. Some sort of a fix needed there.

You mean like doctors, dentists, lawyers, auditors...or should it be a free for all regardless of ability, PI cover and qualifications?

It's not just customers who have a choice (albeit very limited when it comes to DB transfers - blame the FCA for that) - service providers do too!

dunstonh

The problem I have is that I cannot find a financial advisor who is interested in transferring the pension.  I know about the miss-selling scandal with the British Steel final salary pensions and can understand why some financial advisors will be reticent about Defined Benefit / Final Salary Pension transfers, but I would have thought that somebody would be interested in doing this type of work.

The DB Pension transfers concerns pre-date British Steel.    It goes back to the 90s.   The regulator considers DB pensions missold unless proven otherwise and, historically, 9 out 10 DB pensions are best left where they are.    The British Steel thing was actually only a small number of firms.       Before the market in DB transfers became hard, only 1 in 10 advisers held the regulatory permissions to do them.   

so I cannot see why they are not interested.

Firms doing DB transfers will be paying for the cost of doing it for the rest of the time their firm exists.  It's not a one-off cost that is suffered.   Yet your bill is one off.   Your CETV is low and you are effectively asking an advice firm to do one of the highest risk transactions they can carry out in an area that is currently a hot potato.   There isn't a lot of logic in doing it from a business point of view.

JohnWinder

Marcon said:

You mean like doctors, dentists, lawyers, auditors...or should it be a free for all regardless of ability, PI cover and qualifications?

It's not just customers who have a choice (albeit very limited when it comes to DB transfers - blame the FCA for that) - service providers do too!

Indeed, for two people to conduct their business both need to agree to do it. But the forum hears repeatedly of people having difficulty getting this aspect of business done. I know this is not the forum for it, but are there so many complaints about doctors or dentists not treating their patients in particular circumstances, or auditors reticent to check the books or lawyers to take on a case?  And let's ignore publicly funded services; I was thinking about ones for which private payment is being offered. Have the policy makers really got this aspect of financial services regulation/control as good as the public might expect it to be? It doesn't sound like it from the posts we read.

xylophone

or auditors reticent 

they're only reticent 

https://www.vocabulary.com/articles/chooseyourwords/reluctant-reticent/

I'm a "diehard snoot"!

Mistral001

I assume that the reluctance to take on this work is all about professional indemnity insurance .  I know from my own business that there are some types of work which push up the cost of premiums.  I assume that it is the same with financial advisors.  I totally accept what some people have said about the right for FA's to refuse any work.  They probably cannot get the insurance for it or it does not make business sense to pay the extra premiums to carry out the work.  

[Deleted User]

Advisers are greedy for the business, especially if there is the prospect of charging ongoing fees, but at the same time fearful of getting blame if the pension goes wrong.  So there is a tension between greed and fear but I agree with John Winder, the system is broken. 

Marcon

JohnWinder said:

Marcon said:

You mean like doctors, dentists, lawyers, auditors...or should it be a free for all regardless of ability, PI cover and qualifications?

It's not just customers who have a choice (albeit very limited when it comes to DB transfers - blame the FCA for that) - service providers do too!

Indeed, for two people to conduct their business both need to agree to do it. But the forum hears repeatedly of people having difficulty getting this aspect of business done. I know this is not the forum for it, but are there so many complaints about doctors or dentists not treating their patients in particular circumstances, or auditors reticent to check the books or lawyers to take on a case?  And let's ignore publicly funded services; I was thinking about ones for which private payment is being offered. Have the policy makers really got this aspect of financial services regulation/control as good as the public might expect it to be? It doesn't sound like it from the posts we read.

Completely agree that things have gone OTT. I'm waiting for the first complaint about a member being advised NOT to transfer (and following that advice) when transferring was clearly in their best interests! I think I'll have a long wait....