Db pension transfer advice/suitability report.

rich744

Linton said:

rich744 said:

The advice is invariably to stay put. The pension transfer specialists and FA's are running scared of the regulator. 

Wanting to pass on your money seems like a very reasonable desire to me. 

The reason why employers pay into DB pensions and the government provides tax breaks is to help people to have a reasonable standard of living in retirement.  Money in pensions is not your money. It is money held in trust for your benefit. You have probably contributed less than half of it. Why should employers and the government subsidise your gifts to your beneficiaries?

The regulator seems to be taking a similar view.  If a transfer is demonstrably for your benefit eg if you have a terminal illness, you should have no problem with getting a transfer.

All regulated professionals must follow the requirements of their regulator. If they don’t they could be prevented from continuing in business. That is the purpose of having a regulator.

If you want complete freedom of choice with your money don’t put it in a DB pension.

Bizzare  - Pensions are contractual deferred earnings. The idea that 'money in your pension is not your money' is nuts. The pension freedoms bill was implemented to provide errrr, freedom, to do what you like with the accrued contractual value you have attained.

Having been through the process it's a convoluted sham that goes against the spirit of the Bill.  

rich744

Prism said:

Albermarle said:

If you want complete freedom of choice with your money don’t put it in a DB pension.

Good point . Of course any employee offered the chance of being in a DB pension would normally snatch the employers hand off, as it will almost invariably be better ( a lot better normally ) than  a DC pension  ( and then later complain that they could not get their money out.....)

I know. I have never understood why people seem happy to sign up for a DB pension fully understanding the deal and then later get disappointed when they can't have something entirely different. If you don't want a DB pension and its important to you then don't take a job with a DB pension.

'Sign up'...? staff were automatically enrolled into the company schemes, these were then closed to new staff members and a DC alternative was provided. Staff members in DB were largely not permitted to transfer value into new DC schemes. 

'Don't take a job with a DB pension' - So you'd have people base their career choice on the type of pension scheme that a given company provides....? Give me strength! 

grumiofoundation

rich744 said:

Prism said:

Albermarle said:

If you want complete freedom of choice with your money don’t put it in a DB pension.

Good point . Of course any employee offered the chance of being in a DB pension would normally snatch the employers hand off, as it will almost invariably be better ( a lot better normally ) than  a DC pension  ( and then later complain that they could not get their money out.....)

I know. I have never understood why people seem happy to sign up for a DB pension fully understanding the deal and then later get disappointed when they can't have something entirely different. If you don't want a DB pension and its important to you then don't take a job with a DB pension.

'Sign up'...? staff were automatically enrolled into the company schemes, these were then closed to new staff members and a DC alternative was provided. Staff members in DB were largely not permitted to transfer value into new DC schemes. 

'Don't take a job with a DB pension' - So you'd have people base their career choice on the type of pension scheme that a given company provides....? Give me strength! 

People base career choices on the salary all the time. For many people (sensibly) the pension offering is seen as part of the remuneration and the is therefore factored into whether to take a certain job or not.

Are you suggesting people completely ignore the pension on offer? If so I will take some of that strength too! 

Linton

rich744 said:

Linton said:

rich744 said:

The advice is invariably to stay put. The pension transfer specialists and FA's are running scared of the regulator. 

Wanting to pass on your money seems like a very reasonable desire to me. 

The reason why employers pay into DB pensions and the government provides tax breaks is to help people to have a reasonable standard of living in retirement.  Money in pensions is not your money. It is money held in trust for your benefit. You have probably contributed less than half of it. Why should employers and the government subsidise your gifts to your beneficiaries?

The regulator seems to be taking a similar view.  If a transfer is demonstrably for your benefit eg if you have a terminal illness, you should have no problem with getting a transfer.

All regulated professionals must follow the requirements of their regulator. If they don’t they could be prevented from continuing in business. That is the purpose of having a regulator.

If you want complete freedom of choice with your money don’t put it in a DB pension.

Bizzare  - Pensions are contractual deferred earnings. The idea that 'money in your pension is not your money' is nuts. The pension freedoms bill was implemented to provide errrr, freedom, to do what you like with the accrued contractual value you have attained.

Having been through the process it's a convoluted sham that goes against the spirit of the Bill.  

Thanks for adding extra detail to my argument...

I would be astonished if your contract of employment gave you anything other than the right to a guaranteed income at retirement.  It would not have given you any right of access to the assets held by the trustees to ensure that they can meet the contractual obligations.  Those assets are not your money.  Please correct me if your contract of employment is dfferent. 

The "pensions freedom" bill was only intended to apply to DC pensions.  It did not give DB pensioners any extra freedoms that were not already allowed by the law. Quite the reverse as it added a couple of relatively minor restrictions, one of these being the requirement to receive regulated advice.

Transfer of DB pensions was always legally possible.  It just was very rarely used since prior to the 2008 crash the CETVs were much lower and would be very unlikely to provide sufficient income to replace the DB pension lost.  The main usage of DB pension transfer was for difficult cases such as severely reduced life expectancy and by scammers to swindle naive pensioners. 

Diplodicus

The bill is explicit:- 
"The act also includes important legislation on the new pension freedoms which will give people greater flexibility and help them make informed decisions about what to do with their savings..
..those with a Defined Benefit pension who want to access their pension flexibly will benefit from regulated financial advice to ensure that they make the right decision."

It's simple. If DB pensions were not meant to be subject to pension freedoms, they would not be subject to pension freedoms. 

RoadToRiches

Prism said:

I know. I have never understood why people seem happy to sign up for a DB pension fully understanding the deal and then later get disappointed when they can't have something entirely different. If you don't want a DB pension and its important to you then don't take a job with a DB pension.

Not as simple as that, job comes with a DB pension, there was no other option at the time.  Also DB pension employer was topping up pension with up to 49% of salary. That is unheard of in a DC scheme, where max we get now is 12% for a employee contribution of 6%. Now when you weigh up what I believe to be my life expectancy, through lifestyle choices,.being single with no dependents or children to get their pensions which is accounted for in the full report to compare like for like with an annuity the scheme benefits are no longer suited to me and the CETV becomes very attractive alternative and so going against the advice as an insistent client.

dunstonh

Also DB pension employer was topping up pension with up to 49% of salary. 

The employer doesn't top up a DB pension.  The employee gets a range of defined benefits.   The employer funds the DB scheme to meet its liabilities.   Sometimes the employer will pay in nothing. Sometimes they will need to pay a lot.  However, there is no impact on the employee what the employer pays as long as the scheme can meet its liabilities.

Linton

Diplodicus said:

The bill is explicit:- 
"The act also includes important legislation on the new pension freedoms which will give people greater flexibility and help them make informed decisions about what to do with their savings..
..those with a Defined Benefit pension who want to access their pension flexibly will benefit from regulated financial advice to ensure that they make the right decision."

It's simple. If DB pensions were not meant to be subject to pension freedoms, they would not be subject to pension freedoms. 

My interpretation based on memory of events at the time....

The bill did not actually give any additional freedoms to DB pensioners. All new freedoms enacted by the bill only applied to DC pensions.  The whole area is a mess because the DB pension bit was added towards the end of the process when the select committee got worried about the Lamborghini problem.  The requirement for advice was what the select committee and the government came up with as a compromise but the implications were not thought through.

The FCA was given the role and authority to ensure that the pension system worked in the customers' best interests.  IFAs, through the advice requirement, were given the role of determining what those best interests were at the detailed level which got everyone else off the hook for what could be a very tricky question.  The FCA kept the IFA's in line by strict guidance and potential heavy penalties should that guidance not be followed.  This worried the insurance companies who charged the IFAs large sums for liability protection.

Ombudsman decisions added to the general concerns by ruling that an IFA recommending a transfer could be held responsible for subsequent foolish investment decisions made by the customer.  The pension providers were afraid they could be similarly be held responsible if they accepted a transfer-in against advice and so refused to do so.

Thus we end up with the situation we have now.  If you want something different to happen you should discuss it with your MP to get the law changed.  

Diplodicus

Consider the individual with an eligible  DB pension.

Does she have the right to transfer?  Yes.

Does she have the final say on whether to transfer? Yes.

Upon that transfer, is the money "hers"? Effectively yes, same as any SIPP.


This is the spirit freighting the pension freedom bill, the right and responsibility of the individual. What never was an intended consequence is the current impasse where, effectively, the Financial Adviser determines whether an individual can transfer a DB pension. 

Silvertabby

Transferring out of a DB scheme may indeed be suitable for some - but not for the many who don't have the first idea about managing their own pension funds, but were just blinded by the lump sums on offer.

Forget the 40X annual pension CETVs often mentioned on these boards - the LGPS transfer factors are set by GAD, and are nearer 20X the pension given up.  Yet LGPS members, both current and deferred, fell over themselves in the rush to transfer 'their money' into a 'cash it in spend it now' pension scheme.

The scary thing was that most of these had responded to a cold call from a pension review company, most of which had only just crept  out of woodwork.

Back then, my colleagues and I gave it 10 years before the LGPS would have to deal with complaints from former members '... but no-one told me that my money would run out....'

The clock is ticking