Db pension transfer advice/suitability report.

Malthusian

Diplodicus said:

And that, I'm afraid, is the nadir to which the DB pension transfer advice market has sunk. 

1) You have to hire an adviser.
2) The adviser makes a self-serving recommendation.
3) No clear way forward. Just say "thank you.".  

There are two clear ways forward. Either take the advice or transfer against advice (assuming a negative recommendation). If you can't be bothered with the latter it's a free country.

There is no possible system under which advisers can be compelled to cut their own throats. Advisers are required by law and regulations to provide a recommendation in the client's interests. Which means it will serve both themselves and the client. If it doesn't the client can make a formal complaint and will eventually they will be reimbursed. Meanwhile they can either find a better adviser who will give them a positive recommendation or just use the bad advice to meet the requirements of an insistent client transfer. If the advice was negative and correct they can also use that to transfer as an insistent client. If they can't be bothered it's a free country.

Linton said:

The requirement for advice on DB pension transfer came in with the 2015 pensions freedom legislation.  There was no fundamental perceived problem until that time.  Prior to that legislation there were limitations on the amount you could drawdown on DC pensions so drawdown was less attractive - unless you could prove you had significant other retirement income the limit was (IIRC) not very different to the then annuity rate.  Most people with DB pensions would not have had sufficient other retirement income to take more.

It was 120% of a theoretical annuity rate (as calculated by an official table, not necessarily open market annuity rates) until 2011, then chopped to 100% from 2011 to 2014 (on the grounds that drawdowners were in danger of spending all their money as longevity rose), then briefly increased to 150% as a stopgap before pension freedoms, and after 2015 it became largely irrelevant.

If you had more than £20,000pa in guaranteed income (2011 rate) you could use flexible drawdown, but that swiftly became a footnote in history as it was invented in 2011 and obsolete in 2015.

Between that and lower CETVs, the chance of being able to draw a higher income from capped drawdown (as we now call it) than from taking the DB pension pre 2015 was probably minimal. Unless, of course, you transferred well in advance of taking benefits and assumed an unrealistically high growth rate - hence the 1990s "breaking the chains" misselling scandal.

Daniel54

Your link points to FCA concerns in 2019 that transfer recommendations were being too freely given.I agree that some of those recommendations at the time were self serving ( think the British Steel workers in Wales)

Guidance has been tightened in 2021 as per the attached and the linked to pdf.Clearly ,and in my view correctly, this is aimed at reducing dubious transfer recommendations.

Effectively the insistent client route has been all but eliminated, which is no obstacle to those who receive positive recommendations from an authorised IFA

https://www.fca.org.uk/publication/finalised-guidance/fg21-3.pdf

rich744

In the land of DB pension transfers,  it's certainly not "A free country"......

The barriers now in place are against the spirit of the Pension freedoms act. 

The idea that it's 'not your money' is beyond ridiculous. The same claim could be made for anywhere that one stores value. 

Daniel54

As a recipient of two DB pensions, they are a collective investment and there is no pot with my name on it

However I am absolutely entitled to the indexed income for life ( and spouse if I go first ) they provide me.That has a pretty high value in my view

I have taken the six figure PCLS in both cases,and that is indeed my money.

If there is not enough money in the collective pot that is not my concern, but an obligation on the employer to make up the shortfall

With the cooperation of those who have transferred out, both my schemes are currently more than 100% funded.Happy days.

Pablo7474

rich744 said:

In the land of DB pension transfers,  it's certainly not "A free country"......

The barriers now in place are against the spirit of the Pension freedoms act. 

The idea that it's 'not your money' is beyond ridiculous. The same claim could be made for anywhere that one stores value. 

Have you actually read any responses on here as you are repeating yourself? The advice protects people who lack understanding so perhaps it works in your favour. 

Malthusian

xylophone said:

Re stakeholder - once more into the breach.... my post of 18 June

Given the above, where does "must accept" stand?

We won't know until someone with an already-open stakeholder pension attempts to transfer in a DB pension, having taken professional advice which was negative, is told they can't, takes it to the Ombudsman and the Ombudsman rules that stakeholder pension providers actually can ignore the law. At which point we will all know for certain as the decision will published publicly on ombudsman-decisions.org.uk.

People have been in this position in the past and the stakeholder pension provider backed down and accepted the transfers. Nothing has changed since then in terms of the legal requirement for stakeholder pensions to accept any transfer.

Pensions law > copy and pasted text in application forms.

Japdtp

I’m going through the process of transferring my db pension with a FA if I get a negative decision I will explore the stakeholder route . 

I have a stakeholder pension which I’ve had for about 12yrs with the pru anyone want to comment on my chances?

dunstonh

I have a stakeholder pension which I’ve had for about 12yrs with the pru anyone want to comment on my chances?

I think you will get the initial knockback and will then need to be more aggressive in your approach.

I’m going through the process of transferring my db pension with a FA if I get a negative decision I will explore the stakeholder route . 

Anecdotally, you may find more success with an IFA than an FA given the level of FA restrictions.  Although it depends on the company the FA is tied to.

jamesd

Linton said:

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.

"Further policy decisions announced when draft legislation was published in August 2014 included:

• Allowing transfers from private sector defined benefits pensions and funded public sector defined benefits pensions;"

House of Commons Library Research Briefing Pension flexibilities: the 'freedom and choice' reforms full PDF bottom of page 21.

Diplodicus

Japdtp said:

I’m going through the process of transferring my db pension with a FA if I get a negative decision I will explore the stakeholder route . 

I have a stakeholder pension which I’ve had for about 12yrs with the pru anyone want to comment on my chances?

Excellent. If Prudential should offer any resistance in accommodating your DB pension, just tell them Malthusian says they have to accept it.