Db pension transfer advice/suitability report.

dunstonh

Diplodicus said:

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. 

Wouldnt it be better to say that pension legislation says they have to accept it?

Linton

jamesd said:

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.

From a little research it seems that transfers from DB to DC schemes  were permitted prior to 2015.  See for example https://www.sharingpensions.co.uk/leavingser.htm  a document which seems to date from 2002

"Where a scheme member wishes to change from an existing pension scheme to a new pension scheme, a pension transfer of member rights will facilitate this move. During the early 1990s pension transfers became controversial as regulation became more effective and the Financial Services Authority (FSA) revealed in the pensions review that a substantial number of individuals were advised to transfer their pension rights from final salary occupational pension schemes to money purchase pensions and a buyout policy commonly known as section 32 policies."


A guess that maybe others can confirm is that the purpose of  the change you identify is to formalise the previous existing situation but to ban transfers from unfunded schemes.  So a restriction, not a new freedom.

xylophone

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

From the Pru's own guidance to advisers - see below


https://www.pruadviser.co.uk/knowledge-literature/knowledge-library/transfer-pension-scheme/

However, although most schemes provide the right to transfer, not every scheme has to accept an incoming transfer.

A stakeholder pension scheme is currently the only type of scheme which must accept any transfer from another registered pension scheme.

Malthusian

As Linton says, transfers from private sector defined benefits pensions and funded public sector defined benefits pensions to DC pensions were already allowed prior to 2015. As were transfers from unfunded DB schemes, as far as I know. (As previously discussed, it almost never happened outside divorce.)

DB to DC pension transfers were the cause of the personal pensions misselling scandal of the 90s, so you need to be pretty wet behind the ears to believe that they were a new thing in 2015.

The House of Commons document is incorrect in suggesting such transfers weren't allowed prior to the August 2014 proposals.

I'm not sure where the error even came from because the August 2014 proposals barely mention defined benefit pensions (except in passing references relating to the money purchase annual allowance and trivial commutation), as you would expect for a proposal relating to pension freedoms. I suspect the author meant to write something else and nobody picked up on it because it's a passing historical reference in a briefing note destined to be stuffed into the middle of a minister's red box on its way to becoming hamster bedding.

The pension freedoms bill increased restrictions on defined benefit pensions via a) the requirement to take professional advice and b) banning all transfers out of unfunded schemes. *edit* "All" is wrong - transfers out for divorce are still allowed.

When George Osborne announced the pension freedoms reforms, pretty much the first words out of his mouth were "No-one will have to buy an annuity" (which was about the fifth time a Chancellor had announced the end of compulsory annuities, starting with the introduction of income drawdown in 1995). Not "now you can finally cash in your final salary pension".

dunstonh said:

Wouldnt it be better to say that pension legislation says they have to accept it?

Even better, just tell the Prudential that "it's my own money and I can do whatever I wan' ".

Diplodicus

dunstonh said:

Diplodicus said:

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. 

Wouldnt it be better to say that pension legislation says they have to accept it?

I certainly would not say that unless it were  proven to be the case in reality.
Are you sure that would be the definite outcome, dunstonh, that Prudential would have to accept a DB pension transfer from an insistent client?

Malthusian

Diplodicus said:

I certainly would not say that unless it were  proven to be the case in reality.

And after you've proven to yourself that it is the case that pension legislation says they have to accept it by reading the Stakeholder Pension Schemes Regulations 2000, section 1(6)?

xylophone

Are you sure that would be the definite outcome, dunstonh, that Prudential would have to accept a DB pension transfer from an insistent client?

See Prudential's own advice to advisers.

However, although most schemes provide the right to transfer, not every scheme has to accept an incoming transfer.

A stakeholder pension scheme is currently the only type of scheme which must accept any transfer from another registered pension scheme.

https://www.legislation.gov.uk/ukpga/1999/30/part/I

Stakeholder pension schemes

Meaning of “stakeholder pension scheme”.

(1)A pension scheme is a stakeholder pension scheme for the purposes of this Part if it is registered as such a scheme under section 2 and each of the following is fulfilled, namely—

(a)the conditions set out in subsections (2) [F1to [F2(10)[F2(9)]]]; and

(b)such other conditions as may be prescribed.

...................

The seventh condition is thatF4... the scheme accepts transfer payments in respect of members’ rights under—

(a)other pension schemes;

[F5(b)contracts and schemes that became registered pension schemes by virtue of paragraph 1(1)(f) of Schedule 36 to the Finance Act 2004 (pension schemes etc. : transitional provisions and savings) ]

(c)annuities and insurance policies purchased or transferred for the purpose of giving effect to rights under pension schemes; and

(d)annuities purchased or entered into for the purpose of discharging liability in respect of pension credits under section 29(1)(b) or under corresponding Northern Ireland legislation.

Also

https://www.legislation.gov.uk/uksi/2000/1403/made

The Stakeholder Pension Schemes Regulations 2000

(6) For the purposes of these Regulations and section 1(8) and (9) (which provide that stakeholder pension schemes must have tax-exemption or tax-approval and must not refuse to accept transfer payments except in so far as necessary to ensure that the scheme has such exemption or approval) “tax-exemption” and “tax-approval” mean tax-exemption and tax-approval under Chapter IV of Part XIV of the Income and Corporation Taxes Act.

Diplodicus

Malthusian said:

Diplodicus said:

I certainly would not say that unless it were  proven to be the case in reality.

And after you've proven to yourself that it is the case that pension legislation says they have to accept it by reading the Stakeholder Pension Schemes Regulations 2000, section 1(6)?

No, you don't prove it by reading section 1 (6) of the Stakeholder Pension Schemes Regulations 2000.

You prove it by providing a recent example of someone effecting a DB pension transfer an an insistent client to Prudential.
Or the Pru themselves vouchsafing  this process. 

xylophone

As were transfers from unfunded DB schemes, as far as I know. (As previously discussed, it almost never happened outside divorce.)

Transfers out of unfunded public service schemes to DC (or indeed other DB schemes) were permitted pre 6.4.2015.

See https://citywire.co.uk/funds-insider/news/why-theres-no-pension-freedom-for-the-public-sector/a801075

article dated 3rd March 2015

To stop a run on pensions and avoid paying out large sums of money, the government has said those in unfunded DB pension schemes will not be able to transfer out from 6 April, giving public sector workers just a month to do so.

Diplodicus

xylophone said:

Are you sure that would be the definite outcome, dunstonh, that Prudential would have to accept a DB pension transfer from an insistent client?

See Prudential's own advice to advisers.

However, although most schemes provide the right to transfer, not every scheme has to accept an incoming transfer.

A stakeholder pension scheme is currently the only type of scheme which must accept any transfer from another registered pension sche

Then, as a fellow adviser and answering for dunstonh, is that "Yes", from you xylophone?

You're stating that an insistent client with a DB pension can transfer to Prudential's stakeholder pension. In reality, Prudential cannot refuse. Is that right?