Final Salary Pension Transfer

Gaily123

The advice from the IFA was given before the transfer value was produced and therefore it is the advice regarding the transfer that was being investigated, rather than basing it on the value that could have been reinvested. A quote from the Ombudsman in his final ruling states 'The regulator, the Financial Conduct Authority (‘FCA’), states in COBS 19.1.6G that the starting assumption for a transfer from a DB scheme is that it is unsuitable. So,*** should have only considered a transfer if it could clearly demonstrate that the transfer was in ***’s best interests. And having looked at all the evidence available, I’m not satisfied it was in her best interests.'   my original question was about the calculation 
I agree the 65000 was a very low figure and I queried this at the time with the pensions administrator but they said that this was correct   If they hadnt recommended the transfer, I would have sourced the money from elsewhere probably costing me much more.  When i originally asked for the advice, the IFA was aware that I would be taking 25% tax free lump sum from the fund once invested, however after that it became clear that due to my circumstances changing more funds would be required

najan49

It seems to me that would be impossible to advise in favour of a transfer out of a DB pension without knowing the transfer value, and successfully defend that advice to the ombudsman.

I wonder why the advisor did so in this case? If I was underwriting their professional insurance I’d be taking a pretty dim view of this.

Gaily123

L9XSS said:

Cow, market, magic beans springs to mind.....Seriously though it would be interesting to know how the case progresses. Do you expect from the upheld complaint “to be put back in the position before the DB transfer out.”

Not really sure what you mean....to be put back etc is the ruling from the Ombudsman 'A fair and reasonable outcome would be for the business to put ***, as far as possible, into the position she would now be in but for the unsuitable advice. I consider *** would have most likely remained in the occupational pension scheme if suitable advice had been given. *** must therefore undertake a redress calculation in line with the rules for calculating redress for non-compliant pension transfer advice, as detailed in policy statement PS22
my question is merely about the calculation   The advisor contacted me to inform me that there were a number of companies that were being reviewed by the FCA and they were happy to re-look at my case via an independent company.  This independent review supposedly didnt happen and they invited me to complain to them so that they themselves could review their own case.  Of course they found no fault and they said I could have the whole case investigated by the Ombudsman.  The Ombudman's investigator upheld the complaint for poor advice, the IFA had a chance to come back with information against this which they didnt, it then went to the Ombudsman who upheld my complaint.
I have no financial advisory experience, hence why i am interested in others' views on this type of forum, and had the IFA not contacted me initially inviting me to agree to a review of the advice given, I wouldn't have known that their advice was not suitable as I assumed it was

Gaily123

 the IFA was aware of the value but this didnt form part of his defence.   The Ombudsman has stated that regardless of the value there were other areas of discrepancy ie attitutude towards risk, 
'The suitability letter showed that it would cost *** £124,095.51 to obtain a comparable level of income to the DB scheme at age 65. This was £55,508.02 more than the transfer value. This gives a good idea of the ‘cost’ of the benefits she was giving up at the time which I think it’s reasonable to say this is significant.'
'For this reason alone, a transfer out of the DB scheme wasn’t in *** best interests. Of course financial viability isn’t the only consideration when giving transfer advice, as *** has said in this case. There might be other considerations which mean a transfer is suitable, despite providing overall lower benefits. I’ve considered these below. Flexibility and income needs One of the reasons that *** wanted to transfer was that she said she wanted some flexibility in how she took her money. It seems that she wanted to provide some funds for her daughter in the near future. But I think it’s reasonable to say that *** accepted what *** said about this without any challenge'
The above are excerpts from the ruling showing that the value wasnt a major consideration it was the advice to transfer out and the IFA performance models were based on average / good performance and not consideration for poor performance.
I have had to look into all these points myself to try and understand but again it is about the calculation, as the ' putting back in a position etc.... ' is a very complicated calculation 

Pat38493

I am not sure how these things work, but even when the IFA advice was ruled wrong, I would guess that "putting things back to where they were" would, in the best case scenario, still mean that you have to pay back the £65K that you have spent in order to re-instate your benefits - you cannot expect to end up with getting the £65K for free.

Even then, since the mistake was by the IFA and not the DB pension provider, I am not sure that the DB pension provider can be forced to reverse the situation even if you pay back the £65K.  Therefore in reality there would need to be some calculation of the difference between the scenarios and some redress in that respect.

I don't have any experience in this area so I am surmising what I think "should" be the situation.  Reality may be different.  However I would have thought that if the IFA was negligent, you should be entitled to some kind of redress even if you changed your situation after you already had the money.

Gaily123

putting things right doesnt mean giving back the money and having it back in the scheme, it is merely a term to put the customer back in a position financially that they would have been had they not been given advice to transfer out.  In my case it would be a 'fund' or annuity to ensure that the benefits from the dB pension would be guaranteed as they had with the DB

Pat38493

Maybe but even so I would expect that it would be reduced by the effect of the £65K that you have already spent - you cannot expect them to re-instate the full 4K payment per year, when you have taken 65K out of the value of it and spent it.  At least that would be how I would expect it to work.  Maybe you would then get a bit extra as a kind of compensation for the inconvenience, but I am pretty sure you will not get the full 4K per year back when you have already taken and used 65K of cash out of it.

Qyburn

Gaily123 said:

...If they hadnt recommended the transfer, I would have sourced the money from elsewhere probably costing me much more.  ...

So you are better off than if you hadn't made the transfer?

Gaily123

definitely not better off however i have had £65k  i suppose they need to work out whether the £65k would have given me £4k per year from 60 to 85??

Pat38493

Gaily123 said:

definitely not better off however i have had £65k  i suppose they need to work out whether the £65k would have given me £4k per year from 60 to 85??

As I said before I am not the expert there, but to me, if the ombudsman is effectively saying that the IFA should only have recommended the transfer if the CETV was above £124K, then it might be reasonable to think that you should end up with 55K of additional fund so maybe the compensation could be that.  However I suspect it is more complicated than that in reality.