DB Pension Transfer Advice

Pablo7474

Based on what you have said so far, I really can’t see you getting a positive recommendation, you haven’t given any reason to do it that would be classed as good enough. 

arty688

I would say you best bet would be to hold fire and hope the rules change sometime in the future because ATM you will be just wasting a few £K . For my weeks worth of knowledge it seems like the way to get a positive outcome is if you have enough in your pension so you don't need the DB pension. Still not sure why the process has to be so complicated and expensive other than to put you off trying. The rich get richer I'm afraid

Malthusian

DaveT55 said:

But if the DB scheme is an oil company and we have suddenly developed a conscience and a desire to move away from fossil fuels, is this not a reason?

Yeah, I disagree with dunstonh on this one. The scheme's money will be invested in a mix of equities, bonds and other assets to provide the income for the members, which won't take into account any members' ethical concerns. In addition, if it's an oil company's pension scheme, in the event of any shortfall the company will be required to put money into the scheme which has been generated by killing polar bears.

Ethical criteria are unlikely to result in a positive recommendation on their own if it's against the member's own interests, but cashing in a DB pension to reinvest in ethical funds does meet the objectives of someone who wants to invest more ethically.

If you have your own portfolio of ethical funds that you want to invest in you should expect to pay higher fees as the adviser will have to research your fund selection from scratch as if they'd come up with it themselves, while if you were happy for the adviser to recommend funds, some of that work would already have been done.

I have read a few articles that longer term investment planning in farming or property can be a positive factor for moving out of a DB along with wanting investments in suitably ethical funds rather than the standard investments under a  company DB.

If you already had substantial reliable income from farming or property, that would make a positive recommendation more likely. Wanting to cash it in to invest the CETV in farmland or property would probably result in a negative recommendation due to the high risk that it didn't generate the returns necessary to match the benefits of the DB scheme. In addition, investment in residential property would require you to pay tax to take the money out of the tax wrapper.

There isn't much point "trying to make a case" to the adviser, they're not a judge and their job is to make a case for whatever is the most appropriate option. I would not bother trying to lie about having lots of guaranteed income, most people are rubbish at lying and as soon as the adviser rumbles you, that will be the end of any prospect of getting any kind of recommendation at all. Plus they may still charge you for the work done to that point.

If she seriously wants to transfer (even if it's against advice) I would get on with it. As RoadToRiches has often said, if there is an avenue open at the moment it may be closed by the time you want to transfer. One thing she could do immediately is open a stakeholder pension with a nominal £20 contribution just in case the few remaining ones sold direct to consumer are closed.

dunstonh

Still not sure why the process has to be so complicated and expensive other than to put you off trying.

Because it can make or break someone's life.  (both the consumer and the adviser firm and all its employees)

A guaranteed annually increasing income for life is highly valuable.   A decade of above long term average stockmarket performance has brought complacency.   A decade of below long term average performance (such as a lost decade or a one-in-one-hundred-year event could wipe out a DC fund before the person dies.

A lot of people with six digit CETVs have never invested before in their lives.  Suddenly they are exposed to volatility.   A 25% drop on a £600,000 fund is a drop of £150,000.   You should not underestimate the bad decisions that a new investor can and often make when events like that happen.

arty688

"Because it can make or break someone's life." doesn't mean it has to be expensive

"the adviser firm and all its employees" Is probably what makes it expensive

The fact you have explained the risks in a couple paragraphs shows it doesn't have too be complicated.

DaveT55

If she seriously wants to transfer (even if it's against advice) I would get on with it. As RoadToRiches has often said, if there is an avenue open at the moment it may be closed by the time you want to transfer. One thing she could do immediately is open a stakeholder pension with a nominal £20 contribution just in case the few remaining ones sold direct to consumer are closed.

Thanks for the response, some really good points. 

We would be more than happy to get on with it asap if there was a route open. I don't see anybody that has gone down the route of a Stakeholder pension to transfer a DB pension, on this forum. Lets say I get the negative independent advice not to transfer (as expected) and this is enough to satisfy the current DB pension provider. I assume there is still paperwork to complete on the side of Standard Life (or whoever the stakeholder pension provider is) and therefore a liability that would sit with them for the transfer. I am pretty certain they would refuse to carry out the transfer and I would then be in a debate with an ombudsman about a legal obligation on transfers under this pension option.  

dunstonh

"Because it can make or break someone's life." doesn't mean it has to be expensive

You are right. It doesn't have to be expensive.  Around £3500 per scheme would be fine.

"the adviser firm and all its employees" Is probably what makes it expensive

And the requirements of the regulator and the intensive workload required for that particular transaction are the cause along with a lifetime of liability that can go beyond the grave to the adviser (as happened to a widow in the past who became liable for her deceased husbands advice despite never being an adviser herself).

The fact you have explained the risks in a couple paragraphs shows it doesn't have too be complicated.

I have explained a risk.  Not a comprehensive list of risks.   And risks are just part of the analysis.    

If you think DB pensions and transfers are so easy and profitable, why do so few do them?

arty688

"You are right. It doesn't have to be expensive.  Around £3500 per scheme would be fine."

sounds like £3.5 is not considered a lot of money by IFA's 

"If you think DB pensions and transfers are so easy and profitable, why do so few do them?"

didn't say they were just said I didn't see why they have to be.
but as £3.5k is not considered a lot of money maybe we also have a different definition of profitable?

RoadToRiches

arty688 said:

"You are right. It doesn't have to be expensive.  Around £3500 per scheme would be fine."

sounds like £3.5 is not considered a lot of money by IFA's 

"If you think DB pensions and transfers are so easy and profitable, why do so few do them?"

didn't say they were just said I didn't see why they have to be.
but as £3.5k is not considered a lot of money maybe we also have a different definition of profitable?

Mine cost me nearly 10K in total so this is a very good deal.  Also going against advice fee is payable regardless of outcome and as it's negative it comes out of your own pocket and not the pension fund as it would have done if they were managing the pot.

arty688

Maybe £10k isn't much either ?