DB Pension transfer..a no brainer?

Parking_Trouble

Still no sign retirement needs and plans then.

segovia

We deliberated a transfer of a DB for nearly 5 years and in the end decided to leave it alone. The main reasons were cost of transfer and ongoing costs. On a 1m pot I am guessing you would be paying nearly 4% PA in fees. Leave it and enjoy your retirement without the hassle of annual financial reviews.  

Thrugelmir

C_Mababejive said:

Thrugelmir said:

C_Mababejive said:

Parking_Trouble said:

Thrugelmir said:

Parking_Trouble said:

Diplodicus said:

Did you read the OP, cloud dog? 

OP
Approaching 60. £60k in a SIPP. £1m CETV offer. No dependents.
Seeking support that a transfer out is a 'No Brainer'

2nd post
The projected pension is roughly £24k pa
Thinks they are approaching LTA

3rd post
Previous recommendation was not to transfer for several reasons stated.
Throws up some options of what to do.
Wants control of 'their' money (but includes options not to transfer out)

Overall, lacking any clarity of needs or plans so likely to have further recommendation not to transfer out.

Meanwhile the usual tension between the polemicists comes to the surface and the thread goes off track in the absence of the OP providing the information needed to help make the right decision.

Most importantly the OP is still working and contributing to the scheme. Also asks a similar question every year. 

Strange that the OP has presumably paid an IFA and couldn't come up with a plan or reasons why they wanted to transfer.

Still no plans, desires or needs by the look of it.

Could have made up some plans to leave work ASAP and travel the world in first class for a few years to justify the need to access a lot of money in the early years of retirement.

It think it reasonable to expect that the capital appreciation over my lifetime would exceed that which i might benefit from a DB pension.

Are you are intending to invest 100% into equities? 

Thankfully those decisions wont really rest with me but will be entrusted to others for example Royal LonDON.

According to their risk profiler, im moderately cautious. Perhaps one of their GRIPs ? a 4 maybe? so mixed asset as appropriate.

Why would you give up your indexed linked DB to invest in Government bonds at the current time?  Little sense in that. 

cfw1994

segovia said:

We deliberated a transfer of a DB for nearly 5 years and in the end decided to leave it alone. The main reasons were cost of transfer and ongoing costs. On a 1m pot I am guessing you would be paying nearly 4% PA in fees. Leave it and enjoy your retirement without the hassle of annual financial reviews.  

Why would the cost be 4% pa?

I read initial (one-off) transfer costing in the region of 3-6%….but for larger sums (eg, over 250-500k), the annual charge by an IFA would generally be around 0.5%.  

Fund costs (& perhaps DFM costs) might be anything from 0.5-1.5%.  I’d expect the average annual costs to be below 2%, likely nearer 1.5%

What would double that to 4%?

segovia

IFA Costs 0.5% - 0.75% 
Transaction costs 0.11% 
OCF 0.73% - 1.15% 
Platform Costs 0.2% 

This is at the low end but still around 2.5% - The likes of St James Place are 4% and they lock you in for a minimum six years. 

Even at 2% over 20 years you would be paying £400,000 .00 in fees. Just doesn't sit right with me, that is more than what some people have in their pots. Or to look at another way, say to yourself do I want to save £400,000.00 over the next 20 years? (;-)

Albermarle

segovia said:

IFA Costs 0.5% - 0.75% 
Transaction costs 0.11% 
OCF 0.73% - 1.15% 
Platform Costs 0.2% 

This is at the low end but still around 2.5% - The likes of St James Place are 4% and they lock you in for a minimum six years. 

Even at 2% over 20 years you would be paying £400,000 .00 in fees. Just doesn't sit right with me, that is more than what some people have in their pots. Or to look at another way, say to yourself do I want to save £400,000.00 over the next 20 years? (;-)

You could drop the IFA , transfer to fixed cost investment platform and invest in equity and bond trackers . Total cost around 0.2%.
Or drop the IFA , use a % platform but invest mainly in ETFs/ITs/MA funds  . Total cost around 0.6% 

Also our regular IFA contributor ( sadly absent still) often says even with an IFA , total costs can be kept close to 1 % for larger sums.

Not saying a DB transfer would have been the right thing to do , but just making the point that costs of 4% are not normal.

segovia

Dropping an IFA and the associated baggage that comes with is easier said than done. In our own experience IFA's were not interested in the transfer unless there was evidence of commitment to stick with a long term relationship.   

MarkCarnage

My costs for SIPP/Drawdown portfolio

OCF                              0.75%
Transaction Costs         0.05% ( I run a low turnover portfolio)
Platform                         0.10%
IFA                                  nil (self managed)

Total c 0.9%. 

If I include my overall portfolio (ISA and GSA), then the costs come down another 10bps or so as lower OCF overall. I need to update my numbers here as haven't done so for a year or so....if anything these costs will be lower. 

I could get this a fair bit lower still if I used passive funds, but I don't as:

1) Some holdings are just nor replicable there

2) My active equity funds have in general outperformed passive quite significantly over 5-10 years, this has exceeded OCF costs by a large margin. 

3) The platform costs would be higher (I am on HL platform, so holding ITs and shares is actually fairly cheap given I don't trade much). 

I appreciate that not all will feel comfortable not getting advice, but for a decent sized portfolio it shouldn't be costing that amount. Most people should be able to acquire enough knowledge over a couple of years to run a low cost portfolio of funds/ITs suitable for their needs.