Pension transfer costs

Marcon

MrPauly said:

The IFA I’m currently talking to has said they wouldn’t refer it if they thought it wouldn’t get through. To be fair to them they do keep telling me the pitfalls and reminding me what I’m giving up.
I know it’s difficult to get through but I have lots of colleagues who have done it with no problem. I have asked them what charges they pay and they don’t really know so maybe they’re not as thorough as me. Most of them are like me, can’t face work much longer but too old to change careers. 

Incidentally my DB scheme was closed in 2015 so I am a deferred member and I now contribute to a DC scheme with generous employer contributions and I would probably combine this in my pot with the DB CETV.
 Thanks to all for the replies I definitely need to think about this a lot more.

Like so many people, sounds as if they were blinded by the £ signs spinning in front of them (which is understandable, but doesn't mean the transfer was automatically a good idea). I'll wager they transferred 'with no problem' prior to 1 June this year?

Albermarle

Alexland said:

If you are currently contributing to a DC scheme then could you contribute enough to draw it first and leave the DB scheme alone until it's normal retirement age? Seems a shame to waste all that money on upfront and ongoing charges and give up the security of guaranteed income for later in life.

Yes , I retired recently with a DB and a DC pension pot . It gives a good blend of security and potential growth and helps one sleep at night !

jamesd

Marcon said:

Like so many people, sounds as if they were blinded by the £ signs spinning in front of them (which is understandable, but doesn't mean the transfer was automatically a good idea). I'll wager they transferred 'with no problem' prior to 1 June this year?

Since current transfer rates can provide as much as twice the income using safe withdrawal rates and 100% instead of reduced spousal pension it's unsurprising that people would not be blinded by large numbers but would appreciate the huge potential benefit of transfers. And of course income can be varied over time as desired to better match real world spending patterns that are higher at younger ages and lower at older ones.

Our Dear Regulator considers higher income to be irrelevant.

jamesd

Alexland said:

Seems a shame to waste all that money on upfront and ongoing charges and give up the security of guaranteed income for later in life.

The effects of all costs are part of the calculation of a safe withdrawal rate, so when the calculation says 50% higher income or 100% higher income, and a spouse getting the same, that's reliable.

No need to give up guaranteed income in later life either. State pension deferral can be started as young as 66 at the moment and provides a guaranteed uncapped inflation linked income for life. Some annuity buying at various ages is also entirely sensible if people want higher levels of guaranteed income or want it before reaching state pension age.

What the transfers do is offer far more choice in guaranteed and unguaranteed amounts and timings of when income can be taken, as well as usually substantially higher income levels.

This post assumes current market conditions for private sector transfers, not public sector.

jimjames

Albermarle said:

Alexland said:

If you are currently contributing to a DC scheme then could you contribute enough to draw it first and leave the DB scheme alone until it's normal retirement age? Seems a shame to waste all that money on upfront and ongoing charges and give up the security of guaranteed income for later in life.

Yes , I retired recently with a DB and a DC pension pot . It gives a good blend of security and potential growth and helps one sleep at night !

I thought it was more relevant to add to this thread rather than a brand new one as it's the same sort of issue. I'm in a similar position although not retired yet.

I have 2 deferred DB schemes, one of which I contributed for a long time, the other for only a few years. I also have a DC scheme where current contributions are 30% of salary via sacrifice with 10 more years to go before retirement.

The short contribution DB pension will be only paying a small annual pension but the scheme have offered a CETV of 50x the annual pension to transfer. Seriously looking at the options to transfer that to my DC pension or SIPP but does anyone have any suggestions of the likelihood of getting a transfer approved for the small DB pension as it's over £30k. Is it more likely to be approved if you have other DB and DC schemes to give a mix of income streams?

thebands

Are there any fixed price transfers ?

I have no problems with paying for financial advice but absolutely disagree with it being a % fee of my savings.

The considerations and the effort for an FA are fundamentally the same whether the transfer value is £250k, £500k or £1m, why should the FA take a bigger fee just because someone has been prudent enough to save themselves a bigger pot?

p00hsticks

thebands said:

Are there any fixed price transfers ?

I have no problems with paying for financial advice but absolutely disagree with it being a % fee of my savings.

The considerations and the effort for an FA are fundamentally the same whether the transfer value is £250k, £500k or £1m, why should the FA take a bigger fee just because someone has been prudent enough to save themselves a bigger pot?

It's not the effort involved in the initial transfer that's the issue - it's the potential compensation that would need to be paid if the person later decided they'd 'been mis-sold', and the insurance to cover it that will be dependent on the sum involved.

Brie

@jimjames
I'd be asking the admins of the tiddly DB scheme what you could do at NRA with it.  If it's just a case of getting £20 a year well it's hardly worth the stamp.  But if it would be considered a trivial amount in it's entirety perhaps you could get the full value paid out at NRA.  I know this used to happen but don't know if it's still allowed - I'm sure some expert will be able to tell you.

thebands

p00hsticks said:

It's not the effort involved in the initial transfer that's the issue - it's the potential compensation that would need to be paid if the person later decided they'd 'been mis-sold', and the insurance to cover it that will be dependent on the sum involved.

Are you sure about that? The FA will already have suitable professional indemnity insurance cover they won't be taking individual cover for each client they take on. Yes I know they have to pay for the insurance but I doubt it is such a linear relationship. Seems more a case of you have more money so I want a bigger slice.

dunstonh

I have no problems with paying for financial advice but absolutely disagree with it being a % fee of my savings.

One of the reasons percentage is so popular is that people can easily work it out.  Plus, the risks to the advice firm increase as the value increases.

The considerations and the effort for an FA are fundamentally the same whether the transfer value is £250k, £500k or £1m, why should the FA take a bigger fee just because someone has been prudent enough to save themselves a bigger pot?

No they are not.

A £20k ISA is difficult to get wrong and the financial impact is insignificant.  A £2m value spread across multiple wrappers and tax issues can close down a firm if it gets it wrong.