DB Transfer

Touchdown67

Hi, new to this site, a novice at finance, and probably asking an age old question. Is it possible to transfer one (or more) DB schemes into a DC scheme ? I am 10 years into a 20 year DB scheme which I intend to retire on, but have three previous DB schemes, overall worth around £300k. I have three children at University age and would like to take around £50K tax free when I'm 55 (next year) to finance this, knowing my current DB scheme will probably have approx. £450K in it when I retire at 65. I have been told that I need independent financial advice before I can transfer, but the ones I have spoken to have said that they will not advise this. What can I do ? Any thoughts would be appreciated.

dunstonh

Is it possible to transfer one (or more) DB schemes into a DC scheme ? 

Yes

 I have three children at University age and would like to take around £50K tax free when I'm 55 (next year) to finance this

Can you afford to?     

I have been told that I need independent financial advice before I can transfer, but the ones I have spoken to have said that they will not advise this. 

 Short conversations lack details but you can get some information that can lead you to form an early opinion.  Robbing your retirement years to pay for something in your working life is generally frowned upon unless you have sufficient other means.  

Why cant you use your savings and investments or do a loan or a remortgage?

What can I do ? 

Very little if you cant get a recommendation to transfer.

Touchdown67

I don't have any savings or investments and still have 10 years on my mortgage. Isn't there a way of signing an agreement to say that I've taken financial advice and still decided to transfer or is that not how it works ?

Aretnap

Touchdown67 said:

I don't have any savings or investments and still have 10 years on my mortgage. Isn't there a way of signing an agreement to say that I've taken financial advice and still decided to transfer or is that not how it works ?

You can in theory do this, but it depends on finding a pension provider willing to accept the transfer. Currently all of the major providers and (almost? ) all of the small ones will refuse to accept a transfer without a positive recommendation from an adviser. If you search the forums for "insistent client" you will find about a million threads on the subject. Someone recently did claim to have found an obscure provider willing to accept a transfer against advice, but didn't name them. 

Dazed_and_C0nfused

Touchdown67 said:

I don't have any savings or investments and still have 10 years on my mortgage. Isn't there a way of signing an agreement to say that I've taken financial advice and still decided to transfer or is that not how it works ?

Yes there is.  The difficulties you will have are finding an IFA who is prepared to take this work on and the fee that might be payable for this advice (could easily be high 4 or into 5 figures).

And if you are deemed an insistent client then finding a provider who will accept a transfer will be another hurdle.

Touchdown67

Thanks for the advice, doesn't look like I'm going to be in luck. Wouldn't the fact that my current pension would currently pay me a £27K annual pension in 10 years give my some financial stability if something goes wrong ?

Alfredi

Your DB providers should give you an option to take up to 25% of your DB pension as a lump sum on retirement and this can be better than transferring everything to a DC scheme, if I understand your Q. Similarly with several DB pensions (lucky you) you could surely retire now on one, or more of these, while continuing to work and contribute into your main DB scheme until full retirement.  Worth exploring.

eskbanker

Touchdown67 said:

Thanks for the advice, doesn't look like I'm going to be in luck. Wouldn't the fact that my current pension would currently pay me a £27K annual pension in 10 years give my some financial stability if something goes wrong ?

That ought to be a positive factor in the analysis, but there will be negatives too, which will be covered during the engagement with the adviser.  In particular, if you're building up a pretty significant £27K DB pension entitlement over a mere 20 years then that would suggest that you're well paid, but the fact that you're mortgaged to 65, with no savings or investments, and are contemplating raiding your pension to pay the kids through university would imply that your overall finances don't have as much headroom as might be expected.

Touchdown67

Thanks Alfredi, that's an option I hadn't considered. Am I right in assuming then that I would receive my tax free lump sum plus a pension at my current tax rate though ?

dunstonh

I don't have any savings or investments and still have 10 years on my mortgage.

Dont take what I am saying the wrong way but are you perhaps living beyond your means then?
And would facilitating this further by robbing your retirement (and deferring hardship until later) be a good thing?

Isn't there a way of signing an agreement to say that I've taken financial advice and still decided to transfer or is that not how it works ?

You dont need to sign an agreement.  Seeking advice is the requirement.  Following that advice is up to you.  However, the nanny state we live in, an inconsistent regulator, and overly consumer-friendly FOS decisions scares PI insurers.   

Whilst FCA rules allow IFAs to carry out insistent client transactions, the FCA also say that IFAs should not carry out transactions that they know to be wrong.   

So, at this time, IFAs are not transacting unless the advice is to transfer.  And providers are not accepting transfers unless the advice is suitable to transfer.  Everyone is scared of missell claims. 

Thanks for the advice, doesn't look like I'm going to be in luck. Wouldn't the fact that my current pension would currently pay me a £27K annual pension in 10 years give my some financial stability if something goes wrong ?

How much are you earning now?  I assume it's more than 27k as pensions are normally a fair bit less.   However, despite you earning more, you have no excess income to fund your lifestyle.    

QrizB

Touchdown67 said:

Thanks Alfredi, that's an option I hadn't considered. Am I right in assuming then that I would receive my tax free lump sum plus a pension at my current tax rate though ?

If you draw your pension early, to get the PCLS, then yes you'll have extra taxable income. That will be taxed at your marginal rate.

Subject to the annual allowance, you could increase your contributions to your new pension scheme to compensate (gaining tax relief along the way); or set up a separate SIPP; or you could use the extra income to build up your non-pension savings / investments. Or just spend it the George Best way: