Transferring out of a defined benefit scheme and pre-requirements

elliottk

Hello, 
I have a deferred defined benefit pension scheme that had 4 years contributions and closed in 2001. I recently got a valuation which looks favourable to transfer out from the scheme (approx 40x). 

I understand financial advice is mandatory over 30k but is there any company that specializes in reviewing these and provide the information required to be able to transfer out. 

40x is good and I would like to have some control over investments. 

I have spoken to a local IFA, but the costs to review the scheme and provide what would be required to transfer out, i was quoted 7-8k which seems extremely high....!

Thanks
Kevin

Dazed_and_C0nfused

40x is good and I would like to have some control over investments. 

With a DB pension there are no investments which you need to be concerned about.

You have a guaranteed, usually inflation proofed, pension for life.

Why do you think giving that up, in return for a, proportionally, very large fee is a good move?

dunstonh

I understand financial advice is mandatory over 30k but is there any company that specializes in reviewing these and provide the information required to be able to transfer out. 

Advice is required to be personalised and not generic.   So, if its right for you, then the recommendation will be to transfer.  if its wrong for you then it wont be.

I have spoken to a local IFA, but the costs to review the scheme and provide what would be required to transfer out, i was quoted 7-8k which seems extremely high....!

You can get cheaper but typically £3500-5000 is typical of the ball park to aim for.

Albermarle

This subject is discussed a lot on this forum .
Put ' DB transfers' in the search box at the top.
Here are a couple of starters for 10
Tiny, almost forgotten pension offers CETV of £175k - need IFA — MoneySavingExpert Forum
Defined pension — MoneySavingExpert Forum

elliottk

Thanks all.  
From my latest statement with CETV, it show's a PA value of 1.4k PA with a CETV of 83k. 
Interestingly my statement from May 2020 had a PA value of 2.2k with a CETV of 74k

I thought the PA values should increase, in any case it would seem sensible at least to look at a transfer out.  Although understand finding an IFA to do this may not be so easy. 

Thanks

Albermarle

elliottk said:

Thanks all.  
From my latest statement with CETV, it show's a PA value of 1.4k PA with a CETV of 83k. 
Interestingly my statement from May 2020 had a PA value of 2.2k with a CETV of 74k

I thought the PA values should increase, in any case it would seem sensible at least to look at a transfer out.  Although understand finding an IFA to do this may not be so easy. 

Thanks

That looks like a mistake unless there is something very unusual about the pension.
I would query that £1.4K pa , maybe it should be £2.4K pa 

elliottk

Albermarle said:

elliottk said:

Thanks all.  
From my latest statement with CETV, it show's a PA value of 1.4k PA with a CETV of 83k. 
Interestingly my statement from May 2020 had a PA value of 2.2k with a CETV of 74k

I thought the PA values should increase, in any case it would seem sensible at least to look at a transfer out.  Although understand finding an IFA to do this may not be so easy. 

Thanks

That looks like a mistake unless there is something very unusual about the pension.
I would query that £1.4K pa , maybe it should be £2.4K pa 

Thanks, i've just called and they will look into it.  Person i spoke with agreed it looked 'odd' 

Richknott83

1.4k could be from date of leaving scheme maybe, whereas the £2.2k revalued to 2020. As already mentioned a transfer value of 83k very unlikely on 1.4k pa benefit.

Be careful getting advice as the rules have changed in the last 18 months, so you will have to pay the fee regardless of the outcome of the advice, and if it is not to transfer you’ll be left with a big bill and not achieved anything.

You’ll need a pretty strong reason to transfer out as the FCA default position is that it isn’t suitable. Seeing a transfer value of 83k and thinking this is good value won’t be sufficient. And being charged almost 10% for the advice is extremely expensive…..but there are less and less advisers left in this area of advice.

elliottk

Richknott83 said:

1.4k could be from date of leaving scheme maybe, whereas the £2.2k revalued to 2020. As already mentioned a transfer value of 83k very unlikely on 1.4k pa benefit.

Be careful getting advice as the rules have changed in the last 18 months, so you will have to pay the fee regardless of the outcome of the advice, and if it is not to transfer you’ll be left with a big bill and not achieved anything.

You’ll need a pretty strong reason to transfer out as the FCA default position is that it isn’t suitable. Seeing a transfer value of 83k and thinking this is good value won’t be sufficient. And being charged almost 10% for the advice is extremely expensive…..but there are less and less advisers left in this area of advice.

Yes, this seems most likely so i've asked they look into this again. Hopefully get an update soon, although they are very slow. 

Thanks, this is really useful to know.  Seems everything is against transferring a DB scheme and probably getting more and more difficult to, seems almost impossible! 

Thanks. I spoke with an IFA, they will only investigate if CETV is minimum 300k.. Maybe because their fee is % related, in anycase, makes it probably impossible for me to proceed even if value is 40x.. 

dunstonh

Thanks. I spoke with an IFA, they will only investigate if CETV is minimum 300k.. Maybe because their fee is % related, in anycase, makes it probably impossible for me to proceed even if value is 40x.. 

The fact their fee is percentage based shouldn't make any difference as it adapts to the CETV value.

It's more likely that they feel the larger CETVs are easier to justify for some people or that they feel it is worth the liability risk at that level upwards.    

Thanks, this is really useful to know.  Seems everything is against transferring a DB scheme and probably getting more and more difficult to, seems almost impossible! 

It has been difficult since the 90s.    Back then only 1 in 10 cases were considered suitable for transfer.   Today, it is actually easier than it was back then as the ratio to transfer has improved due to the large increase in CETVs.     The problem is that around 2012-2018 a number of factory line companies set up and basically did a load of transfer on a bulk copy and paste basis. They made it appear much easier.    The FCA did not like that one bit and basically shut them down and made DB transfers a hot potato.  So, we are back to how it was before they existed where fewer firms do them but are recommending transfer in more cases than they would have done in the 90s or early 2000s.

Albermarle

Thanks. I spoke with an IFA, they will only investigate if CETV is minimum 300k.. Maybe because their fee is % related, in anycase, makes it probably impossible for me to proceed even if value is 40x.. 

Although a high multiple obviously helps , many other factors are taken into account. For example if you had say another DB scheme/guaranteed income that would cover day to day costs , then that would help .