Tips on how to ensure your Financial Advisor gives the green light to transfer DB pension to SIPP.

ANotInUseName

Dear All,

I have a couple of DB pensions and am now over 55, one I can take at 63, the other at 65. The smaller of the pots is the one I can take at 65, and this is the one I would like to transfer to a SIPP, plan being the purchase some land and extend our holiday let business. As the pot is > £30k, I'm aware I need a financial advisor to confirm the decision to transfer out of the DB is financially sound, however understanding that the decision will always be no unless proven otherwise and after being quoted £6,000 to £10,000 to go through the process, I need to be as confident as possible that the decision will be in my favour before investing such a sum as it would cause a great deal of hardship if lost (especially when they add VAT). I'm sure I heard about a way of getting a 'decision in principle' for around half the price by which some financial institutions will give you a feel as to how a decision may go, if positive you can continue with the process and try and get the pension transferred. I thought it was called a 'Bridging decision' or something similar however not been able to find anything further on this on the net. Has anyone heard of such a service being offered? and what are some tips I should take into account during the application. My key concern is that the pension in real terms looks to be being devalued over time, with CPI where it currently is I can't see the value of the pension keeping pace with inflation. 
Many thanks

Albermarle

I think 'Triage' is the word you are looking for. As in A&E someone will assess your position before deciding the probable next best step. 

My key concern is that the pension in real terms looks to be being devalued over time, with CPI where it currently is I can't see the value of the pension keeping pace with inflation. 

It is not clear over the next few years whether DC pensions will keep up with inflation either . So far in 2022, most DC pots are down 20/25% in real terms.

dunstonh

I need to be as confident as possible that the decision will be in my favour before investing such a sum as it would cause a great deal of hardship if lost (especially when they add VAT). 

Intermediation (i.e. advice with the intention to buy a financial product) is non-Vatable.

I'm sure I heard about a way of getting a 'decision in principle' for around half the price by which some financial institutions will give you a feel as to how a decision may go, if positive you can continue with the process and try and get the pension transferred.

It results in either a No or unclear outcome.   Never a positive.

My key concern is that the pension in real terms looks to be being devalued over time, with CPI where it currently is I can't see the value of the pension keeping pace with inflation. 

The rise in interest rates has affected gilts which in turn has lowered CETVs.   So, you are already taking it hit if you go down the transfer route (assuming you can still find a firm willing to do it).

Dazed_and_C0nfused

I have a couple of DB pensions and am now over 55, one I can take at 63, the other at 65. The smaller of the pots is the one I can take at 65, and this is the one I would like to transfer to a SIPP,

There is no pot.  The transfer value is what the scheme is willing to give you to get you off their books and save having to pay you a guaranteed, likely inflation proofed to a certain degree, for upto 30 or 40 years.

Mr.Generous

I looked at scheme rules re lump sum, from pension scheme max tax free lump sum was £XXXX whereas from a SIPP I could take 25% tax free - slightly more than double. I stressed how I was going to expand my rental portfolio by buying property to let out (and pay me more per month than entire pension would) by taking the max tax free lump sum. They transfered it, I did it, and while my property values have gone up in value greatly my pension pot has fallen like a stone.

sandsy

It's called 'abridged advice'. 

As Dunstonh said, it's a either a no, or an unclear. 

It focuses on whether keeping the DB scheme lets you meet your needs and objectives.

It's cheaper as it doesn't involve a full analysis of the potential outcomes if you transferred.

If you get an unclear then take full advice, the unclear could be a positive or a negative. So still no guarantees.

ANotInUseName

Many thanks for the contributions, I looked at taking the lump sump from the pension scheme, however like yours Mr Generous only came in at around half what I could withdraw tax free from the SIPP, the annual payment would also be reduced to a meagre £1k, so the idea was to try and purchase the land and have the land within a land SIPP, a 25% tax free sum would go a long way to building the holiday rental, but I believe as DunstonH pointed out 'if I can find a firm willing to do it'. I'm also finding firms specialising in Land SIPPS they are becoming few and far between. D&C, I appreciate pot was a bad choice of words, looking at the inflation proofing, I believe that if I take this pension after 65, there is a 3% max inflationary cap on the pension income, whether this will be enough who knows.
Sandsy, great summary thanks, will check out 'abridged advice'. 

Ibrahim5

You just need a crooked IFA. Not difficult in my experience.

ANotInUseName

Alas Ibrahim5, I need the money to invest for myself, not to support the coffers of a bunch of crooks  .

Just for the thread, would I assume correctly that a business plan submitted to support the holiday let business help such a decision, the returns on the holiday let would certainly exceed the pension and with a ROI of around 4 years, would be seriously contributing to the coffers some 5 years before the pension would start paying out. To me it would be a no brainer. I appreciate that property such as holiday lets can't be directly held within a SIPP, do correct me if this view is incorrect. However created within a Ltd company, then I believe this is a different matter and can be held within a SIPP.

Dazed_and_C0nfused

You need to bear in mind that one of the reasons the costs of advice on DB pension transfers in the insurance needed to cover the risk of you deciding to make a complaint when you realise the DB pension was the better option all along.

A scheme such as yours may seem a great idea to you but I suspect it will tip the scales more to the not suitable for transfer as far as the adviser is concerned.

Malthusian

I'm sure I heard about a way of getting a 'decision in principle' for around half the price by which some financial institutions will give you a feel as to how a decision may go, if positive you can continue with the process and try and get the pension transferred.

You could easily get an "unclear" verdict from the triage advice and a "don't do it" from full advice. Which would leave you doubly out of pocket if the cost of the triage advice wasn't deducted from the cost of full advice.

If the loss of £6,000 would leave you in severe hardship, can you afford the risk of cashing in your gold-plated pension, investing it in holiday lets and potentially losing most or all of it?

The DB pension is guaranteed to increase in line with CPI inflation. For income from your holiday let business to increase in line with inflation, you need to stick the rising cost of inputs onto your holidaymakers while still filling all your lets each year. That is far from guaranteed.