Pension, CETV, retiring Oct 22

Albermarle

C_Mababejive said:

It is commonly stated that IFAs and the industry will generally not recommend a DB transfer . Are IFAs still minded to process insistent transfers or is that door closing? Where i work this seems to be the complete opposite and DB transfers are being operated seemingly without any opposition. This might be to do with the fact that the company have a contract/business arrangement with a certain financial company who are offering a free service for potential DB transferees. I wonder if this relationship is a bit close for comfort? Do companies routinely arrange free or low cost DB transfer assessments for employees using financial companies that they have hired in for that purpose? I wonder if Tesco provide this too?

My ex employer did this. Free advice and a roadshow and 'helpful' calculations to show how you could exchange a modest annual pension for a what seemed a very large sum. In fact they did it twice.

For some people the fact they were so keen to get people off the DB scheme, and there was a relationship between the company and the advice firm, made them a bit suspicious and put them off applying  !

daveyjp

For me based on the facts given its an easy initial calculation.  £270,000 from a Tesco CETV isn't much to live on for 25 years, at 55 it could be 50 years and you need to manage the money.

Having a mix of DB and DC is no bad thing.

The question to an IFA should be around the current pension mix and how he can provide protection to the family should anything happen to him.

At 55 life insurance should still an option and a DB pension is guaranteed income for asset purchases.  There may also be DB widow pension.

dunstonh

It is commonly stated that IFAs and the industry will generally not recommend a DB transfer . Are IFAs still minded to process insistent transfers or is that door closing? 

Historically only around 1 in 10 DB cases was considered suitable to transfer.   Post credit crunch, the rising CETVs moved that to around 6 in 10.    Falling CETVs have moved that back.  I would estimate to around 3 in 10 currently.

IFAs will not process insistent clients as there is no known PI insurer that will cover insistent clients on DB transfers.  They will sign the advice given form, though.   However, it is providers that have closed that door as they won't accept insistent clients unless it is processed via the adviser's agency.

 Where i work this seems to be the complete opposite and DB transfers are being operated seemingly without any opposition. This might be to do with the fact that the company have a contract/business arrangement with a certain financial company who are offering a free service for potential DB transferees. I wonder if this relationship is a bit close for comfort? 

Historically, there have been cases where the effective remit for the advice/administrating firm is to encourage as many transfers as they can.   So, it is possible that the relationship is not without some bias.  It should be less likely nowadays but you can never rule it out.

It is possible that they weed out many of the unsuitable ones during early discussion and are left with a smaller number of cases that are more likely to be suitable.  You can often do that without formally going through the process.    If they can get rid of 3 in 10 just through conversation, you are left with 7 in 10 and at the old rate of 6 in 10 being ok to transfer, you would get a higher rate.   Even at 3 in 10 you are seeing around half of them still suitable by the time they get to that stage.

Remember that the big fall in CETVs has only occurred in the few months.  Many of those going through are working off earlier higher CETVs.    The drop off may not yet be visible depending on where you are looking.  For example, if you are looking at cases completed, then volume on those is likely to be higher than looking at cases being approved to transfer at the start.