Finding a truly independent IFA for advice on Defined Benefit Pension transfers

Pilkinn

I have a old defined benefit (final salary) pension that has a transfer value of £162K but has low benefit of just £2756 per year. I'm over 55 and haven't started taking any benefits from the scheme so want to transfer it to my SIPP with Hargreaves Lansdown. In order to do so the FCA have stipulated that I must get an advisor to agree to the transfer otherwise the transfer can not take place - ever!. I'm not happy about this, but those are the rules so I need to find an advisor to give me advice - one way or the other. If they say I should keep the pension as it is then so be it - they'll have do some convincing though for my satisfaction. This is where things get tricky. I need to find an advisor that a) is truly independent and b) won't rip me off with fees.

For example, one advisor was very encouraging until I said I wanted to transfer the pension pot into my HL SIPP. He wanted me to transfer it to something called "True Potential" which I don't even really understand what it is and would charge me 1% of the value. THe charge isn't too bad but I wanted to use my SPP so no thanks to that. Hargreaves Lansdown didn't care where I transferred it to (although warned me about scams etc.) but wanted to charge me £1250 + VAT + 2% of the value of the transfer. So if they recommend the transfer then that would be over £5000 in fees!.

So my question is, can anyone recommend an IFA that is qualified to give advice on defined benefit pension transfers (not many are) and won't charge me an extortionate fee and will not force me to use a different pension platform for the transfer?

Thanks in anticipation.

Marcon

Pilkinn said:

I have a old defined benefit (final salary) pension that has a transfer value of £162K but has low benefit of just £2756 per year. I'm over 55 and haven't started taking any benefits from the scheme so want to transfer it to my SIPP with Hargreaves Lansdown. In order to do so the FCA have stipulated that I must get an advisor to agree to the transfer otherwise the transfer can not take place - ever!. I'm not happy about this, but those are the rules so I need to find an advisor to give me advice - one way or the other. If they say I should keep the pension as it is then so be it - they'll have do some convincing though for my satisfaction. This is where things get tricky. I need to find an advisor that a) is truly independent and b) won't rip me off with fees.

For example, one advisor was very encouraging until I said I wanted to transfer the pension pot into my HL SIPP. He wanted me to transfer it to something called "True Potential" which I don't even really understand what it is and would charge me 1% of the value. THe charge isn't too bad but I wanted to use my SPP so no thanks to that. Hargreaves Lansdown didn't care where I transferred it to (although warned me about scams etc.) but wanted to charge me £1250 + VAT + 2% of the value of the transfer. So if they recommend the transfer then that would be over £5000 in fees!.

So my question is, can anyone recommend an IFA that is qualified to give advice on defined benefit pension transfers (not many are) and won't charge me an extortionate fee and will not force me to use a different pension platform for the transfer?

Thanks in anticipation.

Endless threads on this forum about just this topic. I fear there is little new to say, so worth browsing those - they are recent enough to deal with your questions. 

The adviser doesn't need to convince you 'to your satisfaction' that you should keep the pension. Many people simply won't be convinced, as you will see from other similar threads.

Be aware that if you've already got the transfer value, the 3-month guarantee period is already ticking away, so there's little  chance of an adviser being able to complete all the work required before the CETV expires when you haven't even got an adviser lined up ready to go. Always assuming your scheme will allow you another quote within a 12 month period, they may charge - and be aware that market conditions mean it is likely to have dropped, possibly substantially.

p00hsticks

Welcome to the forum. If you look back through this board you will find that there are loads of previous threads on this topic, which I suggest you have a read through.

In short, the fees are charged for the advice - you'll pay it whether or not the advice is positive. 
Even with those fees, there are less and less IFAs willing to take the job on, as it is risky (they're likely to be classed as liable even if you ignore their advice and later complain) so their insurance premiums are very high. 
It's not (theoretically) true that   

Pilkinn said:

 the FCA have stipulated that I must get an advisor to agree to the transfer otherwise the transfer can not take place - ever!. 

The advisor gives a recommendation, and has to sign that they have given you advice. Even if that advice is not to transfer then (theoretically) you are still able to transfer out as an ''insistent client' but you will struggle to find any Pension Companies willing to take you on (as again, they have no appetite for having to fight any future claim from you that you were mis-sold. mis-led etc).  

Bear in mind that assuming you do get a positive recommendation and transfer out, it should then be relatively straightforward to move the funds into another pension if you don't like the charges associated with the one you initially transfer into. 

Linton

I do not believe that the transfer value matches the stated benefit.  Transfer values were typically 30 to 40 times the annual pension but have decreased by a large amount in recent months. I guess you have not taken into account that your DB pension will rise by inflation every year from when you left the scheme.

I am unclear how much you woukld be charged for the recommendation and how much for the transfer.  However £5K for a recommendation on its own seems pretty normal for a pot worth £162K.

Pilkinn

Linton said:

I do not believe that the transfer value matches the stated benefit.  Transfer values were typically 30 to 40 times the annual pension but have decreased by a large amount in recent months. I guess you have not taken into account that your DB pension will rise by inflation every year from when you left the scheme.

I am unclear how much you woukld be charged for the recommendation and how much for the transfer.  However £5K for a recommendation on its own seems pretty normal for a pot worth £162K.

It was £1250 + VAT PLUS 2% of the transfer value (assuming I was able to do the transfer). The other firm (who were obviously a tied agent) wanted 1% of the transfer value but I had to transfer to their chosen pension scheme. 

wjr4

If you think £5,000 is a rip off, how would you feel if your pension value fell by £33k (20%)? 

Marcon

Pilkinn said:

Linton said:

I do not believe that the transfer value matches the stated benefit.  Transfer values were typically 30 to 40 times the annual pension but have decreased by a large amount in recent months. I guess you have not taken into account that your DB pension will rise by inflation every year from when you left the scheme.

I am unclear how much you woukld be charged for the recommendation and how much for the transfer.  However £5K for a recommendation on its own seems pretty normal for a pot worth £162K.

It was £1250 + VAT PLUS 2% of the transfer value (assuming I was able to do the transfer). The other firm (who were obviously a tied agent) wanted 1% of the transfer value but I had to transfer to their chosen pension scheme. 

 What would the fees have been if you didn't go ahead with the transfer?

Dazed_and_C0nfused

I have a old defined benefit (final salary) pension that has a transfer value of £162K but has low benefit of just £2756 per year

I suspect you're comparing apples and pears!

Is the £2756 an up to date amount which includes each years inflation increase since the date you became a deferred member of whichever DB scheme it is?

dunstonh

Finding a truly independent IFA for advice on Defined Benefit Pension transfers

An adviser is either an IFA or FA.  The I stands for independent.    So, if you remove FAs from the equation, you are left with IFAs.

I have a old defined benefit (final salary) pension that has a transfer value of £162K but has low benefit of just £2756 per year. 

At 58x that seems very very high in the current environment.  CETVs have fallen by about a half in the last year (i.e. your £162k , if current would have been around £300k this time last year).  How old is your CETV?  Has the income been updated?

In order to do so the FCA have stipulated that I must get an advisor to agree to the transfer otherwise the transfer can not take place - ever!.

Its pretty much been that way for 30 years.  And over most of that period, only around 1 in 10 people are best to transfer with 9 in 10 best staying put.  So, its clear to see why this extra step of consumer protection exists.

For example, one advisor was very encouraging until I said I wanted to transfer the pension pot into my HL SIPP. He wanted me to transfer it to something called "True Potential" which I don't even really understand what it is and would charge me 1% of the value. THe charge isn't too bad but I wanted to use my SPP so no thanks to that. 

Whilst I would understand an IFA not wanting to use HL (its almost twice the cost of platforms available to IFAs), a True Potential FA is not an IFA.  So, they can only offer the products and services of TP.

Hargreaves Lansdown didn't care where I transferred it to (although warned me about scams etc.) but wanted to charge me £1250 + VAT + 2% of the value of the transfer. So if they recommend the transfer then that would be over £5000 in fees!.

In the current environment, £5k is cheap.

It was £1250 + VAT PLUS 2% of the transfer value (assuming I was able to do the transfer). The other firm (who were obviously a tied agent) wanted 1% of the transfer value but I had to transfer to their chosen pension scheme. 

That method of charging is banned.     So, I suspect your misunderstood or havent quite typed it as intended.

The £1250 plus VAT is to get an initial outcome that can only be unclear or unsuitable.  If they say its unsuitable, that is all you will pay and the next stage will not occur.  If its unclear, you will be given the choice to proceed to the next stage.   If you agree to that, you will pay the 2% fee even if the final outcome is to not transfer. 

Pilkinn

Thanks everyone for your input. I now see that the £2756 per year was the pension at time of leaving the scheme - in 1995. Looking more closely at the statement of entitlement I got from the scheme administrators it does state that ...

• The GMP will increase by 7% per tax year from the date I left the scheme to the GMP age (65 in this case).
• The scheme pension (over the GMP) built up before April 1997 (I left in 1995) will increase by price inflation up to 5% per year since leaving and the NRD (on my 60th birthday)

So I can see why it might be best to stay with the scheme. However, in order to answer this I now have another question. I can easily work out the 7% compound growth on the GMP bit, but where do I find the price increase percentages for calculating the scheme pension bit? Does anyone know of an online calculator or even where I can find the % to be used for each year from 1995 to the current/last year ? I assume RPI is used (not CPI)? 

Sorry to ask as I should be able to ask my financial advisor (but I don't have one and are too tight to pay) or the Pension Wise service (which I might still do) but it seems people on this forum as pretty well informed. 

Jacklob

Try googling “bank of England inflation calculator” I used this and it was very accurate when compared to the true pension I did end up receiving.