Small pot transfer from DB occupational pension into SIPP

sxgirl

Hi, 
At 65 and a bit, I am part way through my retirement plan which mainly consists of making a little go a long way! Assisted by reading and occasionally asking questions on this forum. 😀🤞 However I have hit an unexpected banana skin.

I have 1 very small DB pension in payment, and another very small one deferred, which I’ll take at 67. I also have a DC pot made up of AVCs under the deferred pension, worth just over £18k.

I opened a HL SIPP (cash) so that I could contribute a couple of years when I was self-employed, and as a drawdown vehicle for UFPLS to maximise my tax free allowances until I get my state pension.

So, in November I started the process of requesting the transfer of my pot, (not the small DB pension) to my SIPP, so that I can crystallize some this tax year. After postal delays etc, I’ve now been notified by HL that their business rules (not legal requirement) mean I have to get IFA sign off for them to accept the transfer, if it’s over £10k.

My DB pension provider has no issue transferring the pot, ( they don’t do drawdown, UFPLS). The only option I’m ‘losing’ is potentially using the DC pot to buy additional DB pension, which I was aware of and is definitely not in my plan.

With the small amounts involved I really don’t want to have to pay for the IFA sign off. I’m considering whether I should quickly open another SIPP with another provider who doesn’t have this £10k transfer policy.

Any ideas/suggestions.TIA

Albermarle

A DB pension does not have a pot, it has a promise to pay you a guaranteed pension at some future point.
However you can obtain a CETV ( Cash Equivalent Transfer Value) . In return for this you have to give up your rights to the guaranteed pension income and it can only be transferred to a DC pension.
However due to past problems with these types of transfers there are strict rules in place. Any CETV worth over £30K can only be transferred after receiving expensive advice from a specially qualified IFA and even then it could well not be successful. Due to general sensitivity around this subject, some individual DC providers put a lower limit, or refuse any CETV transfers at all.
So the critical point is how much is the CETV on the deferred DB pension? If it is over £30K , you can probably best forget the whole idea. If it is under £30K you may find a DC provider who will accept it .

Pat38493

Albermarle said:

A DB pension does not have a pot, it has a promise to pay you a guaranteed pension at some future point.
However you can obtain a CETV ( Cash Equivalent Transfer Value) . In return for this you have to give up your rights to the guaranteed pension income and it can only be transferred to a DC pension.
However due to past problems with these types of transfers there are strict rules in place. Any CETV worth over £30K can only be transferred after receiving expensive advice from a specially qualified IFA and even then it could well not be successful. Due to general sensitivity around this subject, some individual DC providers put a lower limit, or refuse any CETV transfers at all.
So the critical point is how much is the CETV on the deferred DB pension? If it is over £30K , you can probably best forget the whole idea. If it is under £30K you may find a DC provider who will accept it .

I think OP wants to transfer their £18K AVC pot not the DB part if I understood? 

Albermarle

Pat38493 said:

Albermarle said:

A DB pension does not have a pot, it has a promise to pay you a guaranteed pension at some future point.
However you can obtain a CETV ( Cash Equivalent Transfer Value) . In return for this you have to give up your rights to the guaranteed pension income and it can only be transferred to a DC pension.
However due to past problems with these types of transfers there are strict rules in place. Any CETV worth over £30K can only be transferred after receiving expensive advice from a specially qualified IFA and even then it could well not be successful. Due to general sensitivity around this subject, some individual DC providers put a lower limit, or refuse any CETV transfers at all.
So the critical point is how much is the CETV on the deferred DB pension? If it is over £30K , you can probably best forget the whole idea. If it is under £30K you may find a DC provider who will accept it .

I think OP wants to transfer their £18K AVC pot not the DB part if I understood? 

You might be right. You could read the OP both ways. Even if it is the fact that the AVC is linked with a DB pension, seems to be causing the usual nervousness .

sxgirl

Thanks both, sorry if I wasn’t clear. Yes, I am only looking to transfer the AVC pot, not the DB pension part. They are under the same account number with my occ pension provider, but they refer to it as the DC element.
HL have just messaged me saying their policy relates to the fact I could have the option of maximising the tax free lump sum out of the AVC pot, when I reach the NRA stage and take the DB pension.

Pat38493

Given that it's 18K, I don't think there is any legal obligation for you to take advice, so if they really won't do it, I guess you should find another SIPP provider that will.  Do HL allow a self certify that you have taken advice in this situation?

Malthusian

sxgirl said:

HL have just messaged me saying their policy relates to the fact I could have the option of maximising the tax free lump sum out of the AVC pot, when I reach the NRA stage and take the DB pension.

Why not just leave it and do exactly that when you want to draw the DB pension?
If you draw your entitlement to a tax free lump sum across the DB and AVC scheme from the AVC only, this is a very valuable benefit:

• you can take tax free cash without having to give up annual pension in exchange (or less of it)
• you can draw more than the standard 25% of the fund value from the AVC

It would usually then be possible to transfer the remaining value of the AVC to a drawdown pension. 

sxgirl

Thanks Pat, yes HL have told me it’s not a legal requirement, just their policy if the tax-free cash that can be provided exceeds £10,000. By this I assume they mean if I didn’t take the £18k pot now, because the tax free element of this clearly is well below £10k. The form they’ve sent me doesn’t allow for self certification.
I think I will need to approach another provider to see if they will apply the same policy. And then hope I can get the transfer (it will have to be converted into cash from the invested funds first) done in time to draw some out this tax year.

sxgirl

Even if it is the fact that the AVC is linked with a DB pension, seems to be causing the usual nervousness . Thanks Albemarle - do you know of any SIPP providers who don’t have the same nervous policy? If I can’t persuade HL, and don’t swiftly switch to a new SIPP, my only option would be to take the whole pot out as cash from my occ pension, which I think will cost me about £425 in tax. If I don’t draw anything out of my pension this year, I will lose the benefit of this year’s personal tax allowance

sxgirl

(Wish I knew how to reply to/quote from replies above! 😂)

Thanks Malthusian - apart from the fact that I don’t know if I actually have this option from my provider (I am checking, but they did refer to it as a ‘separate DC fund’) - my plan was to crystallize c£15.5k this tax year, as my income is little over £1k, so after 25% tax free, I will get the rest tax free using my personal allowance. If I don’t draw this down this year, I don’t think I can carry forward my personal tax allowance to next year?

xylophone

Thanks Malthusian - apart from the fact that I don’t know if I actually have this option from my provider (I am checking, but they did refer to it as a ‘separate DC fund’) 

If you don't have the option (the DC element is completely separate from the DB element), what exactly is HL's problem?