Cash out of DB Pension?

Pat38493

Marcon said:

Pat38493 said:

You may know this already but if the CETV value is more than £30K, you have to get financial advice to transfer out and the advice will cost you several thousand pounds, and may still yield a negative recommendation.  If the recommendation is negative, you will find it hard to get a provider who will accept the transfer.

I thought we'd put this long-running misunderstanding to bed long ago! Advice is still needed where the transfer is at least £30K, if the scheme has 'safeguarded rights' (and a DB scheme certainly does).

A stakeholder pension has to accept any transfer from a UK registered pension scheme, whatever the advice says about the wisdom of transferring. 

MallyGirl said:

and if you ignore the £5k plus it would cost for the advice to transfer - with no guarantee that you would get a yes

Doesn't matter if it's yes or no; a determined member can still proceed, however foolish it would be to do so. Transfer to a stakeholder, and then on to a SIPP (which would be a DC to DC transfer, so no further advice needed).

Did OP say it was a stakeholder pension?  I don't think so.  I know that you said they could transfer everything to a stakeholder pension and then do it but wasn't there only one provider that even has stakeholder pensions you can open now?  

xylophone

wasn't there only one provider that even has stakeholder pensions you can open now?  

https://www.aviva.co.uk/retirement/aviva-stakeholder-pension/

https://www.standardlife.co.uk/pensions/stakeholder-pension

appear to be available.

See

https://forums.moneysavingexpert.com/discussion/comment/79855875/#Comment_79855875

Pat38493

Is there some valid reason why the FCA or whoever would want you to be able to bypass the checks by opening a stakeholder pension and cycling the fund through it, or is this a kind of “loophole” that nobody realised?  If it’s the latter and if a lot of people started to do that, I suspect they would put a stop to it pretty quick.

xylophone

bypass the checks by opening a stakeholder pension 

Nobody would be bypassing any checks.

If the person had a DB pension with benefits valued at over £30,000, advice from a Pension Transfer Specialist would be required.

The specialist would either recommend (or not recommend) a transfer.

The Scheme Administrator is only required to obtain confirmation that the necessary advice has been obtained, not the nature of the advice.

However, the scheme member needs to find a transferee to accept the transfer.

If the advice is positive this presents little difficulty - if not, he is likely to find that  most providers will be unwilling to accept a transfer on the grounds of commercial risk.

However, there can be ways round

https://forums.moneysavingexpert.com/discussion/comment/78677214/#Comment_78677214

or there is the stakeholder route.....

Sarahspangles

Pat38493 said:

Is there some valid reason why the FCA or whoever would want you to be able to bypass the checks by opening a stakeholder pension and cycling the fund through it, or is this a kind of “loophole” that nobody realised?  If it’s the latter and if a lot of people started to do that, I suspect they would put a stop to it pretty quick.

I don’t think the route described ‘bypasses checks’. The individual is required to take advice before transferring their funds out of the DB pension. That is meant to protect them from taking an ill-informed decision. It also indirectly protects the DB pension scheme and the recipient scheme from a later claim that the the individual was ill-advised. A proposed recipient scheme can still decline, if the advice was to not transfer, as the scheme can say it’s not in the individual’s interests - and then they don’t risk a later claim… etc. However stakeholder pensions were set up with a requirement that they accept transfers - the fact they can’t decline protects them from a later claim….etc.

It’s not a loophole that provides benefits to the majority of people who use it and I doubt it would be legislated against since the fact those who use it have had advice implies they’re choosing to do something to their detriment with no prospect of comeback if they realise they’ve lost out.

Marcon

Pat38493 said:

Marcon said:

Pat38493 said:

You may know this already but if the CETV value is more than £30K, you have to get financial advice to transfer out and the advice will cost you several thousand pounds, and may still yield a negative recommendation.  If the recommendation is negative, you will find it hard to get a provider who will accept the transfer.

I thought we'd put this long-running misunderstanding to bed long ago! Advice is still needed where the transfer is at least £30K, if the scheme has 'safeguarded rights' (and a DB scheme certainly does).

A stakeholder pension has to accept any transfer from a UK registered pension scheme, whatever the advice says about the wisdom of transferring. 

MallyGirl said:

and if you ignore the £5k plus it would cost for the advice to transfer - with no guarantee that you would get a yes

Doesn't matter if it's yes or no; a determined member can still proceed, however foolish it would be to do so. Transfer to a stakeholder, and then on to a SIPP (which would be a DC to DC transfer, so no further advice needed).

Did OP say it was a stakeholder pension?  I don't think so.  I know that you said they could transfer everything to a stakeholder pension and then do it but wasn't there only one provider that even has stakeholder pensions you can open now?  

I was correcting  your generic comment in bold/underlined above. You referred to 'finding it hard to get a provider....'. It isn't, although many people have been misled by this forum. People need accurate information, which is why I corrected you.

You only need one stakeholder provider which is open to new retail business - and there is at least one - so not sure what point you're trying to make?

dunstonh

I was correcting  your generic comment in bold/underlined above. You referred to 'finding it hard to get a provider....'. It isn't, although many people have been misled by this forum. People need accurate information, which is why I corrected you.

It wasn't misleading.  It was an untested theory with potential blockers, and it took years for someone to post that they had a success.   With all the posts where it was mentioned, it was surprising it took that long for someone to say they could do it.

Pat38493

dunstonh said:

I was correcting  your generic comment in bold/underlined above. You referred to 'finding it hard to get a provider....'. It isn't, although many people have been misled by this forum. People need accurate information, which is why I corrected you.

It wasn't misleading.  It was an untested theory with potential blockers, and it took years for someone to post that they had a success.   With all the posts where it was mentioned, it was surprising it took that long for someone to say they could do it.

Did the person actually even say they had successfully fully transferred the DB pension after a negative recommendation?  I thought they said that they had opened the stakeholder pension and then called them and confirmed with them that they are obliged to accept the transfer.  Has there been anyone who has actually done this successfully (and then transferred it back out again from the stakeholder pension without issue)?

I'm still also not clear though on the reason why stakeholder pensions are legally obliged to accept all transfers.  Is there some logical reason why this needs to be the case?

The other point I guess is that the OP still has to pay a lot of money for the advice before proceeding so that already puts a dent in the value before you even transfer it.  I suppose you could ask an IFA - can you give me a negative recommendation on the cheap because I don't care if it's negative as I'm going to use a stakeholder pension!

xylophone

https://www.mandg.com/pru/adviser/en-gb/insights-events/insights-library/transfer-pension-scheme

However, although most schemes provide the right to transfer, not every scheme has to accept an incoming transfer.

A stakeholder pension scheme is currently the only type of scheme which must accept any transfer from another registered pension scheme.

https://www.legislation.gov.uk/uksi/2000/1403/made

“transfer payment” means a payment in respect of a person’s accrued rights under a pension scheme or pension arrangement made with a view to acquiring rights under another pension scheme or pension arrangement for that person; 

(6) For the purposes of these Regulations and section 1(8) and (9) (which provide that stakeholder pension schemes must have tax-exemption or tax-approval and must not refuse to accept transfer payments except in so far as necessary to ensure that the scheme has such exemption or approval) “tax-exemption” and “tax-approval” mean tax-exemption and tax-approval under Chapter IV of Part XIV of the Income and Corporation Taxes Act.

Albermarle

Pat38493 said:

Is there some valid reason why the FCA or whoever would want you to be able to bypass the checks by opening a stakeholder pension and cycling the fund through it, or is this a kind of “loophole” that nobody realised?  If it’s the latter and if a lot of people started to do that, I suspect they would put a stop to it pretty quick.

In the past more pension providers would accept transfers from insistent clients. I think even up to about 18 months ago, AJ Bell and PensionBee would still accept them IIRC.

As another poster said it was/is a commercial decision by providers to stop accepting them, to avoid future legal issues presumably.

I would not be surprised if the remaining couple of providers of stakeholder pensions, just stop accepting new clients at some point. They were designed as a simple pension for customers new to pensions, but nowadays there are better/cheaper simple pensions available.