Defined Benefit Transfer

JoeCrystal

IJJoseph said:

dunstonh said:

I'm waiting on a CETV but I believe it will be around £90k which means I am FORCED to seek IFA input.

That CETV would probably have been around £200k 18 months ago.  CETVs are  now just over half what they were then.  Or perhaps if you had a quote from around 18 months ago that was circa £90k, it would now be around £40k.

I know exactly where I want to invest my CETV so I don't need an advisor but I have to have one. I fully understand the risks and I am happy with what I plan to do with the funds.

Are you sure?   Someone doing a DB transfer nowadays is rare.  Especially if the only reason is to invest it as its unlikely that the investments will do well enough.

The issue I have is that I have to go through the process of IFA and it's confusing what that involves. I'm also in a position where I have limited funds currently but am keen to move as I have no control or flexibility with the fund as it currently stands.

You dont need control or flexibility with a DB pension as its nicely defined with no risks.

The issue is that so many IFAs either don't advertise their charges or seem to have an annual fee. I don't understand the annual fee element as I know where I want to invest and i don't need an IFA managing my fund. I also don't have £900 - £5000 that I've been seeing as the fee.

The annual fee is optional. 

A fee for DB transfer is likely to be in the £5k to £10k range and pretty much going to result in advice that says it is unsuitable (the reasons you have given on this thread are not justified reasons)

In my mind, this is a simple consulation.

Its not

I get that I'm walking away from a guaranteed £2k annually. I get that my partner would get half that if I die. I have a choice, take the £2k annual or take £90k and invest it in the hope I can get a better position. I am 99.9% certain I can improve my position and 100% convinced that they cant so I'm confused why I would need to pay ongoing charges.

When was that £2k figure last updated?

What am I missing?

a) you don't have the CETV but you are confident you can make more.  Without the CETV that is impossible to say
b) you are extremely confident of your ability yet statistically, based on current CETVs, its more likely that you will fail to do better in 90% of cases.

Why can't I simply get a report that says we advise this and I absolve them of liability and say...I'm doing this. I don't see where £900 or up to £5k is getting spent. This surely is a £300-£500 report and my decision?!!

The law does not allow you to waive your rights.     People that do not know what they are doing are not in a position to waive taway protection that exists.

£300-£500 is laughable for such a high risk transaction.  That would bankrupt adviser firms very quickly.

WOW - clearly you're a fan of the industry.

Bit uncalled as Dunstonh clearly explained the industry's positions, and you are insulting about it. Especially when the FCA is more pro-customer; remember, we are in a friendly regulatory regime towards the customers. One case in mind is that even the execution-only service (Barclays) was found liable for extremely poor investing by one of their customers and had to pay out compensation to the customer even though no advice was involved. The customer understood the risk of investment performance. Still not good enough to protect Barclays from a customer filing a complaint about losing their money in stocks and shares. As I understood, it was Barclays' fault for offering the choice to buy shares in a specific company in question. 

And with the fact the professional indemnity insurance firms racked up the premiums on the DB transfers so high that it is no longer affordable to pay the insurance for the liability cover, so even more risk is involved. Indeed, over the last few years, the number of firms which got permission to do DB transfers has fallen heavily. Five years ago, most firms would have permission to do it. Now it is the minority and still falling ever since as the firms refused to have the permissions maintained or charge the fees so high that it acts as a blocker to avoid the work.

It would be best to do more research about the DB pension transfers, as you clearly showed in your first post that you haven't got the full details. For example, what is the current pension income in today's term? Do you have the scheme guide explaining how it is index-linked or works with GMPs and all other bells and whistles? So, it would help if you had up-to-date pension income in today's term and up-to-date CETV.

Your belief that the CETV will be £90k is already bringing alarm bells since it is far too high for £2k annual pension especially when you can get £4,671 index-linked income on the £100k annuity @ 65 so better to wait and see what you are going to get from the scheme and make a decision then rather than chewing out IFAs about it.

Remember, it is the Parliament that sets the rule in place. If you have a problem, write to your MP about it so you can change the laws and do whatever you like with your DB pension schemes.

NannaH

My cetv on a small LGPS pension that would have paid around £700 a year was £8000.
So £2k would have extrapolated out to around £24k cetv.  

A £90k cetv /£2k income would have a multiple of 45x

JoeCrystal

NannaH said:

My cetv on a small LGPS pension that would have paid around £700 a year was £8000.
So £2k would have extrapolated out to around £24k cetv.  

A £90k cetv /£2k income would have a multiple of 50x . 

Not very surprising since the LGPS is bound by the actuarial guidance by the Department for Levelling Up, Housing and Communities (GAD as well), which are much less generous than in the private DB schemes, which are based on bond yields or whatever the scheme decides to. Terrible value for transferring out but excellent value for transferring into the LGPS, though!

p00hsticks

IJJoseph said:

Marcon said:

IJJoseph said:

Marcon said:

IJJoseph said:

Apologies if I have missed a thread or section. I think my question is quite simple but trying to find the answer is proving otherwise.

I have a single DB pension (all the rest are DC) the will pay out around £2400 p.a. - I'm waiting on a CETV but I believe it will be around £90k which means I am FORCED to seek IFA input.

I know exactly where I want to invest my CETV so I don't need an advisor but I have to have one. I fully understand the risks and I am happy with what I plan to do with the funds.

Are you sure the destination you have in mind will accept the transfer if, as is highly likely, the adviser recommends you stay put?

IJJoseph said:

In my mind, this is a simple consulation. I get that I'm walking away from a guaranteed £2k annually. I get that my partner would get half that if I die. I have a choice, take the £2k annual or take £90k and invest it in the hope I can get a better position. I am 99.9% certain I can improve my position and 100% convinced that they cant so I'm confused why I would need to pay ongoing charges.

What am I missing? Why can't I simply get a report that says we advise this and I absolve them of liability and say...I'm doing this. I don't see where £900 or up to £5k is getting spent. This surely is a £300-£500 report and my decision?!!

What is a simple consultation to you is a massive deal for any adviser willing to take your case, always assuming you can find someone willing to do so. They acquire a lifetime of liability and their PI premiums reflect this. Expect to pay upwards of £5K - and thank the FCA for imposing such strictures on advisers that this is the result.

Yes - I know they'll accept the funds...and i understand the liability aspect and am quite prepared to absolve them of that liabilty...thanks for your input

So you've got a stakeholder pension set up to accept the transfer (currently the only type of pension willing to accept DB transfers against advice)?

You can't absolve the adviser of liability, however willing you are (and eager they would be!). Do you have an adviser lined up who is prepared to take your case and can guarantee to jump through all the hoops within the 3 month guarantee period which applies to a CETV? If you haven't, don't wait until the CETV lands on your doormat - the adviser will need the full period if they are to have any chance of meeting the statutory deadlines.

This is the issue.

I have had private pensions through every job. It's only this job (very early in my career and before I was financially aware) that I was in a final salary scheme. 6 years...that was it. I logged into the site to see an annual pension of £2k and asked for a transfer value (not confirmed because the site does a snapshot based on a point in time) which was around £90k. I've asked for a gauranteed value...which is what i'm waiting for.

Even if i take £90k and don't get any growth....age 65 I can draw down 4% (p.a. declining) and shuffle off this mortal coil at age 85 with £39k in the bank.

My DC schemes - I've opted out of the "default" option and have done very well and i'm happy to take that risk....it's served me well so far.

I'm not in the industry, but have gone through the advice process a few years ago and I suspect that the fact that this DB pension only forms a small part of your otherwise all DC pension portfolio would be seen by the advisor as an argument for NOT transferring out. 

I also think that an expected  CETV of £90k for an annual pension of £2400 sounds very high, so I wouldn't be counting on it.

I know values go up and down, but around seven years ago I was offered  a CETV of around £160k in return for a pension of around £8k a year, which to me was derisory, but went through the advice process anyhow as the pension provider had offered to pay for it in an effort to try to get rid of the liability. It was a useful exercise, and I did end up with a positive recommendation to transfer, mainly on the grounds that I had a larger DB pension also in play as well as other investments with a S&S ISA, but I chose to decline and am happy that I did so. 

IJJoseph

JoeCrystal said:

IJJoseph said:

dunstonh said:

I'm waiting on a CETV but I believe it will be around £90k which means I am FORCED to seek IFA input.

That CETV would probably have been around £200k 18 months ago.  CETVs are  now just over half what they were then.  Or perhaps if you had a quote from around 18 months ago that was circa £90k, it would now be around £40k.

I know exactly where I want to invest my CETV so I don't need an advisor but I have to have one. I fully understand the risks and I am happy with what I plan to do with the funds.

Are you sure?   Someone doing a DB transfer nowadays is rare.  Especially if the only reason is to invest it as its unlikely that the investments will do well enough.

The issue I have is that I have to go through the process of IFA and it's confusing what that involves. I'm also in a position where I have limited funds currently but am keen to move as I have no control or flexibility with the fund as it currently stands.

You dont need control or flexibility with a DB pension as its nicely defined with no risks.

The issue is that so many IFAs either don't advertise their charges or seem to have an annual fee. I don't understand the annual fee element as I know where I want to invest and i don't need an IFA managing my fund. I also don't have £900 - £5000 that I've been seeing as the fee.

The annual fee is optional. 

A fee for DB transfer is likely to be in the £5k to £10k range and pretty much going to result in advice that says it is unsuitable (the reasons you have given on this thread are not justified reasons)

In my mind, this is a simple consulation.

Its not

I get that I'm walking away from a guaranteed £2k annually. I get that my partner would get half that if I die. I have a choice, take the £2k annual or take £90k and invest it in the hope I can get a better position. I am 99.9% certain I can improve my position and 100% convinced that they cant so I'm confused why I would need to pay ongoing charges.

When was that £2k figure last updated?

What am I missing?

a) you don't have the CETV but you are confident you can make more.  Without the CETV that is impossible to say
b) you are extremely confident of your ability yet statistically, based on current CETVs, its more likely that you will fail to do better in 90% of cases.

Why can't I simply get a report that says we advise this and I absolve them of liability and say...I'm doing this. I don't see where £900 or up to £5k is getting spent. This surely is a £300-£500 report and my decision?!!

The law does not allow you to waive your rights.     People that do not know what they are doing are not in a position to waive taway protection that exists.

£300-£500 is laughable for such a high risk transaction.  That would bankrupt adviser firms very quickly.

WOW - clearly you're a fan of the industry.

Bit uncalled as Dunstonh clearly explained the industry's positions, and you are insulting about it. Especially when the FCA is more pro-customer; remember, we are in a friendly regulatory regime towards the customers. One case in mind is that even the execution-only service (Barclays) was found liable for extremely poor investing by one of their customers and had to pay out compensation to the customer even though no advice was involved. The customer understood the risk of investment performance. Still not good enough to protect Barclays from a customer filing a complaint about losing their money in stocks and shares. As I understood, it was Barclays' fault for offering the choice to buy shares in a specific company in question. 

And with the fact the professional indemnity insurance firms racked up the premiums on the DB transfers so high that it is no longer affordable to pay the insurance for the liability cover, so even more risk is involved. Indeed, over the last few years, the number of firms which got permission to do DB transfers has fallen heavily. Five years ago, most firms would have permission to do it. Now it is the minority and still falling ever since as the firms refused to have the permissions maintained or charge the fees so high that it acts as a blocker to avoid the work.

It would be best to do more research about the DB pension transfers, as you clearly showed in your first post that you haven't got the full details. For example, what is the current pension income in today's term? Do you have the scheme guide explaining how it is index-linked or works with GMPs and all other bells and whistles? So, it would help if you had up-to-date pension income in today's term and up-to-date CETV.

Your belief that the CETV will be £90k is already bringing alarm bells since it is far too high for £2k annual pension especially when you can get £4,671 index-linked income on the £100k annuity @ 65 so better to wait and see what you are going to get from the scheme and make a decision then rather than chewing out IFAs about it.

Remember, it is the Parliament that sets the rule in place. If you have a problem, write to your MP about it so you can change the laws and do whatever you like with your DB pension schemes.

Actually, I found the post condescending and presumptuous.

When I log into my DB account I can see what the annual pension is. I can click on the transfer value and see what the estimate is. So I know these two items. I can see the equivalent spouse pension too. I don't have the guaranteed transfer value and appreciate that it might be much lower when they finally provide it.

I came on to see if people knew of any advisors out there that had fees lower than the 1% - 2% or in some cases up to £5k that I've seen on the few IFA sites that advertise rates not for a lecture on how little I might or might not know.

dunstonh

Yes - I know they'll accept the funds.

That is extremely rare.  The vast majority of providers will not accept a transfer in from a DB pension unless the adviser says it is suitable to transfer it.   Given the way that CETVs have more than halved over the last 18 months, recommendations to transfer are back around their historical norm of around 1 in 10.     You seem to think that you are in that 1 in 10.     You could be but nothing you have said suggests that is the case.

WOW - clearly you're a fan of the industry.

No. I just know what I am doing.    You could learn from that.

Actually, I found the post condescending and presumptuous.

Oh dear, you are a sensitive soul if you cannot handle the truth and facts of the situation.  Point out one thing that I said that was wrong?   
A number of the questions I asked are key in any transfer case but instead of engaging, you have chosen to get stroppy about it.  A further indication that you don't appear to know what you are doing.

I came on to see if people knew of any advisors out there that had fees lower than the 1% - 2% or in some cases up to £5k that I've seen on the few IFA sites that advertise rates not for a lecture on how little I might or might not know.

It is not a lecture.  It is a fact.  You have made multiple comments that are just plain wrong and show a lack of awareness and understanding.     You don't even know what the CETV is but you reckon you can do better than the DB pension.  

Marcon

IJJoseph said:

I came on to see if people knew of any advisors out there that had fees lower than the 1% - 2% or in some cases up to £5k that I've seen on the few IFA sites that advertise rates not for a lecture on how little I might or might not know.

Fair enough - but hopefully you now realise that there are no such 'bargain basement' offers for the reasons explained in the answers you've received. Regardless of the level of your CETV, you are looking at upwards of £5K for advice, which is highly like to be be not to transfer. 

You have said you are determined to transfer, but 'don't want to pay for advice you don't need'. Unless you have a destination which has confirmed it will accept the transfer if the adviser does not support transferring, then you're definitely paying for advice which isn't going to help you to transfer.

Albermarle

When I log into my DB account I can see what the annual pension is. I can click on the transfer value and see what the estimate is. So I know these two items. I can see the equivalent spouse pension too. I don't have the guaranteed transfer value and appreciate that it might be much lower when they finally provide it.

We have had many threads like this in the past that go round in similar circles. The law is the law and that's the bottom line, however much you do not like it/think it is unfair.

A number of posters have questioned the very large CETV in relation to the pension income. The usual issue is that the pension income quoted is the pension when the employee left the company, and has not been uprated by inflation in the time between leaving the company and today. The info given by the pension providers is not always that clear. If the uprated pension was now > £4K it would make the CETV look more realistic.

Dunky62

You seem to be very confident about investing, so I am curious why you say you have limited funds available. I am surprised that you don't have some well performing Stocks and Shares ISAs that you could dip into. Just saying.

IJJoseph

Dunky62 said:

You seem to be very confident about investing, so I am curious why you say you have limited funds available. I am surprised that you don't have some well performing Stocks and Shares ISAs that you could dip into. Just saying.

Operation on one of our dogs took a large chunk out of my emergency fund which I want to replace. Would rather not dip into my ISA funds but could if I must. As I know exactly what I want to do with the DB funds I don't need advice per se so I'm seeking to get the compulsory advice at the lowest cost.