Civil Service less than 2 years - transfer of 30k+ benefit value

K_S

This is on behalf of my husband.

He worked in a govt department for a little less than 2 years. All through that period, he bought added pension in the Alpha scheme.

When he moved out to the private sector, CSP gave him two options with the pension -
- refund of contributions less tax as cash, about 22k
- transfer to another pension, about 48k

As he has less than 2 years service, there is no option to retain it as a DB pension.

He wanted to transfer it to his Vanguard SIPP and CSP sent him a pack that he needs to sign and post to Vanguard.

As the transfer value is above 30k, and the CSP is a DB scheme (even though the DB isn't an option in this case!) the Vanguard person he spoke to told him that he needs do the following - 
"If you are looking to transfer a pension from a final salary scheme worth more than £30,000, you'll have to have the transfer signed off by a qualified financial adviser before your pension scheme will release the money. Vanguard will also require your adviser to complete and sign our adviser declaration confirming that they have recommended the pension transfer."

I have an IFA that I have a referral relationship with and spoke to him about this but he said their charge for it would be almost 4k(!) and recommended that I find a cheaper one elsewhere.

To my mind it's a no brainer to opt for a transfer rather than the cash and retaining the DB benefits isn't an option anyway. Hopefully an IFA would feel the same?

I'm not particularly clued up on DB pension, transfers, etc but hopefully I haven't missed anything relevant in my post above.

How can he go about getting the part in bold above in the most cost-effective way possible? Any thoughts would be appreciated.

El_Torro

This seems to be more straightforward than a standard DB to DC transfer, mainly because the option to keep it in the DB pension doesn't exist anyway. Based on what your IFA said they seem to know this. 

Why not just do what your IFA suggested? Shop around and find an IFA with reasonable fees for this. 

Alternatively, have you tried transferring this to a platform that isn't Vanguard? They might tell you the same thing that Vanguard told your husband, then again they might not.

K_S

El_Torro said:

Alternatively, have you tried transferring this to a platform that isn't Vanguard? They might tell you the same thing that Vanguard told your husband, then again they might not.

Thanks @el_torro . You were on the right track, apparently there’s no need for advice in this case as there are no preserved benefits that one is giving up.

My husband spoke to Money Helper and they were adamant that < 2 years CSP pot doesn’t need any financial advice irrespective of size as there simply isn’t any DB pension that the person is giving up.

He said that pension providers can choose to require advice on any transfer but that it isn’t a legal requirement in this case and the 30k threshold simply doesn’t apply. So if Vanguard is suggesting that that is the case, that is incorrect.

hyubh

K_S said:

El_Torro said:

Alternatively, have you tried transferring this to a platform that isn't Vanguard? They might tell you the same thing that Vanguard told your husband, then again they might not.

Thanks @el_torro . You were on the right track, apparently there’s no need for advice in this case as there are no preserved benefits that one is giving up.

My husband spoke to Money Helper and they were adamant that < 2 years CSP pot doesn’t need any financial advice irrespective of size as there simply isn’t any DB pension that the person is giving up.

He said that pension providers can choose to require advice on any transfer but that it isn’t a legal requirement in this case and the 30k threshold simply doesn’t apply. So if Vanguard is suggesting that that is the case, that is incorrect.

Indeed, there are no safeguarded benefits in the CSPS being given up as there are no vested benefits in the first place. Not a CSPS reference admittedly, but see the LGA's guidance to LGPS administering authorities here (p.51): https://lgpslibrary.org/assets/gas/uk/TFRNCv2.4c.pdf (they use the term 'cash transfer sum' [CTS] for short service transfers out to emphasise the difference).

Might be better to go to a SIPP provider that understands the difference...?

michaels

If they had transferred in to Alpha I believe the 2 year minimum no longer applies, sadly the same does not apply to added pension top up

sandsy

The Pensions Regulator explain the legislation for 'cash transfer sums' here:

https://www.thepensionsregulator.gov.uk/en/document-library/codes-of-practice/code-4-early-leavers

They explain the lack of any vested rights which mean that the vale offered is not the usual cash equivalent transfer value that applies for a normal pension transfer. Maybe try pointing Vanguard to that page.

K_S

Thanks all for your comments.

It's all sorted now and in progress. As mentioned above, there was indeed no need for any FA declaration.

Vanguard were easy to get in touch with but the first line staff were woefully unaware of how this worked, my husband had to raise a complaint to get the issue to someone that knew what they were talking about.

CSP were very difficult to communicate with, especially over email which they take weeks to pick up so not very useful when trying to push things along. The phone line was perpetually 'experiencing extremely high call volumes' but once you got through, they were really good.

Anyways it should all be done sometime in the new year.

Albermarle

Vanguard were easy to get in touch with but the first line staff were woefully unaware of how this worked

Front line staff at most financial providers are usually pretty poor at dealing with anything out of the ordinary, and it is not unknown for them to get simple things wrong.

One question ( out of interest) is what would have happened to the £48K if you did not transfer?

Silvertabby

Albermarle said:

Vanguard were easy to get in touch with but the first line staff were woefully unaware of how this worked

Front line staff at most financial providers are usually pretty poor at dealing with anything out of the ordinary, and it is not unknown for them to get simple things wrong.

One question ( out of interest) is what would have happened to the £48K if you did not transfer?

" The computer says No"

The only alternative to a transfer (assuming that OP doesn't return to the CS or take up other public sector employment within the set timescale ) would be the refund of £22K.  A huge difference.

K_S

That's right, if CSP didn't hear back from the member or the new pension provider with X months (I think it's 6 months), they'll send a cheque for 22k (refund of contributions less tax) to the member.

QrizB

K_S said:

Thanks all for your comments.
It's all sorted now and in progress. As mentioned above, there was indeed no need for any FA declaration.

Thank you for coming back to let us know it worked out, it's surprisingly rare for anyone to do so!