Being forced to use a Financial Advisor to transfer pension to pension.

scoobyjones1

Pat38493 said:

scoobyjones1 said:

QrizB said:

scoobyjones1 said:

Her thoughts are that she is desperate to have control over the full CETV immediately, £60k inside her already successful and easy to manage SIPP, rather than receive 2k a year, thanks for asking. I am beginning to think it's not worth the stress, time and expense. It may not even prove to be possible. However, it's her money and her account. I am not telling her what to do!

The commonly-quoted UK SWR is 3.5%, so £60k in drawdown would yield you £2100 a year, which is on a par with the DB payout.

scoobyjones1 said:

... tech stocks have risen to the tune of 90-150% this year ...

You're just doing more to convince the old hands on this board (some of whom have seven or eight figures invested) that you don't understand investment.

All due respect to the old hands and their 8 figure sums but we are talking about £60k here. This is what I am referring to for 2023...just a few...there are dozens of others...and this was of end of November, most of these stocks have had another big jump since then :

Company and ticker symbol Performance in 2023

NVIDIA (NVDA)                 220.0%

Palo Alto Networks (PANW) 111.5%

Salesforce (CRM)          90.0%

Advanced Micro Devices (AMD) 87.1%

Fair Isaac Corporation (FICO) 81.7%

Adobe (ADBE)                  81.6%

Arista Networks (ANET)          81.1%

ServiceNow (NOW)          76.6%

LAM Research (LRCX)          70.3%

Synopsys (SNPS)                  70.2%

Data as of Nov. 30, 2023

And the DB pension may offer up to 5% growth...may be less, capped and linked to CPI...which in her case would be about another £100 a year...or £8.33 a month...

Have you ever heard of something called "Sequence of return risk"?  

Also, we could probably post a list of individual stocks that had stellar growth up until 2022, and then tanked in 2023 - investing in individual stocks is not something that most pension investors would do as they can be very volatile.  Tech stocks in particular, as mentioned by DunstonH, have had a few huge crashes in the past where they lost more than 50% in a short period.

Yes I understand that, we have been in down positions over the years, Trump, Covid, Ukraine etc. The stocks I posted are popular with investors but that is just one sector. You need to have diversity across several sectors...maybe healthcare, media, commodities... US and UK stocks, some cash maybe some bonds.

This thread is getting too diverse now. I may start it again with more specifics. Seems we are stuck with 3 options, take the 2.3k a year, take a 12k pot with 2k a year....or thirdly...possible expensive heart attack for nothing scenario!

LHW99

Seems we are stuck with 3 options, take the 2.3k a year, take a 12k pot with 2k a year....or thirdly...possible expensive heart attack for nothing scenario!

Is there a third (fourth?) option of taking say £1k pa and a larger lump sum? Not as large as the CETV, but larger than otherwise.

xylophone

take the 2.3k a year, take a 12k pot with 2k a year....

The £12,000 could be invested in a stocks and shares ISA.

The monthly pension could be topped up from your savings  to £240 and contributed to her SIPP, gaining tax relief of £720.

artyboy

handful said:

It's very interesting to see how people view the same thing in very different ways. I've got a small DB pension available to me either now or at any point up to 65 when it is scheduled to pay out. Mine is a little bigger than the OPs, CETV of £85k and an income of circa £3500 PA. I view this as being the most valuable part of my pension in many ways because it's guaranteed even though it is only a relatively small part of my overall pension pot. I look at it as a way of funding something like all of our house and vehicle insurances for ever because it should grow at a similar rate to premiums increasing. Or maybe I could buy health insurance and it would fund that. I would never consider trying to cash it into my SIPP. It takes al sorts I suppose and please don't take that as an insult!

Yes, I have one worth a very similar amount from age 60 (accrued long ago from 9 months in a non-contributory scheme before my 1st employer closed it... boo hiss...).

And although it represents a tiny tiny fraction of mine and Mrs Arty's overall pension provision, I'm very happy to have it. Because if the markets have a 20s style crash then depression, or if I somehow make some abysmal investing decisions, we will still have that plus 2 fully accrued SPs to survive on...

molerat

Beddie said:

There should be a "I know what I'm doing and I am happy to take on the liabilities if I made a mistake" process.

That's what the OP needs, as do many others. They don't want full advice and the IFA doesn't want the future liabilities.

Unfortunately we live in a society where people will, as we have seen many times over the years, lie through their teeth where there is the slightest sniff of compensation even though they had been advised against a course of action.  Where there is the remotest possibility of apportioning blame there is a claim !

scoobyjones1

LHW99 said:

Seems we are stuck with 3 options, take the 2.3k a year, take a 12k pot with 2k a year....or thirdly...possible expensive heart attack for nothing scenario!

Is there a third (fourth?) option of taking say £1k pa and a larger lump sum? Not as large as the CETV, but larger than otherwise.

That's a good suggestion and I will ask them but they gave us 3 options, defer, start the pension at 2,300 per annum or take the pot of 12 kish and receive 2k a year. With this type of DB pension I fear it might be complicated and we may have to ask the trustees or show advice from an IFA in order to take a larger lump sum? They are slow to work with due to their size but that would be helpful if she could take out more initially, subject to Tax of course, over the 25%. I think she has some unused personal allowance for this year...so...thanks. Great suggestion.

scoobyjones1

xylophone said:

take the 2.3k a year, take a 12k pot with 2k a year....

The £12,000 could be invested in a stocks and shares ISA.

The monthly pension could be topped up from your savings  to £240 and contributed to her SIPP, gaining tax relief of £720.

Yes, that could be an option next year. Her ISA allowance is used up for this year...
Thanks again for your earlier post, xylo. I looked into all of the links. Extremely helpful. Talking to the DB people it does seem quite possible to transfer into a SIPP but the stumbling block would be the exorbitant fee from an IFA, which would make this hardly worth it on a small amount...counter productive in investment terms. They said not to worry. The pension age thing would be on 31st Jan and if we miss that then it's just deferred, maybe re-calculated and back dated, so that has taken some of the pressure off for now.

scoobyjones1

Beddie said:

There should be a "I know what I'm doing and I am happy to take on the liabilities if I made a mistake" process.

That's what the OP needs, as do many others. They don't want full advice and the IFA doesn't want the future liabilities.

An online flowchart would do the job. Very similar to those used by Nutmeg etc. to decide your risk profile. 

Someone with a nice DB pension as their main retirement asset is very different to someone who has other pensions, ISAs, properties etc. and a sound knowledge of what they are giving up.

And before you say "but what about the risks?" - they stay with the individual. Look at DC pensions and SIPPs now - you can take all of your money out in your late 50s to spend on cars and holidays, without any checks. A very foolish thing to do for many, but no one is stopping them. They might pay a lot more tax and end up being poorer in retirement, but that's allowed according to the rules. That needs to be tightened up and DB rules loosened, to end up with a similar process for all.

Hit the nail on the head there, Beddie. That's another annoying thing because to transfer out of the DB pension you must pay an IFA and ALSO sign an indemnity form, absolving them of any blame so they are covering themselves anyway...twice. As long as they explain the risks to you, as they do, then why should we need to pay 5-10k to an IFA...some of whom may or may not have scruples ...many have been fined or worse for the British Steel Pension episode. Surely an appointment with Pensionwise (not available for DB pensions), Citizens Advice, or just a warning and indemnity form to sign for both the DB holder and new SIPP provider should be sufficient? 

AlanP_2

scoobyjones1 said

A pension provider is holding your money, investing it and making a profit...SOME of which is passed on to the pensioner. Of course risk depends on the amount involved and your circumstances, as we are fully aware after many years investing or saving.

Who do you think gets these excess profits you think are floating around? Any money invested belongs to the scheme and funds member benefits. The administrator will be paid a fee as will the actuarial advisors, auditors and other service providers.

Who do you think tops up the scheme when there's isn't enough money in there to meet the guaranteed benefits they are committed to over the next 50 odd years at least?

You mention that it's taxable income, so are SIPP withdrawals so no real difference there.

You say your investment choices would do better and they may well do but yours are not guaranteed, this income and any CPI increases are. Looking at the CETV and thinking of it in the same way as a DC pot that can be invested is the wrong viewpoint. Look at the CETV as the bribe they are offering you to get rid of a potentially very costly liability (if your wife lived to 100 say).

If the scheme, with all the professional investment advice they get and the underlying promise from the employer to make good any shortfall, think that £80k invested for an unlimited time is the correct amount to deliver £2300 + CPI up to max 5% for the next 30 to 40 years are you sure you could do better? Even when you / your wife are in your 90s and still trying to manage your investments?

I can understand your frustration, but it is pointless in all honesty. Complaining about it on here will not change things. If you feel that strongly write to your MP as it was parliament that passed the legislation.

scoobyjones1

handful said:

scoobyjones1 said:

handful said:

It's very interesting to see how people view the same thing in very different ways. I've got a small DB pension available to me either now or at any point up to 65 when it is scheduled to pay out. Mine is a little bigger than the OPs, CETV of £85k and an income of circa £3500 PA. I view this as being the most valuable part of my pension in many ways because it's guaranteed even though it is only a relatively small part of my overall pension pot. I look at it as a way of funding something like all of our house and vehicle insurances for ever because it should grow at a similar rate to premiums increasing. Or maybe I could buy health insurance and it would fund that. I would never consider trying to cash it into my SIPP. It takes al sorts I suppose and please don't take that as an insult!

Thank you for your comments. The amount does come into it and I see your reasoning. £3.5k would be a useful amount for sure. She has been offered 2k with a lump sum or 2.3k without. We both have SIPPs which are tax efficient for Cap gains and interest / dividends. We can earn interest on the cash, with no risk... or invest in shares...tech stocks have risen to the tune of 90-150% this year so you can see the attraction as I do from your point of view as well.

Tech stocks have done very well for sure but that won't continue for ever. How do you intend to time when to de-invest before that crash when it happens? This last month or so has seen some great gains in my portfolio and I can see it would be easy to think that if I had that £85k CETV in my SIPP I would be much better off but I don't think of it like that. For me, if I live longer than expected or spend more than I should or lose out due to a crash, the one constant I don't have to worry about is the DB!

All you need is a crystal ball! Seriously though, it's not for everyone but over years you get better at it. Take some profits at the highs...hold the cash until a pullback or crash and buy more shares then....it's more complicated than that of course but that's the principle. We have survived, fingers crossed, 3 major falls and more than recovered from those each time but it is risk vs reward. If there was a WWIII then we are likely all dead anyway! Merry Xmas!!