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

dunstonh

e. 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.

That is not correct.   

. As long as they explain the risks to you, as they do, then why should we need to pay 5-10k to an IFA...

approx 30 hours work.  Liability for life.  Higher regulatory costs for life.

some of whom may or may not have scruples ...many have been fined or worse for the British Steel Pension episode. 

And unsurprisingly, many of those companies getting shut down or permissions cancelled had significant number of people who didnt want advice and were just using them to get the money out of the DB pension.   The exact thing you want.

 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? 

None of those places have people who are qualified to do it.

The SIPP provider doesn't need proof of advice from a regulatory point of view.   They want it from a commercial point of view so they don't get to carry the buck when someone complains to them.

JoeCrystal

ALSO sign an indemnity form, absolving them of any blame

Sorry but that doesn't work at all as well, especially with very pro customer regulator. I vaguely recalled a case where someone actually won a complaint against Barclays on Share trading execution only (the one you can just buy and sell shares and other investments aka DIY systems)

Apparently, despite all the terms and conditions and all the risks, the bank still lost since they allowed the customer to buy investments that lost money.

So indemnity forms are not worth a paper it is signed on since the customers can and do lie about the fact they couldn't understand the clearly written warnings in texts.

scoobyjones1

Pat38493 said:

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.

I think that there has been court cases in very areas where it was established (rightly or wrongly) that someone signing an waiver form of that type, does not count unless it can be shown that the person clearly understood the implications of what they were signing.  I've seen posts on this board before from people who say that they, or their relative, signed lots of forms "under pressure" from someone without really understanding it.  

OP is saying now that they know what they are doing, but if they regret it later and come back saying, the IFA didn't explain fully what I was risking when I signed the waiver form, some kind of evidence or backup is needed.

Your last point is actually quite interesting - at the moment, if someone is really determined to take out their huge pension pot as one lump sum, pay huge tax bill on it, and spend it all in the first year of retirement, they can do that and they are not required to take IFA advice before doing so.  If the situation in this thread requires someone to take IFA advice, then surely someone wanting to take out a million pound pension all in the same tax year from a SIPP should also require such advice?

I saw a post on here recently from someone complaining that they were facing a huge tax bill after withdrawing their entire pension in one go - I am sure they would have had to sign lots of forms that they understood the tax implications, but some people just sign them and still don't realize what they are doing.

Noted, good points but we are trying to transfer from one pension pot to another...no tax bill there. Then when you go into drawdown from your SIPP you pay tax as you go. 

Hoenir

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...maybe less, capped and linked to CPI...which in her case would be about another £100 a year...or £8.33 a month...

Do you remember the Dot Com boom?   

scoobyjones1

JoeCrystal said:

ALSO sign an indemnity form, absolving them of any blame

Sorry but that doesn't work at all as well, especially with very pro customer regulator. I vaguely recalled a case where someone actually won a complaint against Barclays on Share trading execution only (the one you can just buy and sell shares and other investments aka DIY systems)

Apparently, despite all the terms and conditions and all the risks, the bank still lost since they allowed the customer to buy investments that lost money.

So indemnity forms are not worth a paper it is signed on since the customers can and do lie about the fact they couldn't understand the clearly written warnings in texts.

Yes but in this case we are not buying shares within the DB pension. We just want to transfer out to another pension that would give us more flexibility with our money. Any risk would then move to the new SIPP provider....and we are already using that at our own risk. I get that there is a risk to an IFA who would need insurance but we really do not want to use one in this case. We fully understand the risk and do not need another person telling us the possible risks...again. However the law states that we have to use one. It's now so prohibitive and expensive that most will not give this work to IFAs so that is counter productive, as this threshold thing is probably designed to give them work, as much as to protect people. But then I am very old and very cynical. Best.

Pat38493

It is not that IFA wants the extra work - many IFAs have voluntarily surrendered their permissions to even advise on DB transfers because they don't want the hassle and extra insurance costs.

scoobyjones1

AlanP_2 said:

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.

Excess profits? Some will go to shareholders...Look, I am not here to complain. That is secondary but this is money saving expert. I would like not to have to spend on an IFA. I would like to think we can grow more than 5% ourselves because we HAVE already done so for 10 years and the amount she is being offered per annum is not really going to help her much. It will not be another 50 years unless she gets to 110, you never know... but our investments can make compound, or exponential gains...we know a loss is possible but we could buy an annuity later in life if we wish (we probably won't). As far as tax...the difference with the SIPP taxable income is that you control that. You may need more money one year and less the next. With the DB pension you get the money they give you and that is subject to tax. With the DB Pension you have no control and no growth over inflation...in fact it's making a loss at the moment.,,,which is why thousands, we are told, are trying to switch out!
We are just going round in circles here, AlanP. I will vote accordingly but that won't help my Wife right now. Maybe the next Parliament...

scoobyjones1

Pat38493 said:

It is not that IFA wants the extra work - many IFAs have voluntarily surrendered their permissions to even advise on DB transfers because they don't want the hassle and extra insurance costs.

Yes...same difference. I am sure they would like to do the work if it was not so risky and difficult...therefore charging the pensioner a lot less to boot.
It needs changing and certainly the 30k threshold would be a start! Even (ex) Tory ministers said so.

xylophone

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. 

Have a look at this under  DB Schemes /Commuting Pension for cash.

https://techzone.abrdn.com/public/pensions/Tech-guide-tax-free-cash

I suspect that the £12,000 is the maximum available if the scheme is using the formula

(20 x pension before commutation) / (3 + 20/CF)

Prism

scoobyjones1 said:

 I would like to think we can grow more than 5% ourselves because we HAVE already done so for 10 years and the amount she is being offered per annum is not really going to help her much.

The thing is that the last 10 years have been incredibly easy investing, where making 10-15% returns with almost no effort has been easy. We haven't had a real crash for 15 years now, and that time we all got bailed out with QE. Are you so sure that will happen next time. The previous bad time, many of us can barely remember, was 2000 into a small recovery followed by 2008 - almost a decade and a half of below inflation equity returns. All of this could happen again. Wouldn't it be nice to have a small DB pension paying out if it does.