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

GDB2222

NoMore said:

You know the method and likely cost you need to go through to transfer the db pension so either do it or not. I really dont see why you keep railing against everything and everybody on here. It’s not getting you any closer to achieving your desire. 

The OP has a very clear idea of what he thinks the right answer is, so doesn’t want to pay for advice that he isn’t interested in. I can sympathise with that. 

NoMore

GDB2222 said:

NoMore said:

You know the method and likely cost you need to go through to transfer the db pension so either do it or not. I really dont see why you keep railing against everything and everybody on here. It’s not getting you any closer to achieving your desire. 

The OP has a very clear idea of what he thinks the right answer is, so doesn’t want to pay for advice that he isn’t interested in. I can sympathise with that. 

Doesn’t matter what he thinks is right. Legally he has to pay for advice. If he doesn’t want to pay then he can’t transfer. It’s as simple as that. 

They can continually complain about that but it’s not going to change via this thread. If he really wants to try and get it changed then complain to his MP. 

scoobyjones1

NoMore said:

You know the method and likely cost you need to go through to transfer the db pension so either do it or not. I really dont see why you keep railing against everything and everybody on here. It’s not getting you any closer to achieving your desire. 

Same apples to you, mate. You have said your piece which is of no help really. Thanks for contributing though. Best wishes.

xylophone

but she worked for a firm, I think pre 88, not sure. They were bought out by a bigger company,

We know this was a DB scheme and it is likely, even almost certain, that it was contracted out of SERPS.

If so, your wife will have accrued a Guaranteed Minimum Pension.

It appears that she is going to take this pension at age 60 which is female GMP age.

She might find that at the time of the pension increase following the pension's  being brought into payment,  only the excess over

 GMP will increase by up to 5% with any pre 88 GMP not increasing at all. Post 88 GMP would increase by up to 3% CPI.

Does she know when exactly she worked for this firm and whether or not the scheme was contracted out of SERPS?

Is there any mention of a GMP/excess split in the information she has received?

Pat38493

scoobyjones1 said:

It is not hard to invest £60k and return 3.8% a year, (approx the £2.3k they are paying) averaged over 10-20 years and still have the original 60k as well, to cash in if ever you wanted to. And anything above that 3.8%, with compound gains, dividends and interest, would grow that original 60k very nicely as well. The SIPP also has a death benefit payout. You can leave it to your spouse or children...or charity...Battersea dogs home...etc. This particular pension has no death benefit, according to their pension advice pack.,,and would leave nothing for the children. It does not seem better to me. We would like to transfer out... and into the SIPP wrapper. 

This is an issue that comes up quite a lot on "biggest investment mistakes" lists.

Looking at long term average returns, doesn't help you if there is a 50% market crash on the day before you want to take out large amounts of money out of your fund.  The potential sequence of returns has to be considered and this cannot be known in advance.  That's why most IFAs would use conservative growth assumptions of something like inflation +2%.

The other thing is, you have come onto a forum that is frequented by some finance experts who work in the industry in one way or another, and then they are not telling you what you want to hear, you seem to believe that you know better because you achieved good returns in a decade when almost everybody achieved good returns.

Dazed_and_C0nfused

Let's be honest, if the op really had that much belief in their investment skills they would have cracked on and paid the £5-£10k to get the (legally required) advice and got the job done rather than arguing the toss on here.

Even just £50k in the wife's SIPP is clearly the better option in the ops eyes so all the prevarication seems odd if he genuinely has such strong belief in the returns that could be made.

scoobyjones1

Dazed_and_C0nfused said:

Let's be honest, if the op really had that much belief in their investment skills they would have cracked on and paid the £5-£10k to get the (legally required) advice and got the job done rather than arguing the toss on here.

Even just £50k in the wife's SIPP is clearly the better option in the ops eyes so all the prevarication seems odd if he genuinely has such strong belief in the returns that could be made.

Pay 10k from a pot of £60k! That really would be bad advice....especially as it seems the transfer advice would be no. But they still take your money...whilst reducing your investment. Some might say that is hypocritical.

Dazed_and_C0nfused

scoobyjones1 said:

Dazed_and_C0nfused said:

Let's be honest, if the op really had that much belief in their investment skills they would have cracked on and paid the £5-£10k to get the (legally required) advice and got the job done rather than arguing the toss on here.

Even just £50k in the wife's SIPP is clearly the better option in the ops eyes so all the prevarication seems odd if he genuinely has such strong belief in the returns that could be made.

Pay 10k from a pot of £60k! That really would be bad advice....especially as it seems the transfer advice would be no. But they still take your money...whilst reducing your investment. Some might say that is hypocritical.

They can't say no, they can say they don't recommend doing it.

You then transfer it as a insistent client.

HappyHarry

scoobyjones1 said:

GDB2222 said:

scoobyjones1 said:

Pat38493 said:

scoobyjones1 said:

xylophone said:

This type of DB pension is dying out and I can see why people want to leave them. 

They may well be dying out but why do you suppose that is?

By way of example, I know somebody  in receipt of a DB pension that was non contributory while he was employed and where the excess over GMP is uncapped RPI.....

I said why...because it costs the firm more..
My Wife's was non contributory while she was employed and hers was originally uncapped...very nice...but then they changed it, presumably due to very high interest rates that were costing them too much. So the person you know was / is better off and sounds pretty happy to be in that DB scheme. Good luck to them.

The reason it costs the firm more is that DB pensions are generally much better than DC pensions due to the guaranteed benefits for life.

More expensive because the company pays more in than most DC schemes. "much better"? that's subjective and a benefit for life may not be much better if it's a fixed (in real terms), small amount. There are plenty of millionaires that made guaranteed benefits for life..and their children's lives, in other ways.

It is not hard to invest £60k and return 3.8% a year, (approx the £2.3k they are paying) averaged over 10-20 years and still have the original 60k as well, to cash in if ever you wanted to. And anything above that 3.8%, with compound gains, dividends and interest, would grow that original 60k very nicely as well. The SIPP also has a death benefit payout. You can leave it to your spouse or children...or charity...Battersea dogs home...etc. This particular pension has no death benefit, according to their pension advice pack.,,and would leave nothing for the children. It does not seem better to me. We would like to transfer out... and into the SIPP wrapper. 

But it’s NOT 3.8% that you are talking about here. It’s 3.8% + index linking (subject to the 5% limit). 

I’m sorry that you think I am patronising, but you don’t seem to understand that you need to make some effort to compare the CETV with the value of the benefits being given up.  

you have not understood a word I have said. In year one, she would get 2.3k....3.8% of the CETV, rising with inflation. We can easily beat that IMO, if she had the 60k as a lump sum to work with...we are consistently achieving 10% over the last 7 years...probably more after this year. The sum would grow and with compound gains and dividends it would be easy to beat the benefits on offer. The bigger point is though, that she would have liked that option but as I have said our only option is to pay (I am told here) 5-10k because the IFA needs insurance to avoid risk to themselves and would likely also say it's a bad idea... to avoid risk to themselves and for us...we WANT that risk. Seems many IFA's won't even do the job anyway...not worth the hassle for them I am told. Let's leave it at that because we are going round in circles. I fully understand your point and what you have said. Please try and see it from our point of view. All the best.

Very few IFAs have the regulatory permissions and required insurance to advise on DB transfers. The ones that are left in the market tend to be the good ones who will advise properly. They will not take unnecessary risks but will give the client the most appropriate advice for the client's individual circumstances. I am not aware of any IFAs with the permissions and insurance who say it "is not worth the hassle". 

If it is more appropriate for your wife to transfer her DB pension than to retain it, then an IFA will recommend so. Many posters seem to believe that an IFA will always recommend to retain the DB scheme in order to reduce risk to themselves. I can assure you, this is not the case. 

I would suggest that if your Wife really wants to transfer her DB pension, she should speak to two or three IFAs who can advise on DB transfers, and take it from there. 

scoobyjones1

Pat38493 said:

scoobyjones1 said:

It is not hard to invest £60k and return 3.8% a year, (approx the £2.3k they are paying) averaged over 10-20 years and still have the original 60k as well, to cash in if ever you wanted to. And anything above that 3.8%, with compound gains, dividends and interest, would grow that original 60k very nicely as well. The SIPP also has a death benefit payout. You can leave it to your spouse or children...or charity...Battersea dogs home...etc. This particular pension has no death benefit, according to their pension advice pack.,,and would leave nothing for the children. It does not seem better to me. We would like to transfer out... and into the SIPP wrapper. 

This is an issue that comes up quite a lot on "biggest investment mistakes" lists.

Looking at long term average returns, doesn't help you if there is a 50% market crash on the day before you want to take out large amounts of money out of your fund.  The potential sequence of returns has to be considered and this cannot be known in advance.  That's why most IFAs would use conservative growth assumptions of something like inflation +2%.

The other thing is, you have come onto a forum that is frequented by some finance experts who work in the industry in one way or another, and then they are not telling you what you want to hear, you seem to believe that you know better because you achieved good returns in a decade when almost everybody achieved good returns.

I do not "know better" you are missing the point of the whole thread. Maybe read it when you have an hour to waste. We have lived through 2 or 3 market crashes, our family has been in stocks for generations. 50% loss in a day is extremely unlikely...that would be a Nuclear War or something...and we are happy to risk this small, bonus pot. It is not part of our original retirement plan and it is not a huge risk. You are more likely to get run over buy a bus.

Most people in America have a 401k as a pension and the vast majority of those are heavily invested in stocks and shares. Works for them and it has worked for us. I know there are many younger IFA's working now that use shares as a major part in their portfolios. I will talk to some on Monday for some other opinions.

And you say : " most IFAs would use conservative growth assumptions of something like inflation +2%."
That would do nicely and give her more money than this DB scheme is paying.,,,plus she would have something to leave at the end of it. The DB pension dies with her.