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

AlanP_2

How does your SIPP charge, that is a DC pension the same as the stakeholders mentioned?

I've never know one that doesn't charge on a per day basis so would be surprised if your current one is any different. Logically they can't predict how much will be on there on a future date so how could it be any different?

GDB2222

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.

Leaving aside your views about the lack of IFAs who will work for nothing, I'm intrigued about your investment return of 10% pa. Surely, rather than worrying about the rather paltry CETV from your wife's DB pension, you should gear up your finances generally? Why not maximise your mortgage and invest the funds at 10%? The interest will be less than your investment return, even allowing for tax. It's a bit harder now, with mortgage interest at 5%, but for much of the last 10 years you could have borrowed at 1 or 2%. Why on earth didn't you?

However, I agree with you that an IFA report on the DB pension won't really help you, because the IFA simply won't allow for a 10% return. I also agree with you that, if you can earn 10% on average throughout the rest of your wife's life, then it is a no-brainer and the CETV is more than adequate. Where we part company  is that I don't think you can achieve that return long term.

scoobyjones1

AlanP_2 said:

How does your SIPP charge, that is a DC pension the same as the stakeholders mentioned?

I've never know one that doesn't charge on a per day basis so would be surprised if your current one is any different. Logically they can't predict how much will be on there on a future date so how could it be any different?

The SIPP is part of a package deal, we pay annually. You get a SIPP, a trading account and an ISA. It's a set fee every year. They do not work it out on a percentage or a daily basis. Some SIPPs are different in that the more you have in there the more you pay...a percentage. We are happy with our one. If we have to transfer into it via a new, stake holder account then that will slow things down, get more complicated and add more fees. It may still be an option though, that still depends on us finding an IFA at reasonable cost.

Prism

scoobyjones1 said:

GDB2222 said:

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.

Leaving aside your views about the lack of IFAs who will work for nothing, I'm intrigued about your investment return of 10% pa. Surely, rather than worrying about the rather paltry CETV from your wife's DB pension, you should gear up your finances generally? Why not maximise your mortgage and invest the funds at 10%? The interest will be less than your investment return, even allowing for tax. It's a bit harder now, with mortgage interest at 5%, but for much of the last 10 years you could have borrowed at 1 or 2%. Why on earth didn't you?

However, I agree with you that an IFA report on the DB pension won't really help you, because the IFA simply won't allow for a 10% return. I also agree with you that, if you can earn 10% on average throughout the rest of your wife's life, then it is a no-brainer and the CETV is more than adequate. Where we part company  is that I don't think you can achieve that return long term.

I never said we expect an IFA to work for nothing...only that we don't want to use one! A mortgage is way different. Of course we would not risk our house to put the money into stocks! Besides we haven't had a mortgage for 20 years. Frankly your comments are getting a touch ridiculous as if you just want to win an argument or something. I didn't say we expected to achieve a 10% gain for ever, we have done more than that though, the past 7 years. YOU said an IFA would plan for 2% on top of inflation and I said that would do nicely....you don't see the point of the thread, just the opposite. This is a small sum she would like to save in HER account and invest some of it as and when. To lose 2k a year for that option, at our age, seems a perfectly reasonable idea. You just don't get it.
I'm sorry but life is too short. Goodbye and good luck.

I'm not sure if GDB2222 was being serious about maxing out the mortgage, but we have had the funds to clear our mortgage for nearly 10 years now, but have chosen to invest it instead. It hasn't been such a wild idea with interest rates being low. Going forwards it may be a different matter though.

I knew someone who got out a new mortgage in retirement many years after clearing it for the first time - just to invest it. It has worked out very well.

Mutton_Geoff

Interesting thread but I can't help thinking the OP and his wife probably have other pensions in addition to their two state pensions so money is not an issue. Even if their only other income was state pension, this locked in DB scheme is only due to pay 10% of their pension income. In reality with other pension income, it's likely to be a tiny fraction. Why get so concerned that the financial industry is out to screw you when you could just leave it as it is, pop the monthly income from the DB into a savings account and use it as your holiday fund.

You won't be able to convince the government to let you transfer the state pension so you're already going to have multiple income sources in retirement, why not just relax and enjoy them? I can't believe there are 18 pages of bubble about a £2k pension.

QrizB

scoobyjones1 said:

Prism said:

I'm not sure if GDB2222 was being serious about maxing out the mortgage, but we have had the funds to clear our mortgage for nearly 10 years now, but have chosen to invest it instead. It hasn't been such a wild idea with interest rates being low. Going forwards it may be a different matter though.

I knew someone who got out a new mortgage in retirement many years after clearing it for the first time - just to invest it. It has worked out very well.

Personally I would not advise people to borrow money in order to invest. I would always clear debts first.

There is a difference if opinion on the MSE boards between (on one hand) the inhabitants or the pensions and investments boards and (on the other) the debt-free and mortgage-free boards.

The former group consider that a well-managed mortgage, or similar low-interest loan, lets you invest more and profit. The latter group see debt as a burden to be got rid of.

Both groups seem to be correct, for the typical members of the boards concerned.

Over the last decade, based on your own claims in the thread above, it would have been profitable for you to have taken an interest-only mortgage at 3%pa and to invest the money earning 10%pa. That's 7% clear profit for you.

You chose to clear your mortgage 20 years ago, and I'm sure that seemed the best option at the time. But you can also see the opportunity costs that has caused.

QrizB

If you can point out an error in my maths, I'd welcome it.

Otherwise you seem to be flailing.

scoobyjones1

QrizB said:

If you can point out an error in my maths, I'd welcome it.

Otherwise you seem to be flailing.

It's not about the maths. I have no more time for pointless arguments about maybe something that might not have happened. All the best.

scoobyjones1

Mutton_Geoff said:

Interesting thread but I can't help thinking the OP and his wife probably have other pensions in addition to their two state pensions so money is not an issue. Even if their only other income was state pension, this locked in DB scheme is only due to pay 10% of their pension income. In reality with other pension income, it's likely to be a tiny fraction. Why get so concerned that the financial industry is out to screw you when you could just leave it as it is, pop the monthly income from the DB into a savings account and use it as your holiday fund.

You won't be able to convince the government to let you transfer the state pension so you're already going to have multiple income sources in retirement, why not just relax and enjoy them? I can't believe there are 18 pages of bubble about a £2k pension.

The DB fund in question has no death benefits. So say she is knocked down by a bus (we nearly were, yesterday!) the pension would die with her. If she transfers it first then she would have a growing, £60k in her SIPP to leave to whoever she wants. That may sound extreme but every IFA discusses what happens if you live longer or shorter than expected. 

Hoenir

scoobyjones1 said:

Mutton_Geoff said:

Interesting thread but I can't help thinking the OP and his wife probably have other pensions in addition to their two state pensions so money is not an issue. Even if their only other income was state pension, this locked in DB scheme is only due to pay 10% of their pension income. In reality with other pension income, it's likely to be a tiny fraction. Why get so concerned that the financial industry is out to screw you when you could just leave it as it is, pop the monthly income from the DB into a savings account and use it as your holiday fund.

You won't be able to convince the government to let you transfer the state pension so you're already going to have multiple income sources in retirement, why not just relax and enjoy them? I can't believe there are 18 pages of bubble about a £2k pension.

The DB fund in question has no death benefits. So say she is knocked down by a bus (we nearly were, yesterday!) the pension would die with her. 

Normally there's a dependents benefit payable.