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

Prism

scoobyjones1 said:

leosayer said:

scoobyjones1 said:

Yes, it is a Defined Benefit scheme. As I said we do not want or need the advice. We would happily sign a disclaimer but seems that's not an option. This is the 2nd time of doing this and the pension is merely being moved into another pension with all of the same retirement options remaining. We have made the decision and informed the pension holder. The transfer is in progress but will not progress because of this snag. We will not be paying upwards of £5K for a pension this size. That would be insane.

Why bother if that's the case?

Is the transfer value below £30k? There is no regulatory requirement to take advice if so.

It's 60k so she has to do it. The old pension would either give her a partial lump sum and about £2k a year. Or a straight 2.5k per year. They have now set limits as to how much this will grow which is 5% I believe and this is why many, many people want to move out of these schemes. We certainly would like to!

If inflation was consistently above 5%, then it would be unlikely that the invested £60k would provide a return as high as £2.5k per year. You would probably be better to stay in the DB pension with that low transfer amount.

Brie

scoobyjones1 said:

leosayer said:

scoobyjones1 said:

Yes, it is a Defined Benefit scheme. As I said we do not want or need the advice. We would happily sign a disclaimer but seems that's not an option. This is the 2nd time of doing this and the pension is merely being moved into another pension with all of the same retirement options remaining. We have made the decision and informed the pension holder. The transfer is in progress but will not progress because of this snag. We will not be paying upwards of £5K for a pension this size. That would be insane.

Why bother if that's the case?

Is the transfer value below £30k? There is no regulatory requirement to take advice if so.

It's 60k so she has to do it. The old pension would either give her a partial lump sum and about £2k a year. Or a straight 2.5k per year. They have now set limits as to how much this will grow which is 5% I believe and this is why many, many people want to move out of these schemes. We certainly would like to!

Pat38493 said:

Brie said:

MTB1986 said:

scoobyjones1 said:

The SIPP gives you the same options. Invest or not, 25% tax free ...drawdown when required. If she wants to invest that's her risk. The annuity offered is of little use and is taxable.

The SIPP doesn’t give the same options, there is no 25% tax free lump sum with a Defined Benefit pension, and you can’t drawdown as required - it’s a set amount paid each year for life. 

I agree that a SIPP doesn't give the same options to a DB scheme but you can get a 25% TFLS with a DB pension.  I certainly got one with mine.  Of course it's possible that some won't have this as an option.  And mine is not a set amount as such.  It's set for this year and then there's an annual increase.  But certainly drawdown is definitely not allowed. 

Oh and drawdown amounts out of a SIPP are taxable I believe.

You can get a tax free lump sum with a DB pension, if the scheme rules allow it, but it is not 25% of the CETV value of the pension - it's calculated in a different way and is also subject to the rules of the pension as well. 

Sorry got the terminology wrong.  I was told that it was similar to a 25% TFLS so that has lodged in my brain.  My point was that there is a TFLS which the which another poster seemed to think didn't exist - by my reading of the comment.

scoobyjones1

Prism said:

scoobyjones1 said:

leosayer said:

scoobyjones1 said:

Yes, it is a Defined Benefit scheme. As I said we do not want or need the advice. We would happily sign a disclaimer but seems that's not an option. This is the 2nd time of doing this and the pension is merely being moved into another pension with all of the same retirement options remaining. We have made the decision and informed the pension holder. The transfer is in progress but will not progress because of this snag. We will not be paying upwards of £5K for a pension this size. That would be insane.

Why bother if that's the case?

Is the transfer value below £30k? There is no regulatory requirement to take advice if so.

It's 60k so she has to do it. The old pension would either give her a partial lump sum and about £2k a year. Or a straight 2.5k per year. They have now set limits as to how much this will grow which is 5% I believe and this is why many, many people want to move out of these schemes. We certainly would like to!

If inflation was consistently above 5%, then it would be unlikely that the invested £60k would provide a return as high as £2.5k per year. You would probably be better to stay in the DB pension with that low transfer amount.

Well seems we may have to but we would have liked to move it into her SIPP, invest some of it in US shares which can but not always, grow more than UK inflation. If this rule restricts us and we have to find a financial adviser who will likely not take the "risk" no matter how much we pay them, then that seems unfair to me. It is a Nanny state thing because all that would be required would be a simple indemnity form which states that we accept any risk and not the DB pension holder or the SIPP provider, whose terms and conditions we have already agreed to. Our money is doing fine with them....without advisers fees every year. We would prefer to manage our own money and not leave some of it in some pension scheme that we know very little about.

QrizB

scoobyjones1 said:

Nope, I was writing for help, not to be told off and not to wind anyone up. We are not allowed to do what we would like which would be to invest some of the money.

At the moment, though, you don't have any money in this scheme. What you have is a promise from her old employer's scheme to pay £2.5k a year from the scheme's normal retirement age.

The CETV of £60k is, in effect, what the employer's scheme will pay you to surrender your rights. But that £60k neds to be transferred into another pension scheme, nd to do that you are required by law to take professional advice and the scheme you're transferring into is almost certain to require that the advisor states the transfer is in your wife's best interest.

Taking advice is a legal requirement. Getting a positive recommendation isn't, but is likely to be needed nevertheless.

scoobyjones1 said:

We know what we are doing with investments and have been successful for 10 years on the US markets which are up 8% since just October this year.

Being successful on the US markets in the last 10 years hasn't taken any particular skill. It's just how it's been.

scoobyjones1 said:

I did not realise that this old pension was a DB pension

But you do now.

dunstonh

We are not allowed to do what we would like which would be to invest some of the money. 

That is because what you want to do is financially unsuitable in 9 out of 10 cases.

 She has been offered a small annual payment which may or may not technically be an annuity, what's the difference?

Has that scheme pension been updated?  ie. is it using the 2023 figures or still referring to the original leaving date figure?

Are you using an up-to-date CETV?    CETVs have halved since the end of 2021.

 It MAY grow up to 5% which is not really growth vs inflation. 

It is indexed but remember that investments havent grown with inflation for a number of years now.

 We know what we are doing with investments and have been successful for 10 years on the US markets which are up 8% since just October this year.

That is a 10 year period when US equities was the best place to be.   However, cycles vary.  The cycle before that 10 year period saw US equities lose money over 10 years.   They underperformed most global areas.

 I did not realise that this old pension was a DB pension, her main work pension from BT was not and that was easily moved into her SIPP.

The old BT DB pension would have had the same requirements.   The BT DC pension does not.

(Removed by Forum Team)

Marcon

dunstonh said:

 This is the 2nd time of doing this and the pension is merely being moved into another pension with all of the same retirement options remaining. 

That doesn't seem likely, as DB pension transfers have required mandatory advice for 30 years.  

Advice only became mandatory (s.48 of the Pension Schemes Act 2015) when the so-called pension freedoms were introduced in 2015. 

Marcon

Brie said:

I've been looking to move my pensions to someplace that will provide an annuity and everyone so far has stated categorically that they will not consider accepting any DB scheme.  And that's even if you have advice.  It is just too big a risk for any SIPP provider that, in however many years, your wife might suddenly realise that she has lost some benefit the DB scheme would have given, whether it's an enhanced, guaranteed monthly payment or a survivor option or anything else.  

I have heard of people paying up to £10k to an IFA in an attempt to get a positive result only to be told there's no way the IFA will recommend it.  The very very few that do succeed are those with an extremely limited life expectancy.  I'm hoping that's not your wife's situation.

You're right that no SIPP will take a DB transfer against advice, but a stakeholder pension will - there is a legal obligation to do so. You'll still need to take advice, because the DB scheme cannot release the transfer (if it's upward of £30K and has 'safeguarded benefits', as all DB schemes do) without verifying that you've done so.

Marcon

MallyGirl said:

if the transfer value is greater than £30k then she has to take advice. There is basically no one that will accept a transfer without a positive recommendation but she will still pay the fee for the advice exercise (maybe £5k). It is not a box ticking exercise. Unless she has some very specific reasons that would make it positive - such as very reduced life expectancy - then this is basically a non-starter.

See my answer above...I thought this particular myth had been laid to rest long ago.

scoobyjones1

Marcon said:

dunstonh said:

 This is the 2nd time of doing this and the pension is merely being moved into another pension with all of the same retirement options remaining. 

That doesn't seem likely, as DB pension transfers have required mandatory advice for 30 years.  

Advice only became mandatory (s.48 of the Pension Schemes Act 2015) when the so-called pension freedoms were introduced in 2015. 

Ha ha...typical. It's ridiculous and restrictive. We will not be able to do what we want to because of the cost and someone else's perceived "risk". The changes seem to me to be designed to help advisers and/or insurers. Freedom? Nope... Schemes? Yes!

Mutton_Geoff

The rules are there to protect you from yourself. Your post has attracted very valid comments from a selection of regular posters (likely IFAs) who I personally hold in high regard. To block them is akin to sticking your fingers in your ears.