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

scoobyjones1

Marcon said:

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.

Thanks for that...so we could move it into a stakeholder type pension but again, only if we pay an adviser? Because the DB pension holder will not release it unless we do? Still feels like a stitch up!
We would be prepared to move it into another pension first if we could them transfer it to her SIPP eventually. Would that be an option? 

Pat38493

scoobyjones1 said:

dunstonh said:

s I said we do not want or need the advice. We would happily sign a disclaimer but seems that's not an option.

You cannot waive your rights away because you are unlikely to be in a position to know what you are waiving away.

 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.  

We will not be paying upwards of £5K for a pension this size. That would be insane.

Only around 1 in 10 DB pensions can be justified to transfer.   In 9 out 10 cases, it would be insane to transfer them.

Why do you think you are in the 1 in 10?  

In the current environment, an IFA would be daft to charge as little as £5k to transfer the pension.

The SIPP gives you the same options.
. Invest or not, 25% tax free ...drawdown when required. 

No it doesn't. 
DB pensions do not have 25% TFC
DB pensions are not invested
DB pensions have a guaranteed scheme pension for life.

The annuity offered is of little use and is taxable.

DB pensions do not use an annuity.

 No work is required except ticking the form...

Surely you are just writing that to wind us up?    
It is one of the highest risk transactions an IFA can carry out and nowadays would require compliance checking (third party usually) and heading towards 30 hours work.

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. She has been offered a small annual payment which may or may not technically be an annuity, what's the difference? It MAY grow up to 5% which is not really growth vs inflation. 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. 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. SHE was allowed to tick the box which said no financial adviser was required in that case and with replies like yours I assume you are one? If so I am glad to not be working with you!

Unfortunately you are not the first poster to come here saying that they wanted to transfer their DB pension into a DC fund without taking advice.  Unfortunately there is no way around this as it's a legal/statutory requirement.

As pointed out by a couple of other posters, it's quite likely that the advice you pay for will be to NOT transfer out, because the adviser cannot just tell you what you want to hear - they are only allowed to advise you to transfer out if they think it's in your interests to do so, regardless of your wishes or willingness to sign disclaimers.

If that's the case, it's likely that the only way you could transfer out would be to open a stakeholder pension and transfer it into there against the IFA advice.

Either way, it's highly unlikely that this would be worthwhile for you to do given that you would lose at least £5K of the value already in adviser fees.

Sadly there are too many people who don't read the documentation around such transactions and then try to sue somebody when they realize they have done the wrong thing, hence the reason why strong safeguards have been put in place.

HappyHarry

scoobyjones1 said:

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!

Trust me - the rules are not designed to help financial advisers in any way at all. The rules, the recent guidance from the FCA regarding DB transfers and the significantly lower transfer values currently on offer make it very difficult for IFAs to successfully recommend a transfer.

The box that you want checking is the one that says an appropriately qualified IFA has provided advice. No IFA is going to check that box without doing the full work required - which is a horrendous amount. The IFA will be held responsible for that advice for ever, and the FCA and FOS do not recognise disclaimer documents signed by clients.

if you want to have a look at the guidance provided by the FCA to IFAs when transferring DB pensions, take a look at the following links: (and when I say guidance, I mean these are the rules and the IFA must interpret them in the way that the FCA and FOS determine that they should be - though they do not define how that actually is).


https://www.fca.org.uk/publication/finalised-guidance/fg21-3.pdf

https://www.fca.org.uk/firms/defined-benefit-pension-transfers

Hoenir

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.

I suspect there's many newer investors who have become complacent since 2008 when the US Federal Reserve first commenced Quantitative Easing.  An era of cheap money and a lack of viable alternatives to equities. Has resulted in numerous cases of inflated asset valuations. The wider implications of higher interest rates and QT aren't being fully registered yet. As they are going to take some consider time to have an impact.

scoobyjones1

Mutton_Geoff said:

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. 

Thanks but if someone is rude or arrogant then I don't find it particularly helpful. All the best.

MallyGirl

Marcon said:

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.

I haven't noticed anyone coming on here to say that this avenue has been successfully utilised. There has been discussion in the past on the limited number of stakeholder offerings out there that could be used but I see that Standard Life seem to do one. Maybe that is the answer but the advisor fee still has to be paid and that now sounds like it is rising

scoobyjones1

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.  I think there is an HMRC formula to calculate the maximum tax free amount that could be done based on the annual pension entitlement, but it's also subject to whatever the trustees and rules decided.

Also - DB pensions are pretty heavily protected against inflation on a statutory level before they are put into payment, which is not the case with DC.

As an aside - I'm not sure how long the 30K cutoff point for requiring advice has been inplace, but if it's for several decades as mentioned above, the amount should have been substantially increased in the meantime as £30K is a pretty low limit for this topic.  However, the current rules can't be wished away so for the moment, that's just the way it is.

Yes Brie...that is another example of long frozen thresholds that are costing people money! If this had gone up with inflation then we most likely would not have had this issue. Jobs for the boys perhaps...

Albermarle

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!

One point that has not been made, is that typically an employer offering a DB pension ( in the past in this case ) will have put a lot more money in it themselves ( typically >20%)than an employer only offering a DC pension ( typically a few per cent)
So if your wife had been with an employer with a DC pension, it would very likely be worth a lot less than £60K anyway.
So she actually has a better pension, even if there are  some restrictions on what to do with it,

scoobyjones1

xylophone said:

Has your wife now reached Normal Retirement Age under the rules of the DB Scheme?

Well Xylophone, she is a month away from 60 which was the agreed retirement age according to the DB scheme. This is why we are trying to sort it out at this time and assumed we would be able to transfer it to her SIPP. She is not working or earning now and has to wait 6/7 years for state pension...but that's another thread!

scoobyjones1

Albermarle 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!

One point that has not been made, is that typically an employer offering a DB pension ( in the past in this case ) will have put a lot more money in it themselves ( typically >20%)than an employer only offering a DC pension ( typically a few per cent)
So if your wife had been with an employer with a DC pension, it would very likely be worth a lot less than £60K anyway.
So she actually has a better pension, even if there are  some restrictions on what to do with it,

Thanks, yes you may be right there but this was an old job she did years ago for about 3 years. We would prefer to move it into her SIPP, which is her main pension which will have to be utilised as she waits another 7 years for state pension.