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

FIREDreamer

Interesting thread. I have done the opposite and spent 70% of my drawdown pot on a joint life RPI annuity with a 10 year guarantee period at a rate slightly below the oft quoted 4% safe withdrawal rate. With a stocks and shares ISA as well, I was happy to reduce investment exposure to gain a guaranteed income.

OP: Please think very carefully about giving up a guaranteed income, many people are not in the fortunate position of having one. I am glad I managed to get one at such a good rate - I hit a somewhat sweet spot a few weeks ago.

scoobyjones1

xylophone said:

Well Xylophone, she is a month away from 60 which was the agreed retirement age according to the DB scheme. 

Normal Scheme Retirement Age?

Presumably the Administrator  has confirmed  a "non - statutory right to transfer"?

See

https://www.mandg.com/pru/adviser/en-gb/insights-events/insights-library/transfer-pension-scheme#:~:text=Any scheme wishing to offer,flexible benefits (defined contributions).

There is no statutory right to transfer in relation to non-flexible benefits (for example Defined Benefit types schemes) if the member is within 12 months of normal pension age. Any scheme wishing to offer a member the right to take a transfer of their DB benefits within 12 months of normal retirement age will need to provide a non-statutory right to transfer.

If so, and your wife wishes to continue with the transfer process, there is no way round the advice requirement.

However, once the advice has been obtained, your wife has no obligation to follow it.

She does, however, need to find a scheme to accept a transfer against advice.

 No scheme, except  a stakeholder scheme, has to accept a transfer.

https://www.mandg.com/pru/adviser/en-gb/insights-events/insights-library/transfer-pension-scheme?utm_source=legacyurls&utm_medium=301&utm_campaign=/knowledge-literature/knowledge-library/transfer-pension-scheme/

A stakeholder pension scheme is currently the only type of scheme which must accept any transfer from another registered pension scheme.

It appears that Aviva still offers the direct to consumer option.

https://static.aviva.io/content/dam/document-library/adviser/pensions/sp01001c.pdf

https://static.aviva.io/content/dam/document-library/adviser/pensions/sp01006.pdf

Thus a person could open a stakeholder, obtain the required advice in respect of the DB transfer, and then request the stakeholder provider to organise the transfer in. 

Once in the stakeholder, the person could then request the SIPP provider to transfer the stakeholder into the SIPP.

If your non earning wife decided against proceeding with a transfer out of her DB scheme,  she could always pay the pension she receives (up to £2880) into her SIPP and receive tax relief of up to £720 - she can do this up to her 75th birthday.

It appears the the DB pension offers commutation of part of the pension (calculated as here) 

https://www.theprivateoffice.com/pensions/lump-sums-explained#:~:text=If you have a defined benefit pension, you can also,scheme, is slightly more complex

 to provide a PCLS?

And has she obtained a state pension forecast?

Thanks ever so much, xylophone. That's a fabulous post and will help many people. I will work through it tomorrow, Have a good night.

gm0

Not terrible rules at society level.  An inconvenience to you.  A valuable protection for someone else

Even the UK government eventually stopped teeth sucking and got around to trying to reduce rentier DB transfer farming and worse via a legal and bureaucratic patch.

An example horror

https://www.fca.org.uk/firms/british-steel-pension-scheme-our-approach-enforcement

It is what it is.  It's going nowhere.

jimjames

eskbanker said:

scoobyjones1 said:
My wife is upset though as she would prefer to have the CETV in her own SIPP. What they have offered may be nice, and a small help to her, if she lives to a hundred.

What's the CETV as a multiple of the annual DB payment, and what indexation is there?  Did any advisor plant the idea in her head that transferring into a SIPP would be straightforward or was that just a misunderstanding?

I was looking at exactly the same thing a couple of years ago and came up against the same hurdles. For me pension would have been £2k, CETV £120k so 60x. In the end I didn't proceed but with the changes in bond values the CETV is likely to be much lower now based on the numbers in this thread. 
I couldn't find any adviser that would advise on the transfer due to the reasons given in this thread. Frustrating but after seeing the numbers who have lost pensions to scams or ill advised transfer enriching advisers you can fully understand the reasons for it.

scoobyjones1 said:

dunstonh said:

 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. 

This line exactly sums up why advice is needed, if you weren't aware it was even DB then you probably aren't aware of the other benefits you are giving up. I was aware my pension was a DB one and have substantial investments I manage but it was still suggested that even as a small proportion of retirement funding it would not get approval for transfer due to the risk aversion.

wjr4

scoobyjones1 said:

wjr4 said:

scoobyjones1 said:

QrizB said:

scoobyjones1 said:

Marcon said:

scoobyjones1 said:

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? 

Yes, yes and yes - but if the transfer value has already been issued, and she's close to the scheme's retirement age, you would probably need to get on with it. The CETV is only valid for 3 months from the calculation date, and your wife may not be entitled to another once she reaches the scheme's retirement age (you'd need to check with the scheme).

But would the DB pension holder even release the pension to be transferred into a stakeholder type pension, which also have fees, without us paying an IFA to approve it?

No, because it would be illegal. Pension funds know what the law is regarding DB transfers. The DB fund wouldn't release it, and (if for some reason they did) the SIPP wouldn't accept it.

scoobyjones1 said:

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.

Has the scheme said they'll start paying out in a month, or does your wife need to actively claim it? If the former, you're probably already too late to start a transfer.

eskbanker said:

scoobyjones1 said:
My wife is upset though as she would prefer to have the CETV in her own SIPP. What they have offered may be nice, and a small help to her, if she lives to a hundred.

What's the CETV as a multiple of the annual DB payment, and what indexation is there?  Did any advisor plant the idea in her head that transferring into a SIPP would be straightforward or was that just a misunderstanding?

OP has said £2.5k pa, CETV £60k. It's not yet clear whether £2.5k was the value when OP's wife left the scheme, or if it's what she's been quoted at NPA in a month.

so far it has taken 6 weeks just to get the CETV figure,,,after it took them months to contact her initially. This is why we want out of the scheme. They are overworked and under staffed (their words). Her payments will only grow 5% a year at best and she would have to live a long time to get the same value as the CETV...which I know we can grow as well as having the money available for emergencies or unforeseen circumstances. To me, the rule of "pay out for advice and protection from yourself" is a nonsense. They did mention a 2nd option of a partial cash sum (not 25% though) and a lower, annual payout of 2k. However we are still waiting on the paperwork from them as regards this. Hopefully THAT would not need advice to accept, from an IFA?!!

Only 5% a year? What if you took it out the DB pension and it fell to 40k in the first year for example? 

That's a massive IF. In her SIPP she can hold most of this 60k as cash, they pay interest... and some she could invest in fairly safe stocks such as Apple and Microsoft. For them to drop 33% in an instant would take a catastrophic event, which we have had, I grant you with Covid and Ukraine. But that risk would be ours and you can sell / buy within the SIPP at any time. She has other funds to fall back on in the worst case. Even if she held it all as cash then she would have all of that money available quickly...subject to tax of course...but the first 25% would be tax free, upon starting drawdown. We have managed to beat the S&P 500 by a good amount over the last 7/8 years. You learn as you go.

At the moment she / I would prefer that to a guaranteed 2 or 2.5k per year. How long do you have left of good health and full faculties in your 60s? We do not know... And another thing, if you were to add that to your state pension...if you ever get one...then they would start taxing you again as the allowance is now so small in real terms.

Maybe not overnight, but I’ve seen clients lose that amount. What is her capacity for loss? What is her attitude to risk? What are HER thoughts & not yours, as it’s her pension? 

dunstonh

That's a massive IF. In her SIPP she can hold most of this 60k as cash, they pay interest... and some she could invest in fairly safe stocks such as Apple and Microsoft. For them to drop 33% in an instant would take a catastrophic event, which we have had, I grant you with Covid and Ukraine.

Never heard of the dot.com crash or the global financial crisis?   Apple shares lost 80% of their value during dot.com one.   Tech stocks in general fell around 90% from peak to trough.    They lost over half in GFC.

They barely wobbled with Covid or Ukraine.

Tech stocks are not fairly safe.  They are highly volatile.   They tend to bubble and burst more than than the wider market.

 We have managed to beat the S&P 500 by a good amount over the last 7/8 years. You learn as you go.

You haven't experienced a major fall as of yet.  

At the moment she / I would prefer that to a guaranteed 2 or 2.5k per year. 

£2500 in year one would be around £8500 in 28 years.  By that time, it would have paid out £140k

 How long do you have left of good health and full faculties in your 60s? 

Half will get into their 90s

MeteredOut

I can understand the OPs frustration here since the amount sounds like it is a relatively small portion of his wife's cumulative pension pots across all providers. They are effectively being constrained by the need to protect the general populace.

Probably too late for the OP, but it sounds like a fix could be to propose a change to the regulations to vary the £30K limit to include something based a percentage of an individuals cumulative pension pots.

So, the need for an IFA's approval could kick in at the lower of either the existing £30K or, eg, 10% of the cumulative total in all pension pots at the date of request to withdraw.  This would allow those more willing to take risk to do so with smaller pots.

Isn't going to happen any time soon though

hugheskevi

It is perhaps worth noting that several prominent commentators have criticised the £30,000 limit, eg, the former Pension Minister Steve Webb who said back in 2018:

"When the threshold for advice was originally set at £30,000 it reflected prevailing views about the borderline between what was a ‘trivial’ amount of pension savings that could be taken as a cash and a more meaningful pot.

"But now we have seen how pension freedoms are being used and the growing demand for pension transfers, a significantly larger threshold now seems appropriate."

And the Chief Exectutive of The Pension Advisory Service, Michelle Cracknell (also in 2018):

Michelle Cracknell, chief executive of The Pension Advisory Service, said the £30,000 requirement was "a very blunt instrument" and represented a "market failure".

I do hope the govt. moves away from putting in place cash limits that don't have any automatic indexation, do not get regularly reviewed, and which just leads to a system that comes under more and more pressure until it breaks and then something dramatic has to be done, eg, the Annual Allowance.

MeteredOut

As a very blunt check, I put £30K and 2014 (when I believe the limit was set) into the BOE inflation calculator, and it spits out the value in today's money at near enough £40K

https://www.bankofengland.co.uk/monetary-policy/inflation/inflation-calculator

scoobyjones1

FIREDreamer said:

Interesting thread. I have done the opposite and spent 70% of my drawdown pot on a joint life RPI annuity with a 10 year guarantee period at a rate slightly below the oft quoted 4% safe withdrawal rate. With a stocks and shares ISA as well, I was happy to reduce investment exposure to gain a guaranteed income.

OP: Please think very carefully about giving up a guaranteed income, many people are not in the fortunate position of having one. I am glad I managed to get one at such a good rate - I hit a somewhat sweet spot a few weeks ago.

Thanks for the good advice, this is guaranteed income but only £2300 per year or £2000 per year if she takes the lump sum, approx £12k first. We would rather risk saving and or investing £60k, within a UK registered SIPP, straight away than wait for dribs and drabs as we get older.