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

handful

It's very interesting to see how people view the same thing in very different ways. I've got a small DB pension available to me either now or at any point up to 65 when it is scheduled to pay out. Mine is a little bigger than the OPs, CETV of £85k and an income of circa £3500 PA. I view this as being the most valuable part of my pension in many ways because it's guaranteed even though it is only a relatively small part of my overall pension pot. I look at it as a way of funding something like all of our house and vehicle insurances for ever because it should grow at a similar rate to premiums increasing. Or maybe I could buy health insurance and it would fund that. I would never consider trying to cash it into my SIPP. It takes al sorts I suppose and please don't take that as an insult!

scoobyjones1

jimjames said:

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.

Thanks for that, this was a pension we did not even know she had...so that is why I did not know what type of pension it was. We now know it's a DB scheme and we do know the benefits and protections that you get. They make you read the info and tick the boxes over and over and you have to pay for an IFA to tell you all this as well as signing indemnity forms.
We would still prefer to have the CETV, approx £60k (yes...seems that these levels have dropped in half!) rather than a trickle of 2k a year.
It is so difficult and stressful to do,,,(IF we find a reasonable IFA that will do it) that we may have to opt for staying in the DB scheme, which so many people are now trying to get out of, as the benefits are not as good as they once were. They are only inflation protected at a cap of 5%, so if CPI is higher...as it is now,,,then your pension is shrinking in real terms. Nobody likes shrinkage!

scoobyjones1

wjr4 said:

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? 

Her thoughts are that she is desperate to have control over the full CETV immediately, £60k inside her already successful and easy to manage SIPP, rather than receive 2k a year, thanks for asking. I am beginning to think it's not worth the stress, time and expense. It may not even prove to be possible. However, it's her money and her account. I am not telling her what to do!

scoobyjones1

hugheskevi said:

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.

Spot on, exactly our thoughts. I wonder why this Gov has frozen such allowances for so long? They are not stupid and know full well all of the consequences. What's next, tax taken from your State Pension at source? Ridiculous.

Pat38493

scoobyjones1 said:

jimjames said:

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.

Thanks for that, this was a pension we did not even know she had...so that is why I did not know what type of pension it was. We now know it's a DB scheme and we do know the benefits and protections that you get. They make you read the info and tick the boxes over and over and you have to pay for an IFA to tell you all this as well as signing indemnity forms.
We would still prefer to have the CETV, approx £60k (yes...seems that these levels have dropped in half!) rather than a trickle of 2k a year.
It is so difficult and stressful to do,,,(IF we find a reasonable IFA that will do it) that we may have to opt for staying in the DB scheme, which so many people are now trying to get out of, as the benefits are not as good as they once were. They are only inflation protected at a cap of 5%, so if CPI is higher...as it is now,,,then your pension is shrinking in real terms. Nobody likes shrinkage!

Are you sure that you shouldn't take a step back and re-examine the situation in terms of your overall retirement spending needs, rather than from the lens of not liking the legal restrictions on your freedom of choice?

If, when your wife is retired, she is going to have annual spending that is at least as much as the amount of this DB pension, what does it really matter if you just keep the DB pension and have it pay out - you will need to take out that money one way or another?

To justify going through all the stress and pain of transferring out, you would need to be sure that you can beat the growth of the DB pension amount with the £50-55K that you will eventually end up with, consistently every year by something greater than the annual inflation increases on the DB payments.

Also you have a very easy middle way which is to take the maximum tax free lump sum allowed from the pension, so at least you can have some of the value now.

Even more so if this is only a relatively small part of your wife's total pension assets - I suspect that you can achieve your spending goals either way.

Also - once a DB pension is in payment, there are hardly ever problems with it paying out each month on schedule - the frustrating delays and admin parts are usually related to getting the pension calculated and put into payment in the first place.  It's worth noting also that taking money out of your SIPP won't be just like bank account withdrawals - you will have to complete paperwork for that as well (maybe online but there will still be a lot of questions to go through).

eastcorkram

handful said:

It's very interesting to see how people view the same thing in very different ways. I've got a small DB pension available to me either now or at any point up to 65 when it is scheduled to pay out. Mine is a little bigger than the OPs, CETV of £85k and an income of circa £3500 PA. I view this as being the most valuable part of my pension in many ways because it's guaranteed even though it is only a relatively small part of my overall pension pot. I look at it as a way of funding something like all of our house and vehicle insurances for ever because it should grow at a similar rate to premiums increasing. Or maybe I could buy health insurance and it would fund that. I would never consider trying to cash it into my SIPP. It takes al sorts I suppose and please don't take that as an insult!

Similar for me. I'm very happy I have it, and it'll cover my council tax, electric, gas and water . I wouldn't transfer it, even if it was easy to do. 

eskbanker

scoobyjones1 said:
It is so difficult and stressful to do,,,(IF we find a reasonable IFA that will do it) that we may have to opt for staying in the DB scheme, which so many people are now trying to get out of, as the benefits are not as good as they once were. They are only inflation protected at a cap of 5%, so if CPI is higher...as it is now,,,then your pension is shrinking in real terms. Nobody likes shrinkage!

Worth considering though that CPI has only exceeded 5% in any significant way for less than two out of the past 30+ years, and is now back below that level again.

scoobyjones1

handful said:

It's very interesting to see how people view the same thing in very different ways. I've got a small DB pension available to me either now or at any point up to 65 when it is scheduled to pay out. Mine is a little bigger than the OPs, CETV of £85k and an income of circa £3500 PA. I view this as being the most valuable part of my pension in many ways because it's guaranteed even though it is only a relatively small part of my overall pension pot. I look at it as a way of funding something like all of our house and vehicle insurances for ever because it should grow at a similar rate to premiums increasing. Or maybe I could buy health insurance and it would fund that. I would never consider trying to cash it into my SIPP. It takes al sorts I suppose and please don't take that as an insult!

Thank you for your comments. The amount does come into it and I see your reasoning. £3.5k would be a useful amount for sure. She has been offered 2k with a lump sum or 2.3k without. We both have SIPPs which are tax efficient for Cap gains and interest / dividends. We can earn interest on the cash, with no risk... or invest in shares...tech stocks have risen to the tune of 90-150% this year so you can see the attraction as I do from your point of view as well.

QrizB

scoobyjones1 said:

Her thoughts are that she is desperate to have control over the full CETV immediately, £60k inside her already successful and easy to manage SIPP, rather than receive 2k a year, thanks for asking. I am beginning to think it's not worth the stress, time and expense. It may not even prove to be possible. However, it's her money and her account. I am not telling her what to do!

The commonly-quoted UK SWR is 3.5%, so £60k in drawdown would yield you £2100 a year, which is on a par with the DB payout.

scoobyjones1 said:

... tech stocks have risen to the tune of 90-150% this year ...

You're just doing more to convince the old hands on this board (some of whom have seven or eight figures invested) that you don't understand investment.

Beddie

There should be a "I know what I'm doing and I am happy to take on the liabilities if I made a mistake" process.

That's what the OP needs, as do many others. They don't want full advice and the IFA doesn't want the future liabilities.

An online flowchart would do the job. Very similar to those used by Nutmeg etc. to decide your risk profile. 

Someone with a nice DB pension as their main retirement asset is very different to someone who has other pensions, ISAs, properties etc. and a sound knowledge of what they are giving up.

And before you say "but what about the risks?" - they stay with the individual. Look at DC pensions and SIPPs now - you can take all of your money out in your late 50s to spend on cars and holidays, without any checks. A very foolish thing to do for many, but no one is stopping them. They might pay a lot more tax and end up being poorer in retirement, but that's allowed according to the rules. That needs to be tightened up and DB rules loosened, to end up with a similar process for all.