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

handful

scoobyjones1 said:

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.

Tech stocks have done very well for sure but that won't continue for ever. How do you intend to time when to de-invest before that crash when it happens? This last month or so has seen some great gains in my portfolio and I can see it would be easy to think that if I had that £85k CETV in my SIPP I would be much better off but I don't think of it like that. For me, if I live longer than expected or spend more than I should or lose out due to a crash, the one constant I don't have to worry about is the DB!

Pat38493

Beddie said:

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.

I think that there has been court cases in very areas where it was established (rightly or wrongly) that someone signing an waiver form of that type, does not count unless it can be shown that the person clearly understood the implications of what they were signing.  I've seen posts on this board before from people who say that they, or their relative, signed lots of forms "under pressure" from someone without really understanding it.  

OP is saying now that they know what they are doing, but if they regret it later and come back saying, the IFA didn't explain fully what I was risking when I signed the waiver form, some kind of evidence or backup is needed.

Your last point is actually quite interesting - at the moment, if someone is really determined to take out their huge pension pot as one lump sum, pay huge tax bill on it, and spend it all in the first year of retirement, they can do that and they are not required to take IFA advice before doing so.  If the situation in this thread requires someone to take IFA advice, then surely someone wanting to take out a million pound pension all in the same tax year from a SIPP should also require such advice?

I saw a post on here recently from someone complaining that they were facing a huge tax bill after withdrawing their entire pension in one go - I am sure they would have had to sign lots of forms that they understood the tax implications, but some people just sign them and still don't realize what they are doing.

scoobyjones1

Pat38493 said:

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).

I hear you Pat. The anger and frustration is secondary. One of the factors is that this DB pension is firstly a small amount...safe, yes but also inflexible. We have SIPPs up and running, we like them and they do make more than inflation if you invest or save carefully. Any gains, interest, dividends in a SIPP are exempt from Cap Gains tax and we can control our eventual drawdown amounts to be flexible as required. We would prefer to take the risk, small in our experience over the long term, although losses can be sudden they do come back over time and you can put in stop losses to avoid huge losses. You can sell or buy at any time if there is trouble brewing! We and many others it seems would prefer to have this CETV value, 60k to work with rather than 2k a year paid out as £167 per month. That is not hugely useful to us in the grand scheme of things...as a couple with children and grandchildren. This is also subject to tax which may be an issue as Tax allowances remain so very low. 

NlghtOwl

There’s a case for picking your battles and causing stress over something that you can’t control.

I like the idea of diversity of income streams in retirement from: Smaller DB pension, ISA’s, a DC Pot which I can withdraw if required or keep for dependents, and the state pension. 

Good luck, and reading the comments has been informative and entertaining.

scoobyjones1

eastcorkram said:

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. 

That's tidy, eastcorkram...hers might cover the Council Tax... but not the fuel and water on top. She will get 2k a year. However if we could grow the 60k in her SIPP at only 5% per year, very doable, than that would raise £3k a year. So you can see why we might want to do that. 10% would be £6k per year.... again a reasonable expectation over several years.

A pension provider is holding your money, investing it and making a profit...SOME of which is passed on to the pensioner. Of course risk depends on the amount involved and your circumstances, as we are fully aware after many years investing or saving.

xylophone

That is not hugely useful to us in the grand scheme of things...as a couple with children and grandchildren. This is also subject to tax which may be an issue as Tax allowances remain so very low. 

You mentioned that your wife (approaching her 60th birthday) is no longer working.

It seems likely therefore that she has no relevant earnings.

https://www.gov.uk/hmrc-internal-manuals/pensions-tax-manual/ptm044100#earnings

Is she still contributing up to £2880 per annum to her SIPP and receiving tax relief of up to £720?

scoobyjones1

QrizB said:

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.

All due respect to the old hands and their 8 figure sums but we are talking about £60k here. This is what I am referring to for 2023...just a few...there are dozens of others...and this was of end of November, most of these stocks have had another big jump since then :

Company and ticker symbol Performance in 2023

NVIDIA (NVDA)                 220.0%

Palo Alto Networks (PANW) 111.5%

Salesforce (CRM)          90.0%

Advanced Micro Devices (AMD) 87.1%

Fair Isaac Corporation (FICO) 81.7%

Adobe (ADBE)                  81.6%

Arista Networks (ANET)          81.1%

ServiceNow (NOW)          76.6%

LAM Research (LRCX)          70.3%

Synopsys (SNPS)                  70.2%

Data as of Nov. 30, 2023

And the DB pension may offer up to 5% growth...maybe less, capped and linked to CPI...which in her case would be about another £100 a year...or £8.33 a month...

scoobyjones1

xylophone said:

That is not hugely useful to us in the grand scheme of things...as a couple with children and grandchildren. This is also subject to tax which may be an issue as Tax allowances remain so very low. 

You mentioned that your wife (approaching her 60th birthday) is no longer working.

It seems likely therefore that she has no relevant earnings.

https://www.gov.uk/hmrc-internal-manuals/pensions-tax-manual/ptm044100#earnings

Is she still contributing up to £2880 per annum to her SIPP and receiving tax relief of up to £720?

Yes...that's the plan. Thanks for your comment.

Pat38493

scoobyjones1 said:

QrizB said:

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.

All due respect to the old hands and their 8 figure sums but we are talking about £60k here. This is what I am referring to for 2023...just a few...there are dozens of others...and this was of end of November, most of these stocks have had another big jump since then :

Company and ticker symbol Performance in 2023

NVIDIA (NVDA)                 220.0%

Palo Alto Networks (PANW) 111.5%

Salesforce (CRM)          90.0%

Advanced Micro Devices (AMD) 87.1%

Fair Isaac Corporation (FICO) 81.7%

Adobe (ADBE)                  81.6%

Arista Networks (ANET)          81.1%

ServiceNow (NOW)          76.6%

LAM Research (LRCX)          70.3%

Synopsys (SNPS)                  70.2%

Data as of Nov. 30, 2023

And the DB pension may offer up to 5% growth...may be less, capped and linked to CPI...which in her case would be about another £100 a year...or £8.33 a month...

Have you ever heard of something called "Sequence of return risk"?  

Also, we could probably post a list of individual stocks that had stellar growth up until 2022, and then tanked in 2023 - investing in individual stocks is not something that most pension investors would do as they can be very volatile.  Tech stocks in particular, as mentioned by DunstonH, have had a few huge crashes in the past where they lost more than 50% in a short period.

scoobyjones1

NlghtOwl said:

There’s a case for picking your battles and causing stress over something that you can’t control.

I like the idea of diversity of income streams in retirement from: Smaller DB pension, ISA’s, a DC Pot which I can withdraw if required or keep for dependents, and the state pension. 

Good luck, and reading the comments has been informative and entertaining.

Totally get that. I don't want to take this on if it proves :
A : Stressful
B : Expensive
C : Impossible! 

😁