Pension Advisor would want £21,000 for a failed transfer

michael1234

Company pension scheme suggested this chap. So far after two hour's chat I've established that:

1/ He is someone recommended by my complex company pension administrator (DC with DB underpin) because he has successfully transferred many pensions out of the scheme before whereas "other companies have had less success with some failures".
2/ If I sign all the docs, and the preliminary advice shows the chance of success to be "99.9%" (his words) then it would go forward to the "underwriters" for the final decision which he says would be a rubber stamp. "Only one person has ever passed our preliminary advice then failed the full advice and that was because this person wasn't truthful"
3/ IF it does fail, I have to pay 4.5% of the pension.
4/ I said if its so rare why doesn't his company cover the cost of such case. He said "FCA rules mean we can't".
5/ If it succeeds I'll be paying 1.96% for 5 years before I can transfer out without penalty but it will be a "normal" DC scheme.

My questions are:
1/ Is this usual?
2/ Is number 4 above true?
3/ Is the annual fee representative of the market right now? No other fees to pay.
3/ Any other tips/advice? 

Thanks in advance.

Marcon

1. Why do you think transferring out constitutes success, when it might not be in the best financial interests of the client? Transfer values have fallen massively (in some cases halved) in the last couple of years.
2. Yes. Contingent charging was banned in 2020.
3. Why are you considering transferring to something which apparently 'locks you in' for five years?

Are you sure this individual is an independent financial adviser?

If you are determined to transfer come what may, then all you need to demonstrate to the ceding (paying) scheme is that you have received advice from a regulated adviser. You don't have to follow it and the scheme won't ask what it said.

The problem comes when trying to find a scheme willing to accept a transfer against advice - but that too can be overcome if you open a stakeholder (which you can do yourself; no need for an adviser to get involved).  Stakeholders must accept transfers in from any UK registered pension scheme. You'll still need to receive advice because the ceding scheme won't pay out unless you do. You can then arrange the transfer for yourself.

michael1234

Marcon said:

1. Why do you think transferring out constitutes success, when it might not be in the best financial interests of the client? Transfer values have fallen massively (in some cases halved) in the last couple of years.
2. Yes. Contingent charging was banned in 2020.
3. Why are you considering transferring to something which apparently 'locks you in' for five years?

Are you sure this individual is an independent financial adviser?

If you are determined to transfer come what may, then all you need to demonstrate to the ceding (paying) scheme is that you have received advice from a regulated adviser. You don't have to follow it and the scheme won't ask what it said.

The problem comes when trying to find a scheme willing to accept a transfer against advice - but that too can be overcome if you open a stakeholder (which you can do yourself; no need for an adviser to get involved).  Stakeholders must accept transfers in from any UK registered pension scheme. You'll still need to receive advice because the ceding scheme won't pay out unless you do. You can then arrange the transfer for yourself.

Thanks a lot for your response.

 1/ Flexibility
3/ Only way I can see of avoiding an annuity

NOT an IFA but as I understand it a tied FA ("Chartered" he's keen on telling me).

Re stakeholder I'd still need positive advice which is the problem. This way I'd get a tie in for 5 years then free to go wherever.

My biggest worry is what if all the initial checks go though swimmingly but then when I finally need to sign, the (opaque) underwriters decide a transfer is not in in my interests. That would mean paying £21,000. That said, I haven't read many stories about people having to pay that sort of cash for failed transfers but maybe I'm not looking in the right places?

Dazed_and_C0nfused

michael1234 said:

Marcon said:

1. Why do you think transferring out constitutes success, when it might not be in the best financial interests of the client? Transfer values have fallen massively (in some cases halved) in the last couple of years.
2. Yes. Contingent charging was banned in 2020.
3. Why are you considering transferring to something which apparently 'locks you in' for five years?

Are you sure this individual is an independent financial adviser?

If you are determined to transfer come what may, then all you need to demonstrate to the ceding (paying) scheme is that you have received advice from a regulated adviser. You don't have to follow it and the scheme won't ask what it said.

The problem comes when trying to find a scheme willing to accept a transfer against advice - but that too can be overcome if you open a stakeholder (which you can do yourself; no need for an adviser to get involved).  Stakeholders must accept transfers in from any UK registered pension scheme. You'll still need to receive advice because the ceding scheme won't pay out unless you do. You can then arrange the transfer for yourself.

Thanks a lot for your response.

 1/ Flexibility
3/ Only way I can see of avoiding an annuity

NOT an IFA but as I understand it a tied FA ("Chartered" he's keen on telling me).

Re stakeholder I'd still need positive advice which is the problem. This way I'd get a tie in for 5 years then free to go wherever.

My biggest worry is what if all the initial checks go though swimmingly but then when I finally need to sign, the (opaque) underwriters decide a transfer is not in in my interests. That would mean paying £21,000. That said, I haven't read many stories about people having to pay that sort of cash for failed transfers but maybe I'm not looking in the right places?

If it's a DB scheme with DC element where does an annuity fit into things?

Does the DC pot have to be used to buy an annuity?  If so is transferring just that element an option?  Leaving the DB pension in place.

sandsy

michael1234 said:

Company pension scheme suggested this chap. So far after two hour's chat I've established that:

1/ He is someone recommended by my complex company pension administrator (DC with DB underpin) because he has successfully transferred many pensions out of the scheme before whereas "other companies have had less success with some failures".
2/ If I sign all the docs, and the preliminary advice shows the chance of success to be "99.9%" (his words) then it would go forward to the "underwriters" for the final decision which he says would be a rubber stamp. "Only one person has ever passed our preliminary advice then failed the full advice and that was because this person wasn't truthful"
3/ IF it does fail, I have to pay 4.5% of the pension.
4/ I said if its so rare why doesn't his company cover the cost of such case. He said "FCA rules mean we can't".
5/ If it succeeds I'll be paying 1.96% for 5 years before I can transfer out without penalty but it will be a "normal" DC scheme.

My questions are:
1/ Is this usual?
2/ Is number 4 above true?
3/ Is the annual fee representative of the market right now? No other fees to pay.
3/ Any other tips/advice? 

Thanks in advance.

1/ Most transfer advice does not result in a recommendation to transfer because for most people, it's not considered to be in their best interests. An adviser's job is to consider your specific circumstances and recommend whether a transfer is right for you or not.The adviser's firm will likely check the advice before he can confirm his final conclusion to you as they are liable if he gets it wrong and you subsequently complain.

2/ FCA rules require advice firms to charge the same amount for advice whether a transfer proceeds or not.

3/ Looks high and most firms don't have penalties at all if you transfer.

4/ Read the FCA pages on DB transfers and the advice process and the MoneyHelper pages on DB transfers. Do searches using the words DB transfers, unsuitable advice, redress.

tacpot12

I think you are being ripped off. You are paying £21,000 for pension transfer advice and there is a risk that the advice might be not to transfer! I would put the chance that it is not to transfer at closer to 20% if the adviser is honest and 100% if they aren't.

You are also paying £20K+ over five years for the work to transfer the pension (which takes about a couple of hours at max), and to put your money into a pre-defined portfolio and 'manage' it, which you can do yourself. Your money will have to work much harder if this advisor invests it for you. (You only have to acheive 4% return to beat a professional that is acheiving a 6% return).  

I paid £1000 for transfer advice on two DB pensions six years ago, when admitedly the cost of liability insurance for pension was much lower. £5000 is the normal cost for this sort of pension transfer advice these days, for the transfer value your figures suggest. 

Don't assume that your pension scheme is doing you any favours by recommending him. The scheme trustees will probably be very happy to divest themselves of investment risk inherent in providing you with a pension, so they might well point you in the direction of someone who has the best success rate. They might even suspect that the advisor is prepared to recommend a transfers even when they are not in the best interests of the scheme member, but so long as they don't check the advisers advice too closely they can claim they weren't aware of any problems. 

Marcon

michael1234 said:

Marcon said:

1. Why do you think transferring out constitutes success, when it might not be in the best financial interests of the client? Transfer values have fallen massively (in some cases halved) in the last couple of years.
2. Yes. Contingent charging was banned in 2020.
3. Why are you considering transferring to something which apparently 'locks you in' for five years?

Are you sure this individual is an independent financial adviser?

If you are determined to transfer come what may, then all you need to demonstrate to the ceding (paying) scheme is that you have received advice from a regulated adviser. You don't have to follow it and the scheme won't ask what it said.

The problem comes when trying to find a scheme willing to accept a transfer against advice - but that too can be overcome if you open a stakeholder (which you can do yourself; no need for an adviser to get involved).  Stakeholders must accept transfers in from any UK registered pension scheme. You'll still need to receive advice because the ceding scheme won't pay out unless you do. You can then arrange the transfer for yourself.

Thanks a lot for your response.

 1/ Flexibility
3/ Only way I can see of avoiding an annuity

NOT an IFA but as I understand it a tied FA ("Chartered" he's keen on telling me).

Re stakeholder I'd still need positive advice which is the problem. This way I'd get a tie in for 5 years then free to go wherever.

My biggest worry is what if all the initial checks go though swimmingly but then when I finally need to sign, the (opaque) underwriters decide a transfer is not in in my interests. That would mean paying £21,000. That said, I haven't read many stories about people having to pay that sort of cash for failed transfers but maybe I'm not looking in the right places?

A stakeholder scheme has to accept transfers in from any other UK registered pension scheme, regardless of the advice. This was certainly the case when the Treasury issued a consultation document in 2015 (see 3.12): https://assets.publishing.service.gov.uk/media/5a7f9325ed915d74e33f7466/PU1847_Pensions_transfers_v4.pdf

Unless the law has changed very recently, that's still the case. Maybe you know something I don't and I've just missed a change in the law...? More than happy to be put right if so.

dunstonh

2/ If I sign all the docs, and the preliminary advice shows the chance of success to be "99.9%" (his words) then it would go forward to the "underwriters" for the final decision which he says would be a rubber stamp. "Only one person has ever passed our preliminary advice then failed the full advice and that was because this person wasn't truthful"

forwarding to the "underwriters" suggests he isn't the one giving the advice.  unless he is a sales rep/FA and has to pass them to his compliance team or if he is an IFA and uses a third party for compliance.

3/ IF it does fail, I have to pay 4.5% of the pension.

Or go with someone cheaper.  £21k is pretty obscene.   £5k to £10k (closer to the latter nowadays) should be more ballpark target.

4/ I said if its so rare why doesn't his company cover the cost of such case. He said "FCA rules mean we can't".

Correct.  Contingency charging is banned by the FCA.

5/ If it succeeds I'll be paying 1.96% for 5 years before I can transfer out without penalty but it will be a "normal" DC scheme.

IFAs are not allowed to set up plans with back end charges.  So, this suggests you are speaking to an FA/sales rep.  St James place by any chance?

NOT an IFA but as I understand it a tied FA ("Chartered" he's keen on telling me).

Chartered is a qualification standard.   Only necessary for about 1% of advice.  Many advisers have some of the chartered modules but haven't gone the whole hog.   So, in your case, someone with the pensions module is all that is needed.

Re stakeholder I'd still need positive advice which is the problem. This way I'd get a tie in for 5 years then free to go wherever.

a)  if the advice is not to transfer, you can go to any scheme you like and the adviser is required to sign the advice disclosure.  the adviser cannot block it.
b) many schemes will not accept a transfer unless its in your best interests.   They are allowed to do that.
c) stakeholder pensions must accept a transfer and only require the adviser to sign the advice disclosure, which the adviser is required to do do.

My biggest worry is what if all the initial checks go though swimmingly but then when I finally need to sign, the (opaque) underwriters decide a transfer is not in in my interests.

The days of easy DB transfers is over because CETVs are around half what they were at their peak at the end of 2021.    They are now closer to their historic norms and the stats are around 1 in 10 being suitable for transfer.

Do you think you are in that 1 in 10 that is suitable to transfer or in the 9 in 10 that are not?

Unless the law has changed very recently, a stakeholder scheme has to accept transfers in from any other UK registered pension scheme, regardless of the advice. 

No change.  I think we are down to three stakeholder pensions open for business still.

ali_bear

michael1234 said:

:
:
4/ Any other tips/advice? 

Sounds like an awful situation. Makes me glad that my company set up a good and straightforward DC scheme with a large reputable company, low annual fees and a decent choice of investments. 

Can you talk to present and retired former colleagues about the scheme? Try talking to HR, tell them about your concerns. They may not have a solution but they should at least be trained in how to listen. Study the T&C's and the relevant regulations. And remember that sometimes when it comes down to it, doing nothing can be the best choice of action. 

Marcon

ali_bear said:

michael1234 said:

:
:
4/ Any other tips/advice? 

Sounds like an awful situation. Makes me glad that my company set up a good and straightforward DC scheme with a large reputable company, low annual fees and a decent choice of investments. 

Can you talk to present and retired former colleagues about the scheme? Try talking to HR, tell them about your concerns. They may not have a solution but they should at least be trained in how to listen. Study the T&C's and the relevant regulations. 

What's awful about it? All the hue and cry in recent years has been about DB schemes/DB sections of schemes being closed.

What would be the purpose of such conversations? The scheme rules are what they are, and can't be retrospectively amended just to make it easier for one member to transfer out - which they can do if they wish to, following the usual requirement to take advice where this is mandatory and then transferring to a stakeholder pension if the advice is to stay put.

Aretnap

michael1234 said:

Marcon said:

1. Why do you think transferring out constitutes success, when it might not be in the best financial interests of the client? Transfer values have fallen massively (in some cases halved) in the last couple of years.
2. Yes. Contingent charging was banned in 2020.
3. Why are you considering transferring to something which apparently 'locks you in' for five years?

Are you sure this individual is an independent financial adviser?

If you are determined to transfer come what may, then all you need to demonstrate to the ceding (paying) scheme is that you have received advice from a regulated adviser. You don't have to follow it and the scheme won't ask what it said.

The problem comes when trying to find a scheme willing to accept a transfer against advice - but that too can be overcome if you open a stakeholder (which you can do yourself; no need for an adviser to get involved).  Stakeholders must accept transfers in from any UK registered pension scheme. You'll still need to receive advice because the ceding scheme won't pay out unless you do. You can then arrange the transfer for yourself.

Re stakeholder I'd still need positive advice which is the problem. This way I'd get a tie in for 5 years then free to go wherever.

You wouldn't, as others have said a stakeholder pension is required by law to accept transfers provided there is no law which prevents the transfers from going ahead.

The law only requires you to take advice, not to follow it. The problem is that the overwhelming majority of pension providers will decline to accept your business if you are transferring having been advised not to, because they are worried about potential liability and bad publicity if you subsequently realise that it was a bad idea. A stakeholder pension, unlike other types of pension, does not have discretion to choose whether they want to accept the transfer or not.

If you are determined to transfer whatever happens then your best option is probably to find a pension transfer specialist who will charge a lower fee and open a stakeholder pension with one of the few providers who still offer them. This may well turn out to be a bad decision, but at least you won't have depleted your pension by paying 2-3 times the going rate for advice that you weren't going to follow anyway, then locked yourself into paying very high fees for the next 5 years. (1.96% is daylight robbery - is it St James' Place?)