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

michael1234

wjr4 said:

michael1234 said:

hyubh said:

michael1234 said:

Sorry just attached the personalised notes which I have a feeling get to the crux of what the DB pension is worth. Is the £6191 paid per annum or is it the total value?

£6191 p/a, with some level of inflation proofing, probably CPI up to 5%. Given the terminology used ('RST pension'), I would also expect a widow/er pension on death.

Even the former still seems a lot less than the DC?

On the information given, I imagine the fund value quoted in your other screenshot is not in addition to the DB benefits, but to fund them, or rather, to (ideally) fund a better version of them (i.e. the required annuity you mentioned earlier). This is a different scenario to a more contemporary notion of a hybrid pension (e.g. the modern USS - scheme for university lecturers), where the DB and DC parts are genuinely separate from each other.

I suggest your next step isn't hiring a financial advisor, but getting the scheme administrator to explain what your benefits in the scheme actually are. Only once you have that information should you even consider taking seriously that SJP glorified sales rep...

The DB element acts as an "underpin" which has been explained to me to mean that should the DC element be insufficient to provide the DB part (presumably this inflation proofed £6191) then it would be guaranteed that the pension would pay out at least the DB part.

You are correct about the widower pension which no doubt would make it even harder to transfer.

I have spoken at length to the pension administrator and it was they who referred me to this sjp person (!).

I am now thinking about the stakeholder pension and finding the best value transfer person I can as suggested by one or two others in this thread.

Not sure whether to string the sjp along until I see some initial advice or tell him now I don't want to go along with it.

Don’t string them along. Say their charges are too high and you’re going to see an IFA instead! 

My reasoning was not to p them off but because by going to the initial advice stage, it might give me a clearer view of whether or not I would be much worse off losing the DB underpin.

As it stands from this thread I think I'd be looking to see whether a DC pot of 500K is worth more than an inflation proof £6191 pa plus widow benefits. Isn't it pretty clear cut and are there any IFAs who would actually recommend the transfer IF indeed following their extensive analysis revealed it was a clear cut decision?

hyubh

michael1234 said:

hyubh said:

michael1234 said:

Sorry just attached the personalised notes which I have a feeling get to the crux of what the DB pension is worth. Is the £6191 paid per annum or is it the total value?

£6191 p/a, with some level of inflation proofing, probably CPI up to 5%. Given the terminology used ('RST pension'), I would also expect a widow/er pension on death.

Even the former still seems a lot less than the DC?

On the information given, I imagine the fund value quoted in your other screenshot is not in addition to the DB benefits, but to fund them, or rather, to (ideally) fund a better version of them (i.e. the required annuity you mentioned earlier). This is a different scenario to a more contemporary notion of a hybrid pension (e.g. the modern USS - scheme for university lecturers), where the DB and DC parts are genuinely separate from each other.

I suggest your next step isn't hiring a financial advisor, but getting the scheme administrator to explain what your benefits in the scheme actually are. Only once you have that information should you even consider taking seriously that SJP glorified sales rep...

The DB element acts as an "underpin" which has been explained to me to mean that should the DC element be insufficient to provide the DB part (presumably this inflation proofed £6191) then it would be guaranteed that the pension would pay out at least the DB part.

Yes - so when in a previous post you said, 'if you look at the front page of my pensionA (attached) held at mercer you might forgive the lay person for thinking that one pension dominates the other', that was rather overstating things given the 500K includes what it take to fund the DB part.

That said... roughly speaking current annuity rates would get you maybe three times the underpin with 500K. So the DB guarantee still isn't super great, on the face of, if there aren't any other guarantees attached.

Triumph13

This kind of hybrid scheme only really existed for one purpose and that was to avoid having to pay National Insurance.  Private DB schemes were contracted out of S2P / SERPS which came with an NI 'saving'.  When they wanted to close and convert to DC they would have lost that 'perk'.  The workaround was to create a DB underpin at the absolute minimum value allowed within the contracting out rules.  There was never any realistic expectation that these underpins would actually be triggered as it was so unlikely they would ever be better than just buying an annuity.

I'm not sure exactly what the rules are in this situation, and how much comes down to how the scheme is worded and how helpful your employer is, but I can share my own experience as a member of a similar scheme, although with a larger legacy DB component.  I left the DB part alone and did a partial transfer in 2021 of the DC section with the underpin.  I was able to do this to a normal SIPP and without any advice at all on the basis that the transferring scheme confirmed that the reference scheme test only gets triggered if the value of the DC funds was so low that I would be better off with the underpin.  As it was nowhere near that, it could be treated as a normal DC transfer.

As I say, your scheme may be worded differently, or the rules might have changed, but it is quite possible that it is only that £54 pa DB bit that is causing you problems.  I would suggest contacting the scheme and asking if it is possible to do a partial transfer of just the DC section, leaving the DB where it is, and whether such a transfer would require advice or not.

dunstonh

I'm not sure exactly what the rules are in this situation, and how much comes down to how the scheme is worded and how helpful your employer is, but I can share my own experience as a member of a similar scheme, although with a larger legacy DB component. 

If the DC element has a final salary underpin, then it is a safeguarded benefit and requires a PTS to give advice.   Any segment that has no underpin or safeguarded benefit is free to be transferred without advice.   The £30k rule would also apply if there is an underpin.

michael1234

Triumph13 said:

This kind of hybrid scheme only really existed for one purpose and that was to avoid having to pay National Insurance.  Private DB schemes were contracted out of S2P / SERPS which came with an NI 'saving'.  When they wanted to close and convert to DC they would have lost that 'perk'.  The workaround was to create a DB underpin at the absolute minimum value allowed within the contracting out rules.  There was never any realistic expectation that these underpins would actually be triggered as it was so unlikely they would ever be better than just buying an annuity.

I'm not sure exactly what the rules are in this situation, and how much comes down to how the scheme is worded and how helpful your employer is, but I can share my own experience as a member of a similar scheme, although with a larger legacy DB component.  I left the DB part alone and did a partial transfer in 2021 of the DC section with the underpin.  I was able to do this to a normal SIPP and without any advice at all on the basis that the transferring scheme confirmed that the reference scheme test only gets triggered if the value of the DC funds was so low that I would be better off with the underpin.  As it was nowhere near that, it could be treated as a normal DC transfer.

As I say, your scheme may be worded differently, or the rules might have changed, but it is quite possible that it is only that £54 pa DB bit that is causing you problems.  I would suggest contacting the scheme and asking if it is possible to do a partial transfer of just the DC section, leaving the DB where it is, and whether such a transfer would require advice or not.

That is  clearly very well informed comment and thank you so much for providing some "colour" on the situation.

I would say my former employer's pension scheme admin team are responsive and seemingly helpful but they have told me I cannot split the pension up and just transfer out the DC. They were also the ones to "recommend" sjp.

I am now quite confused about the £54 vs £6K pa. It does strike me as odd that the front page (screenshot above) shows the DB as being £54 per anum but the relevant text (also screenshotted above) shows 6K. As far as I know after about 1997, I was paying 100% of my contributions into the DC but that would appear to contradict the text.

Perhaps a simple question to the administrators to ask if my underpin is £54 or 6K pa would be in order? I have a feeling they will then start to confuse me more talking about my pre and post 1997 Main Account when I want to know what it is worth now in 2024.

As has been said above though, even 6K would appear to be significantly less than what a DC of 500K could buy (18K plus or minus).

If it turns out to be the trivial £54, would most IFAs give positive transfer "advice" or would they simply not touch a DB transfer? Any recommended way to find an honest one (i.e. not a salesman) who's rates are reasonable short of calling up 20 of them ?

xylophone

https://www.linkedin.com/pulse/dc-schemes-contracted-out-rst-basis-dave-king

may be of interest.

OP, when you joined the company in (year?), was the only scheme on offer a pure DB Contracted Out Salary Related Scheme?

You joined immediately?

If so, how long exactly were you a member of this scheme?

Are you saying that it closed to further accrual 5/4/97?

This scheme must pay you your GMP (£54 revalued at Fixed Rate of 4.5% to age 65) when you reach 65 in (when)?

You were then enrolled in the new scheme from 6/4/97 to (when?)?

This  new scheme was a DC Scheme contracted out on the RST basis?

The value of the RST benefit  AT THE DATE YOU LEFT THE SCHEME (when?) was £6,191.64 and this will revalue  "broadly  b in

line with inflation" until NRA of the Scheme (65?) ?

https://assets.publishing.service.gov.uk/media/5a80b577ed915d74e33fbf54/pension-benefits-with-a-guarantee-factsheet-jan-2016.pdf

You might try https://adviserbook.co.uk/ to find an Independent Financial Adviser with Pension Transfer Specialist qualification. should

you decide you need one.

You would tick "confirmed independent","pension transfer"  and other options required when the menu comes up.

Have you obtained a state pension forecast?

Marcon

michael1234 said:

I would say my former employer's pension scheme admin team are responsive and seemingly helpful but they have told me I cannot split the pension up and just transfer out the DC. They were also the ones to "recommend" sjp.



If it turns out to be the trivial £54, would most IFAs give positive transfer "advice" or would they simply not touch a DB transfer? Any recommended way to find an honest one (i.e. not a salesman) who's rates are reasonable short of calling up 20 of them ?

You can't do a partial transfer, so you need to consider your pension benefits as a whole.

This thread is dragging on without getting anywhere conclusive - and your transfer might be dropping in the meantime...who knows?

Maybe now's the time to get 'abridged' advice. That will be much cheaper than full advice, but can only give one of two answers: 'no' or 'possibly, but will need further investigation' - so can't be used to get the magical Section 48 certificate which would enable your current scheme to transfer out your funds if you decide that's what you want. If you want to proceed to full advice, the cost will be reduced by what you've already paid for abridged advice (if you use the same adviser, obviously!).

For help in finding an IFA see https://www.moneysavingexpert.com/savings/best-financial-advisers/

You need one who has FCA permission to advise on DB transfers. Others IFAs won't touch them because they don't have the necessary permission to do so.

For reasons I've explained earlier, it doesn't matter whether the advice is positive or negative (although if the latter you'd do well to listen before jumping regardless); you can still transfer once you've received the necessary advice.

michael1234

Despite its growing length, this thread is probably the most useful and possibly turn out to be the most "money saving" advice I've ever received. So thank you to everyone who has provided pieces of the jigsaw so far.

I am sure this would help at least the 1000 people or so in my direct position at the same company should any of them see this in the future.

I don't believe though it has concluded and once I digest the latest few posts I'll know doubt have a question or two more to ask so apologies in advance although of course answering is obviously only at your kind discretion.

Starting to think I need to pay an hourly rate for someone to read my current pension (3 pages I think) and give highly informal advice on how I could proceed. Would I be laughed out the door if I thought a few hundred quid might be enough? Maybe abridged advice might give me that kind of insight?

P.S. I've gone from 50:50 to 99.99% in favour of dropping sjp (the 0.01 comes from the fact that arn't the varous FAs working for totally different independent companies so maybe some are better than others..)

Bostonerimus1

I would not trust anyone who was directing me towards SJP and I would want to find my own advisor who was truly independent who would look at my whole finances. If you have ISAs, GIAs etc an annuity might be a good diversifier to your retirement portfolio. I know my DB pension/annuity is very welcome when the cheque shows up every month, particularly when the stock market is down 20%.

Triumph13

dunstonh said:

I'm not sure exactly what the rules are in this situation, and how much comes down to how the scheme is worded and how helpful your employer is, but I can share my own experience as a member of a similar scheme, although with a larger legacy DB component. 

If the DC element has a final salary underpin, then it is a safeguarded benefit and requires a PTS to give advice.   Any segment that has no underpin or safeguarded benefit is free to be transferred without advice.   The £30k rule would also apply if there is an underpin.

I think my scheme must have had some very crafty wording in it.  They managed to structure it in such a way that the underpin only came into existence if certain conditions were met.  As they weren't met, I could transfer without advice.  From memory I had >£200k in this section.  I was very surprised myself at the time.  Not much help to OP though!

OP, if your pension doesn't allow partial transfers, then it looks like your only sensible route if you are sure you want to transfer would be the stakeholder pension one.  Whilst second guessing the budget is not generally a sensible idea, in your case I would be very tempted indeed to just quickly open a stakeholder pension with a minimal contribution (£100?) as that would be a very minimal downside risk.