Pension Sharing Order and Drawdown Pension

Albermarle

Phoenix9999 said:

Thank you for the comments.  My husbands pension has a CET aule of £500,011 and I have been awarded 47% of that, so quite a good sum.  I thought that 2.3% for advice and the admin of actually transferring the pension is a bit hefty but wanted to know if it was normal or not.  

I have been told that a I cant leave the pension with Mercer, the fina salary scheme administrator.  I guess it’s not in their interests if they can make me take it elsewhere.  In any case, now that I’m 72 and have cash money to use for the next five years, I would rather put it in a drawdown and hopefully leave it untouched to grow a bit more.

on that point, is Aviva a good platform for me to take a cautious to middle pathway with? All three IFAs that I have spoken to mention them as their preferred platform.  

Thank you so much for all the helpful advice.
Best Lynda

Be aware that the platform is much less important than the investments chosen for the pension to be held on the platform.
IFA's will have preferred platforms that they use for other clients, I would not worry about this point too much as it is the IFA who will be handling most of the communication with them.
More importantly the IFA will pick some investments that suit your objectives for the money and your personality/risk appetite. It is how these investments perform that is important, regardless of which platform they are held on. 

Once the money has transferred, you may wish to consider at some point in the future, managing your own pension, rather than have an IFA do it for you. There are pros and cons to both ways.

gm0

Regrettably the transfer of DB over 30k likely triggers the "must have advice legislation".  Your situation being doubly forced in that you are being taken down the CETV route rather than made a scheme member and paid the (share) of DB pension - which is likely a superior outcome with indexation.  Especially now CETVs have fallen again with rising interest rates from the QE era.

The "cheapest" outcome for you to end up with your 250k in drawdown is via transactional advice from an IFA with the right permissions for DB pension transfer - you end up in a low cost SIPP equivalent and not an expensive wealth managment tied FA solution.  And then they leave.  No 0.5% per year.  Just the "do this for me charge". 

A low cost drawdown pension albeit IFA introduced but not requiring ongoing advice to remain in it.  Some Aegon products are like this.  There are many.  So an adviser *can* put you somewhere which is not tied to them or to a model where you are locked into having ongoing advice.  Or have to transfer again. Signing up to a DIY SIPP and issuing the pull away.  Whether they will ensure it's that flexible unprompted......or prefer to.....is a different question.  IFAs are not saints.  Even if FAs are sinners.  Service for a fee.  Tie in and inertia factors are good.

In transactional version they get paid an agreed fee to do the DB to DC suitability advice (given lack of choice to access it otherwise this seems fairly uncontroversial and then to do the admin for the transfer.  But a customer is still a customer on the count for their PI insurance.  So it won't be cheap. DB to DC isn't. 2.3% on 250k is about 6k which sounds in the ballpark for this now deeply unloved transaction.

Don't get scalped with an uncapped %  of pot though.  Buying advice for DB/DC at this point are forced buyers of it. And get treated accordingly.  Partly but not only because giving the advice now carries a lifetime huge risk of missselling being declared later. And so insuring that lifetime liability is also mandated.  Rather than self-insure and hold it in a "foldable" shoddy limited advice company - this is now - very expensive.  A chunk of that 6k will go to the insurer.  Not the adviser.  Even though you are being forced to do it.  Unintended consequences of prior actions by FCA. 

The product should cost about 0.3% or so for any product/platform fee and fund management charges.  The advice will likely cost 0.5% (as an ongoing pa) for 250k.  The approx 6k going in doesn't look unusual to me based on forum discussion though I have not been shopping for this myself recently.

Advisers will prefer to act with an ongoing service and so may be tricky to find transacitonally.  Preferring a come to my suggested platform and take advice transaction.  Understandably. 

So it may be necessary to hire one on that basis.  Being careful not to sign a long term contract.  To insist the target product is not adviser introduced exclusive. So that you can keep the product or not  as you choose - with and without the adivser depending on your satisfaction with their services.  That is an objective you can feed into the fact find. And which they are obliged to take into account in making a suitable recommendation.

Then keep or dump ongoing advice as you choose when you are confident with it.

dunstonh

Regrettably the transfer of DB over 30k likely triggers the "must have advice legislation".  

Where the existing scheme cannot take on the ex-spouse as a member, then it does not require a PTS to transfer.   
It does not need an adviser if the ex-spouse stays with the existing scheme.
if the existing scheme can take on the ex-spouse as a member and then does so but then wants to transfer then it does require a PTS to transfer. 

A low cost drawdown pension albeit IFA introduced but not requiring ongoing advice to remain in it.  Some Aegon products are like this

Putting someone on Aegon would just be cruel.

sandsy

Who told you that you have to take advice? That's simply not true. 

With pension sharing order, your share of the funds is not a transfer value but something called a 'pension credit'. No advice is required when deciding what to do with it. This is the case whether you:
a) are able to become a member of your ex's DB scheme in your own right, or
b) move it to any other pension of your choice. 

Of course, you can choose to take advice if you want but you don't need an adviser who is a pension transfer specialist.

For anyone of a technical bent, the FCA confirmed this in FG21/3 (para 2.6)

gm0

Ah another learning day

>Where the existing scheme cannot take on the ex-spouse as a member, then it does not require a PTS to transfer.   
>It does not need an adviser if the ex-spouse stays with the existing scheme.
>if the existing scheme can take on the ex-spouse as a member and then does so but then wants to transfer then it >does require a PTS to transfer.

I am sure helpful IFA dunstonh knows more about this.  Amazing.  Another win for simplicity and ease of consumer understanding in pensions rules.  Do I need X.  Yes but also no and also then again yes.

Just as well pension credit on divorce is such a rare transaction.  Wouldn't be helpful to make it complicated for things which happen a lot.