Cost to transfer a 260k pension

Linton

To give some historic background:

As I understand it...... 

Originally DB transfers were permitted if the pension scheme trustees agreed.  However very few people did so because the the only practical option was to buy an annuity with the money and the scheme benefits were in most cases much better than could be obtained commercially.  So the facility was mainly of use to people with terminal illnesses or other similarly very good reasons to access the money.

When the 2015 pension freedom laws were were being debated in parliament the MP committee scrutenising the legislation were very concerned that people with DB pensions with no experience of managing serious amounts of money could now  sell their future income to get a lump sum of £100ks, buy themselves a Lamborghini and then live off the state.  The committee wanted some way of preventing this happening. However the government wanted to stick to the pension freedom policy.  

The rather fudged compromise was that people wanting to transfer should be given advice as to whether a transfer was in their financial best interest. The DB pensioner could then make their own decision. The pension trustees were not able to provide the advice and did not want to put themselves in the position of potentially being sued.  The platforms similarly were not interested.  That left the regulated IFAs as the only people who had the knowledge and the insurance backing who could do the job the MPs wanted doing.

A few years ago when DB transfers against advice were easier there was a case where the IFA advised his client not to transfer.  However the client knew better, did transfer, and made a large loss.  He raised a complaint against the IFA and won compensation for his losses on the grounds that the advice not to transfer was insufficiently strong.  

This leads to the current position.  Most IFAs dont want to, and dont need to, take on the risks of advising on DB transfers.  Those that do want to be appropriately paid. The PI companies charge what they consider to be rates compatible with the risk, and the platforms want to steer well clear of getting involved.

Cobbler_tone

Thanks Linton, good post.
It'd be interesting to read that ruling where advice was given not to transfer and what changes have been made since to add protection. The devil is in the detail. 

Silvertabby

The 'Pension Freedoms' were intended to give those with DC pensions more control over their money, rather than being limited to old fashioned annuities.  I doubt that much thought was given to DB holders wanting to jump on to the bandwagon because - hey, who would want to dip out of a so-called gold plated final salary pension?

In the days following the announcement we in the LGPS were swamped with calls from current and deferred members wanting to access 'their' money.  Many assumed that we could just transfer the cash values straight to their bank accounts, and got stroppy when we said that wasn't going to happen. Those to whom the prospect of getting their hands on several £Ks seemed to think they were in line for the equivalent of a lottery win, and we heard many tales of daughter's wedding/big family holiday/new car etc.  

Then the new 'Pensions Advice' firms started popping up from the woodwork, all willing and able to recommend a transfer out to a private (cash it in now) pension fund of their choosing.  It was so bad the non-funded public sector schemes put a block on transfers out to DC schemes (cue lots of booing) but the LGPS, being funded, had to keep running.  If I only had a tenner for all the Scorpion leaflets I printed off in response to initial transfer out requests......

But still the transfers out continued, including current members who had to opt out of the scheme before the transfer could even start.

At the time, my then colleagues and I gave it 10 years before the brown stuff hit the fan and people would start complaining about their 'losses'.  The clock is ticking....

wjr4

Cobbler_tone said:

wjr4 said:

Cobbler_tone said:

Sarahspangles said:

Cobbler_tone said:

Silvertabby said:

Cobbler_tone said:

You should be able to source free abridged advice, who may well advise you not to pursue and then it won't cost you anything.

Beware of 'free' advice from someone who would only recommend a transfer into a scheme that they work for....

Abridged advice won’t do that. They’ll either say “you shouldn’t transfer” or more likely “you need full advice”. If anyone then offers full advice for peanuts then run! 

I personally think the whole thing is a scam because if someone is switched on they could do most of it on their own, at least to the point of making an informed decision. The IFA’s have certainly turned it into a big money maker.

Here’s an example of thousands of people being compensated for receiving poor advice to transfer out of their DB scheme. In the first place, the advisor can be pursued to pay the compensation. It’s no wonder their insurance is so expensive. Some advisors have gone out of business, in which case FSCS steps in - which we all pay a bit towards, through a levy on what could otherwise be a bit more interest. Presumably it’s the end of those advisors’ careers too.

Many of the affected future pensioners were fixated on getting their hands on the CETV, through a poor understanding of factors like inflation and risk. They just saw a big number.

https://www.bbc.com/news/uk-wales-60937629

Those who received 'unsuitable advice'.
It is pretty clear for me. There is literature in every pension comms warning of pension scams. Then I am sure there are some really poor regulated IFA's, the nature of any industry.
I am sure all of the basics should be covered off. 'take it out and once it has gone it's gone', 'most investments can go up and down'. Then I am sure there are scenarios where people categorically should be advised not to transfer but may not be.
Ultimately if you are being charged 5 figures you should have the confidence that you are fully informed and have the appropriate protection if you are genuinely 'stitched up'. 
If it is a case of someone taking their money and spending it on cars, holidays, shopping sprees etc, I doubt if they would have much to complain about if the correct processes are followed.

Sounds as though regulations may need looking at as the idea of allowing flexibility was introduced to enable exactly that. Maybe all DB schemes should be regulated to allow a bridging option, which allows that flexibility in a more structured and protected way using the available fund. Then the ability to transfer could be reviewed.

You sound very similar to another person who hates financial advisers. 

Now that is a misguided observation.

I respect anyone in any industry that does a good, honest job....even estate agents, although they are harder to find! What maybe is misguided (or lacking appreciation) is the work and associated cost involved in providing advice in this area.  
I've used the same FA for the past 30 years. He lives in a mansion and drives a fast sports car, got the gift of the gab but I trust him and I certainly trust him not to sell me something I don't need. I have always been shown any commission being earnt and the pros/cons of any products I have used over the years. If I have the confidence to source and do something myself I do so, finding that you need them less as you become more experienced.
e.g. most people can negotiate their own mortgage these days without an advisor if they so wish.
 
If you are suggesting that some IFA's are not 'bad eggs' (or at a minimum give poor advice) then I think that IS misguided! It would be like saying all police officers are law abiding citizens, it's just the nature of any occupational demographic.

As for the point 4) from Dunstonh, if IFA's and firms want to play in this area, you would hope and expect that they have a belt and braces approach. I'd imagine this includes building in protection against everything which constitutes being misold...which would no doubt be a rolling live process. Again, justifying some of the high costs.

That’s your fault for choosing a FA who is rich, not all FA/IFAs are. Most just live normal lives and like to help people. 

Commission stopped a long time ago, so in that sentence you’ve already messed up your knowledge.

It gets pretty boring seeing the same comments on this forum. 

FIREDreamer

wjr4 said:

Cobbler_tone said:

wjr4 said:

Cobbler_tone said:

Sarahspangles said:

Cobbler_tone said:

Silvertabby said:

Cobbler_tone said:

You should be able to source free abridged advice, who may well advise you not to pursue and then it won't cost you anything.

Beware of 'free' advice from someone who would only recommend a transfer into a scheme that they work for....

Abridged advice won’t do that. They’ll either say “you shouldn’t transfer” or more likely “you need full advice”. If anyone then offers full advice for peanuts then run! 

I personally think the whole thing is a scam because if someone is switched on they could do most of it on their own, at least to the point of making an informed decision. The IFA’s have certainly turned it into a big money maker.

Here’s an example of thousands of people being compensated for receiving poor advice to transfer out of their DB scheme. In the first place, the advisor can be pursued to pay the compensation. It’s no wonder their insurance is so expensive. Some advisors have gone out of business, in which case FSCS steps in - which we all pay a bit towards, through a levy on what could otherwise be a bit more interest. Presumably it’s the end of those advisors’ careers too.

Many of the affected future pensioners were fixated on getting their hands on the CETV, through a poor understanding of factors like inflation and risk. They just saw a big number.

https://www.bbc.com/news/uk-wales-60937629

Those who received 'unsuitable advice'.
It is pretty clear for me. There is literature in every pension comms warning of pension scams. Then I am sure there are some really poor regulated IFA's, the nature of any industry.
I am sure all of the basics should be covered off. 'take it out and once it has gone it's gone', 'most investments can go up and down'. Then I am sure there are scenarios where people categorically should be advised not to transfer but may not be.
Ultimately if you are being charged 5 figures you should have the confidence that you are fully informed and have the appropriate protection if you are genuinely 'stitched up'. 
If it is a case of someone taking their money and spending it on cars, holidays, shopping sprees etc, I doubt if they would have much to complain about if the correct processes are followed.

Sounds as though regulations may need looking at as the idea of allowing flexibility was introduced to enable exactly that. Maybe all DB schemes should be regulated to allow a bridging option, which allows that flexibility in a more structured and protected way using the available fund. Then the ability to transfer could be reviewed.

You sound very similar to another person who hates financial advisers. 

Now that is a misguided observation.

I respect anyone in any industry that does a good, honest job....even estate agents, although they are harder to find! What maybe is misguided (or lacking appreciation) is the work and associated cost involved in providing advice in this area.  
I've used the same FA for the past 30 years. He lives in a mansion and drives a fast sports car, got the gift of the gab but I trust him and I certainly trust him not to sell me something I don't need. I have always been shown any commission being earnt and the pros/cons of any products I have used over the years. If I have the confidence to source and do something myself I do so, finding that you need them less as you become more experienced.
e.g. most people can negotiate their own mortgage these days without an advisor if they so wish.
 
If you are suggesting that some IFA's are not 'bad eggs' (or at a minimum give poor advice) then I think that IS misguided! It would be like saying all police officers are law abiding citizens, it's just the nature of any occupational demographic.

As for the point 4) from Dunstonh, if IFA's and firms want to play in this area, you would hope and expect that they have a belt and braces approach. I'd imagine this includes building in protection against everything which constitutes being misold...which would no doubt be a rolling live process. Again, justifying some of the high costs.

That’s your fault for choosing a FA who is rich, not all FA/IFAs are. Most just live normal lives and like to help people. 

Commission stopped a long time ago, so in that sentence you’ve already messed up your knowledge.

It gets pretty boring seeing the same comments on this forum. 

Do you think he might be talking cobblers?

Cobbler_tone

Fault? Who mentioned fault?
Some proper 'Karen's' on here. I didn't realise it was the IFA's old boys society 

So a successful, wealthy, FA who gives good advice is now the target. As for commission, it shows how long since I've needed him.  
Anyway, a couple of nice little digs as opposed to the valid question:
It'd be interesting to read that ruling where advice was given not to transfer and what changes have been made since to add protection.

Just sounds as though some IFA's need to get their houses in order to me.

dunstonh

So a successful, wealthy, FA who gives good advice is now the target. As for commission, it shows how long since I've needed him.  

If you haven't used him in 12 years, is he really your FA?

It'd be interesting to read that ruling where advice was given not to transfer and what changes have been made since to add protection.

It does exist and the ruling was by the FOS.   The individual was considered to be of lower intelligence and the warnings about not doing it were not considered to be worded strongly enough.  To be fair, I think it was the right decision for that particular complaint.   Finding it wont be easy as the FOS search filters are rubbish.

However, the Barclays one, where a self-directed investor complained that Barclays let him do a transaction himself without stopping him, was bizarre.

Just sounds as though some IFA's need to get their houses in order to me.

IFAs account for just a few thousand complaints a year at the FOS.  Over 80% of IFAs have never had a complaint with the FOS.      It is FAs that dominate the advice complaints stats along with firms that set up to take advantage of lax regulation and oversight before being caught and then phoenix into a new company (something the FCA finally actively prevents - 15 years or so too late).       As remarked earlier, nobody can claim perfection as that doesn't exist in any profession.  However, wherever there has or still is (indirectly) sales pressure, bad things can happen.  So, if you avoid the sales based FAs then you are halfway there.

Cobbler_tone

Thanks dunstonh,
You are right about 'my' FA, although I believe he is still going. I guess the market and need for such services has changed dramatically since the ability to self service...I mean, there was a time we used to go into an office to get car insurance, or ring them up. 

You would hope that good, honest and well meaning advisors are protected from come backs if people make frivolous decisions after the appropriate advice, especially if implicitly warned against something. I would certainly never begrudge anyone who makes a good living doing it well either. I'd imagine a tip top one is worth their weight in gold, even if gold isn't the wisest short term investment. 

Here is to everyone avoiding the sharks and enjoying a long, happy and healthy retirement.