DB Transfer 'extortion' ?!

WoodForTheTrees123

Albermarle said:

• Some advisors (whittling this down again!) MAY offer a 'Customer Override' process whereby "if the customer (my wife) acknowledges that the advice is to not withdraw however the customer states that they understand this but still want to go ahead", they may be able to start a new process for that"

Just to expand on this part.
If the advisor does not recommend the transfer out ( which seems highly likely), you can still transfer as an 'insistent client' . The only legal requirement is that you go through the process, and if the answer is 'not recommended' you can still transfer the DB out. The DB scheme should be OK as long as you can get proof from the advisor that you have been through the appropriate process. Normally the DB schemes are very happy to get the liability off their books. ( which tells you something)

The issue is that hardly any retail ( dealing with the public) DC pension providers, will accept a transfer from an insistent client. There used to be a few and now there are only two? outdated stakeholder schemes that by the way they are set up are forced to accept transfers ( not sure for how much longer) .
I think some advisors have access to some smaller pension providers who may accept certain insistent clients. I presume this is what your advisor was referring to . It is almost certain they will want to charge another hefty fee for doing this .

Very interesting thoughts there Albermarle - Thanks

Marcon

MarkTorquay said:

Marcon said:

MarkTorquay said:

Marcon said:

MarkTorquay said:

Hi Hoenir - Not sure - I'll see if it's on the Pension Portal and/or the documents and will let you know ...

Which is precisely why advice is a requirement - to stop people making blind decisions based on little or no understanding of what they are giving up (and then trying to find someone to blame!).

Wow "to stop people making blind decisions based on little or no understanding of what they are giving up" - I had not realised that anybody is aware of our personal circumstances - Just throw a blanket over "the right decision", bound to fit everybody.... And to go through the whole process to end up with our override, because we know and understand (only us to blame!) what we want to do and why - is that not farcical ?

Your adviser is required to ensure they are, and give advice on that basis.

If your wife chooses to disregard it, so be it - but based on your first and second posts on this thread, you've already made your decision without understanding what the scheme offers, so might perhaps take note of any advice she receives before summarily dismissing it.

Thanks Marcon - I'm now actually swinging towards listening to what the advice will be ! (it's piqued my interest at least!)  I still believe we'd end up with our 'override' however perhaps I'm wrong pending said advice ! We shall see - I will pop back here to post what may happen ! If we do indeed end up overriding (god - sounds like that in itself may be a challenge to find somebody who may consider it !?!?!), I will then go back to my rant of having to go through the whole painful and costly process. If i'm proved wrong - I will eat humble pie and acquiesce...

I take my hat off to you. It's never easy to back down, even more so on a public forum! Forget the insistent client route being described above. There's nothing wrong with transferring to a stakeholder (Aviva and Standard Life remain open to retail business, meaning your wife can open one for herself with no adviser involvement or fee), especially those which now permit drawdown, although fund choices and online functionality are often limited. If that's the case, all your wife has to do is transfer into, and then out, of the stakeholder (there are no exit charges, and no advice required to transfer from a stakeholder - it's a defined contribution scheme) to her preferred choice of personal pension.

Copying from an answer I posted on another thread a few months ago:

Facts:

1. Advisers have never been the spoilsport 'gatekeepers' as they have often been portrayed, particularly on this site. They have been hamstrung by increasingly onerous FCA strictures and crippling PI insurance costs, which is why so many of them have relinquished their FCA permissions to advise on transfers from DB schemes.
2. When full advice has been given, the adviser must sign the necessary confirmation they have done so - known as a Section 48 certificate.
3. If someone has received full (as opposed to abridged) advice, and they have a statutory right to a transfer from a scheme with safeguarded benefits, the transfer can normally proceed whatever the advice says, provided the receiving scheme will accept the transfer. The exception is where the trustees of the ceding (paying) scheme identify certain risk factors in the proposed receiving scheme, in which case the transfer may be delayed or blocked to help protect members from falling victim to a scam.
4. Stakeholder pensions must accept any transfer from a UK registered pension scheme. That has been the position since stakeholders were introduced over 20 years ago, was confirmed in the 2015 Treasury consultation and remains the case still.
5. At the time of writing there are stakeholder providers open to new retail business. An individual can therefore apply direct to the provider to open one - easy to do by post, with a cheque for £16. They can then arrange their own transfer (with no adviser involvement beyond the provision of a Section 48 certificate, which enables the DB scheme to pay out the transfer - so no need for any 'insistent client' process). Given the tight timeframes involved with DB transfers, it makes sense to have the stakeholder pension set up before beginning the process.

None of the above is to suggest that transferring is necessarily a good idea...if you've paid for advice, it might make sense to pay heed to it!

Marcon

molerat said:

The problem is that if it all goes wrong you will be looking for someone to blame and get your compensation from, part of that high cost is for the advisor's insurance for when you sue them.  You say you won't, and even sign a waiver to that effect, but once you see the "Where there's blame (even though it is all your fault) there's a claim" scammer adverts you might change your mind. And once you have got that negative recommendation you have got to find someone who will take that money, they could also be on the hook for your litigation.

Not if they're a stakeholder. The law gives them no choice but to accept the transfer, which tends to be quite a good defence if sued for having the temerity to accept a transfer in!

WoodForTheTrees123

Marcon said:

MarkTorquay said:

Marcon said:

MarkTorquay said:

Marcon said:

MarkTorquay said:

Hi Hoenir - Not sure - I'll see if it's on the Pension Portal and/or the documents and will let you know ...

Which is precisely why advice is a requirement - to stop people making blind decisions based on little or no understanding of what they are giving up (and then trying to find someone to blame!).

Wow "to stop people making blind decisions based on little or no understanding of what they are giving up" - I had not realised that anybody is aware of our personal circumstances - Just throw a blanket over "the right decision", bound to fit everybody.... And to go through the whole process to end up with our override, because we know and understand (only us to blame!) what we want to do and why - is that not farcical ?

Your adviser is required to ensure they are, and give advice on that basis.

If your wife chooses to disregard it, so be it - but based on your first and second posts on this thread, you've already made your decision without understanding what the scheme offers, so might perhaps take note of any advice she receives before summarily dismissing it.

Thanks Marcon - I'm now actually swinging towards listening to what the advice will be ! (it's piqued my interest at least!)  I still believe we'd end up with our 'override' however perhaps I'm wrong pending said advice ! We shall see - I will pop back here to post what may happen ! If we do indeed end up overriding (god - sounds like that in itself may be a challenge to find somebody who may consider it !?!?!), I will then go back to my rant of having to go through the whole painful and costly process. If i'm proved wrong - I will eat humble pie and acquiesce...

I take my hat off to you. It's never easy to back down, even more so on a public forum! Forget the insistent client route being described above. There's nothing wrong with transferring to a stakeholder (Aviva and Standard Life remain open to retail business, meaning your wife can open one for herself with no adviser involvement or fee), especially those which now permit drawdown, although fund choices and online functionality are often limited. If that's the case, all your wife has to do is transfer into, and then out, of the stakeholder (there are no exit charges, and no advice required to transfer from a stakeholder - it's a defined contribution scheme) to her preferred choice of personal pension.

Copying from an answer I posted on another thread a few months ago:

Facts:

1. Advisers have never been the spoilsport 'gatekeepers' as they have often been portrayed, particularly on this site. They have been hamstrung by increasingly onerous FCA strictures and crippling PI insurance costs, which is why so many of them have relinquished their FCA permissions to advise on transfers from DB schemes.
2. When full advice has been given, the adviser must sign the necessary confirmation they have done so - known as a Section 48 certificate.
3. If someone has received full (as opposed to abridged) advice, and they have a statutory right to a transfer from a scheme with safeguarded benefits, the transfer can normally proceed whatever the advice says, provided the receiving scheme will accept the transfer. The exception is where the trustees of the ceding (paying) scheme identify certain risk factors in the proposed receiving scheme, in which case the transfer may be delayed or blocked to help protect members from falling victim to a scam.
4. Stakeholder pensions must accept any transfer from a UK registered pension scheme. That has been the position since stakeholders were introduced over 20 years ago, was confirmed in the 2015 Treasury consultation and remains the case still.
5. At the time of writing there are stakeholder providers open to new retail business. An individual can therefore apply direct to the provider to open one - easy to do by post, with a cheque for £16. They can then arrange their own transfer (with no adviser involvement beyond the provision of a Section 48 certificate, which enables the DB scheme to pay out the transfer - so no need for any 'insistent client' process). Given the tight timeframes involved with DB transfers, it makes sense to have the stakeholder pension set up before beginning the process.

None of the above is to suggest that transferring is necessarily a good idea...if you've paid for advice, it might make sense to pay heed to it!

Hmmmm..... most interesting indeed !  Thanks again Marcon - Food (and study) for thought...

NoMore

Your wife currently has a magic money tree that will pay out every month at retirement £x with possibly a tax free one off lump sum of £y. With a inflation increase every year, this magic money tree will pay out until your wife's death. It may even still continue to pay out a reduced income to you for the rest of your life, if you outlive her.

The 50k is what they are offering to buy the magic money tree off you. You need to look at the values of £x and £y and then at least see if you think its worth selling for £50k.

This is what people mean when they say you don't have a pot of 50k that's yours, you have an asset that somebody wants to buy off you for £50k, A IFA is there to help you judge if its worth it. I know its annoying that you have to go legal hoops to sell it, but its because the government has recognised that people are really bad at valuing jam today vs jam tomorrow.

The problem is if you don't have an up to date statement, then its hard to find the values of x and y as since the last statement you have, each year it will have been uprated by inflation in someway. So don't just go its only £50 (example)  a month from a 1990 statement, that's an easy sell for 50k, it would pay out more each month now.

I hope this doesn't come across as condescending, it doesn't mean to.

badmemory

There is of course another way to view this.  If you are looking to put this into drawdown as otherwise why take it out of a DB pension.  So this is a decision regularly on how much to withdraw each month/year.  What happens when that person starts to have issues & people don't realise & then it all goes pear shaped especially if that person has also been widowed.  This is obviously more a practical issue than a financial one.

Cobbler_tone

I would call it a magic money tree. My ‘magic money tree’ was an investment of around £150k over the past 25 years. Great investment but not a freebie.

Pat38493

As stated above you need to make sure you have a current up to date CETV (cash equivalent transfer value) - if the value comes from an automated website or suchlike it's probably wrong and you need to specifically ask them to issue a CETV statement.

Before paying 4K to an adviser, it may be a lot cheaper in the long run to do some more research on the value of DB pensions - find out what the pension is actually worth in real terms depending on how long your wife lives for.  A lot of people look at it and ee something like £3K a year or whatever and think - that is nothing I might as well cash it in - what they forget is that the £3K (example figure) is usually uprated with inflation (albeit sometimes with a cap), and that this pays out no matter how long you live.  The long term value of that is quite big if you live for another 30 or even 40 years

Also as otheres mentioned, many DB pensions come with the option of a tax free lump sum at the start in return for a reduction in the annual payment - e.g. it might be 15K in return for a £1K reduction per year of pension (again just example figures each pension will have different rules and reductions).

Finally - I would assume that since you say this is your wife's pension in her name, if you do decide to take advice the IFA will for sure want to discuss it with your wife as technically it is her decision not yours (even though you are married and may in practicality make he decision together, legally it's her decision).

german_keeper

I'm with Marcon, very refreshing to see a poster accepting different viewpoints, usually people get illogically entrenched despite very useful well intended help from others.

The only thing I would add is that I don't think it is wise to look at an individual pension in isolation. Me and Mrs GK both have DB and DC pensions and full state pensions in the bag. I think the certainty of the DB and SP, particularly with good index linking, and the flexibility of DC is a very useful position to be in. So the Nat West DB might sit very nicely with your other pension provision. 

Scrudgy

I must admit, what is wrong about this for me is that the over £30k value is simply way too low for this. The onerous hoops to be jumped through by the pension transfer company to ensure compliance are ridiculous for CETVs of £30k or similar lowish amounts.

When we transferred my wife’s pension we paid £5k, but the CETV was 39 times the annual annuity value, so was worth doing for us, but during the numerous recorded video meetings, the transfer specialist told us the process they went through to make sure they had full compliance and wouldn’t fall foul of the FCA in the event of a customer complaint. He had to employ a dedicated compliance manager to review every video meeting, audit every piece of information that we submitted and received, he didn’t tell us how much his company’s PI insurance premium was, but he indicated it was many thousands per year.  I asked why he bothered staying in DB transfer business, and he said it was ok as long as he completed at least 3 transfers per week to break even and make a few bob. Every transfer took about 6 weeks to go through the advising process, so was a lot of work to juggle.

To go through that entire process for small CETV values is just not right. If it was many hundreds of thousands of pounds, fair enough, but what could be only one or two years worth of living should have a lesser advisory method that should consist of stern warnings and disclaimers that leave you in no doubt of what happens if you blow it all, but it should be very simple to transfer modest values into a SIPP. Above £100k full advisory service, below £100k lesser service or something similar. It not right currently for sure.