DB Transfer 'extortion' ?!

sandsy

AMagny said: Have received quotes from £4k-£15k to approve the move. 

You're not paying for them to approve the move. You're paying for professional, regulated financial advice on whether they think it's in your best interests to move it.

in the vast majority of cases, advisers will take the view that giving up keeping (edited to correct error, as identified by following posters) a guaranteed income where you carry no investment or mortality risk is better than carrying that risk yourself and paying product (and possible ongoing adviser charges) to do so, especially once the cost of the DB transfer advice itself is taken into account on a relatively small transfer value

Some advice firms offer a  free advice service called abridged advice. While this won't let you transfer, an adviser may be able give you a view on whether keeping your DB scheme is the right thing for you.

See: https://www.fca.org.uk/consumers/pension-transfer-advice-what-expect

eskbanker

sandsy said:
in the vast majority of cases, advisers will take the view that giving up a guaranteed income where you carry no investment or mortality risk is better than carrying that risk yourself and paying product (and possible ongoing adviser charges) to do so, especially once the cost of the DB transfer advice itself is taken into account on a relatively small transfer value

If you give up the guaranteed income then you are carrying that risk - have you mixed up the options here?  Are you arguing that most transfers are approved or rejected?

Aretnap

eskbanker said:

sandsy said:
in the vast majority of cases, advisers will take the view that giving up a guaranteed income where you carry no investment or mortality risk is better than carrying that risk yourself and paying product (and possible ongoing adviser charges) to do so, especially once the cost of the DB transfer advice itself is taken into account on a relatively small transfer value

If you give up the guaranteed income then you are carrying that risk - have you mixed up the options here?  Are you arguing that most transfers are approved or rejected?

Seems fairly obvious that he wrote "giving up" where he meant to write "keeping". Or possibly "worse" where he meant "better" - either way the meaning is the same.

eskbanker

Aretnap said:

eskbanker said:

sandsy said:
in the vast majority of cases, advisers will take the view that giving up a guaranteed income where you carry no investment or mortality risk is better than carrying that risk yourself and paying product (and possible ongoing adviser charges) to do so, especially once the cost of the DB transfer advice itself is taken into account on a relatively small transfer value

If you give up the guaranteed income then you are carrying that risk - have you mixed up the options here?  Are you arguing that most transfers are approved or rejected?

Seems fairly obvious that he wrote "giving up" where he meant to write "keeping". Or possibly "worse" where he meant "better" - either way the meaning is the same.

Well, yes, it seems clear that they wrote something different from what they meant, so the currently self-contradictory wording should be adjusted accordingly!

poseidon1

AMagny said:

poseidon1 said:

Pat38493 said:

Scrudgy said:

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.

There is some merit in this point and it was also mentioned on a similar thread a couple of months ago - the £30K value was put in place a long time ago and has never been increased at all, so it’s a lot less in real terms than it was when first introduced.  Meanwhile I suspect that advice fees have increased by more than inflation every year on average for this type of advice.

I would also wonder whether it would be possible to introduce a “no brainer” level of advice that would be much cheaper - there are probably lots of situations where it’s obvious with a 30 minute conversation that the advice will be negative, so there is no point going through the full process.  This would then still enable the person to go through the insistent client route if they were still determined to go ahead in spite of the experts saying they should not.

In 2009 I was charged £400 by HL for a report to transfer £32k from a DB scheme projecting a £1900 p.a annual pension at age 65. I overrode their reccomendation to leave it in place and proceeded with the transfer to their SIPP.

Scroll forward 14 years, there is no way I would contemplate going through the same excercise at 10 times the fees for the cetv in question ( assuming I could find an IFA prepared to advise in the first place).

In 2009 I was charged £400 by HL for a report…

As in Hargreaves Lansdown?? 

Yes it was Hargreaves Lansdown.

Surprising to me ( in view of the serious professional Indemnity insurance implications) HL purport to still offer DB transfer transfer advice. It appears to be on a two tier fee basis being 2% of the CETV value ( up to £200k cetv) plus a specialist fixed transfer advice fee of £1500 ( vat inclusive).

See below link to HL financial planning service and click on the 'key features and terms and conditions' pdf

https://www.hl.co.uk/financial-advice/cost-of-financial-advice

If you look on page 4 of the pdf they give the example of a DB transfer cost for a £400k cetv.

 Extrapolation of the same fee structure for your transfer amount would indicate £50k at 2% plus £1500 ie a total cost of £2,500. Now unlike 2009 I suspect HL would not allow a transfer to their SIPP using the insistent client override, whether any other reputable platform would do so ( in the present protective climate is debateable) , so the fall back position as identified by others could be  a transfer to a stakeholders scheme?

However could be HL provides the cheapest regulated  DB advice service for small pots, and in OP's case is a  £2,500 fee ( ie 5% of DB value ) appealing enough to explore HL's offering especially if they ultimately refuse to accept a transfer at the end of the process.

Informed comments from the forums IFA would be welcome.

poseidon1

poseidon1 said:

AMagny said:

poseidon1 said:

Pat38493 said:

Scrudgy said:

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.

There is some merit in this point and it was also mentioned on a similar thread a couple of months ago - the £30K value was put in place a long time ago and has never been increased at all, so it’s a lot less in real terms than it was when first introduced.  Meanwhile I suspect that advice fees have increased by more than inflation every year on average for this type of advice.

I would also wonder whether it would be possible to introduce a “no brainer” level of advice that would be much cheaper - there are probably lots of situations where it’s obvious with a 30 minute conversation that the advice will be negative, so there is no point going through the full process.  This would then still enable the person to go through the insistent client route if they were still determined to go ahead in spite of the experts saying they should not.

In 2009 I was charged £400 by HL for a report to transfer £32k from a DB scheme projecting a £1900 p.a annual pension at age 65. I overrode their reccomendation to leave it in place and proceeded with the transfer to their SIPP.

Scroll forward 14 years, there is no way I would contemplate going through the same excercise at 10 times the fees for the cetv in question ( assuming I could find an IFA prepared to advise in the first place).

In 2009 I was charged £400 by HL for a report…

As in Hargreaves Lansdown?? 

Yes it was Hargreaves Lansdown.

Surprising to me ( in view of the serious professional Indemnity insurance implications) HL purport to still offer DB transfer transfer advice. It appears to be on a two tier fee basis being 2% of the CETV value ( up to £200k cetv) plus a specialist fixed transfer advice fee of £1500 ( vat inclusive).

See below link to HL financial planning service and click on the 'key features and terms and conditions' pdf

https://www.hl.co.uk/financial-advice/cost-of-financial-advice

If you look on page 4 of the pdf they give the example of a DB transfer cost for a £400k cetv.

 Extrapolation of the same fee structure for your transfer amount would indicate £50k at 2% plus £1500 ie a total cost of £2,500. Now unlike 2009 I suspect HL would not allow a transfer to their SIPP using the insistent client override, whether any other reputable platform would do so ( in the present protective climate is debateable) , so the fall back position as identified by others could be  a transfer to a stakeholders scheme?

However could be HL provides the cheapest regulated  DB advice service for small pots, and in OP's case is a  £2,500 fee ( ie 5% of DB value ) appealing enough to explore HL's offering especially if they ultimately refuse to accept a transfer at the end of the process.

Informed comments from the forums IFA would be welcome.

Correction I see this poster's cetv is £38k which would convert to an HL transfer fee of £2,260 in his case  ie 5.947% of cetv.

sandsy

eskbanker said:

Aretnap said:

eskbanker said:

sandsy said:
in the vast majority of cases, advisers will take the view that giving up a guaranteed income where you carry no investment or mortality risk is better than carrying that risk yourself and paying product (and possible ongoing adviser charges) to do so, especially once the cost of the DB transfer advice itself is taken into account on a relatively small transfer value

If you give up the guaranteed income then you are carrying that risk - have you mixed up the options here?  Are you arguing that most transfers are approved or rejected?

Seems fairly obvious that he wrote "giving up" where he meant to write "keeping". Or possibly "worse" where he meant "better" - either way the meaning is the same.

Well, yes, it seems clear that they wrote something different from what they meant, so the currently self-contradictory wording should be adjusted accordingly!

Thanks to eskbanker and aretnap for pointing out my erroneous contradictory wording. Now corrected in the original post.

ReflectionsinaFIAT

Hi, just wondering how OP got on, I'm in a similar position with a small DB Pension(over £30k) that I want to transfer into my Work DC 
Scheme and I'm having a hell of a time doing it!

dunstonh

ReflectionsinaFIAT said:

Hi, just wondering how OP got on, I'm in a similar position with a small DB Pension(over £30k) that I want to transfer into my Work DC 
Scheme and I'm having a hell of a time doing it!

I suggest you read the threads as it will save us having to repeat what has already been written.

ReflectionsinaFIAT

I have read the thread and they have not posted how they got on?