Def Benefit transfer

Optimist101

Hello All
I have had a CETV from my deferred Def Benefit pension fund and on balance I think it a good option to transfer the money out into a SIPP. Has anyone ever managed to do this? I have to get an FCA approved financial advisor to sign off that I have had advice but no advisor locally will touch a transfer of this nature. Seems they don't want to risk industry disapproval.
Before anyone asks, my guess is the UK is going to be going through another significant inflation, my pension uplifts are capped, so I keep seeing erosion. Also the spousal pension was capped when my pension became deferred in 2003, so it has been significantly eroded by inflation in that time. Plus it's not overly generous anyhow.
Just want to know if anyone has any experience of this process? 
Thanks

MarkCarnage

Your user name probably sums up what you will need to be......
You haven't given any specific details but assuming it's over £30k then you do need advice. The chances that the advice will support a transfer are very low. You will also have to pay several thousand for it assuming you can find someone willing to do it. The reasons for this are that the professional indemnity costs for any adviser doing this work are very high, and that it is a fairly detailed piece of work. 
Your guess about UK inflation may or may not be correct, but what makes you think that you can do better in protecting an income stream in a SIPP, also bearing in mind that you would be effectively giving up longevity insurance too? 
There are plenty of other threads on this topic on here. 

On-the-coast

I won’t talk about the wisdom or not of a DB transfer, because inflation above the DB caps worries me too. 

However if you’ve been deferred since 2003 you’ve likely still got some headroom for inflation since the revaluation takes into account cumulative inflation - and it was well below the caps for a lot of those years. 

OTOH once it’s in payment the caps are annual (which is disappointing.)

Cobbler_tone

I think you are being a bit of an 'optimist' in getting many useful responses. 

Size of pension and guarantees? Inflation has only just come down but maybe your crystal ball is correct? Can't your advisor find a fund that would take it? 

Optimist101

Thanks all. I suspected there was something behind the reluctance of any advisor to look at it. 

In terms of the logic, GBP has depreciated 18% against the USD in last 10 years. US markets generally do better than the UK. The macro scene is more favourable there than the UK for the foreseeable future. So there are too many positives to ignore. This is basically a variant of the Yen carry trade of the last few years. 
Cheers

dunstonh

I have had a CETV from my deferred Def Benefit pension fund and on balance I think it a good option to transfer the money out into a SIPP. Has anyone ever managed to do this?

Lots of people have done DB transfers.   However, its far less common now that CETVs have halved from their peak in 2021.

You think its a good option to transfer but the reality is that its only suitable in around 1 in 10 cases.    So, what is it that makes you think you are the 1 in 10 that is suitable and not the 9 in 10 that it is not?

 I have to get an FCA approved financial advisor to sign off that I have had advice but no advisor locally will touch a transfer of this nature. Seems they don't want to risk industry disapproval.

The FCA treat DB transfers as missold unless proven otherwise.  It is one of the highest risk transactions that an adviser can do.   Only around 1 in 10 advisers hold the required permissions nowadays.

It is nothing about industry disapproval but just a commercial reality of the risks on giving advice on a transaction that is unlikely to be suitable 9 times out of 10.

MallyGirl

You don't mention the size of the CETV but, if you can find an advisor, then you would be looking at fees of £5k ballpark or maybe more. That would payable even if the advice was not to transfer. You would then only have the option to transfer into a stakeholder pension as they have to accept the transfer as long as you have had advice (even if you choose not to follow it).
Depending on the numbers it could take a while to pay back a fee of that size with growth above the cap.
A search on here of DB Pension Transfer would bring back a lot of results

Sarahspangles

Optimist101 said:

Thanks all. I suspected there was something behind the reluctance of any advisor to look at it. 

In terms of the logic, GBP has depreciated 18% against the USD in last 10 years. US markets generally do better than the UK. The macro scene is more favourable there than the UK for the foreseeable future. So there are too many positives to ignore. This is basically a variant of the Yen carry trade of the last few years. 
Cheers

But those aren’t your problem, because your benefit is defined. They are the employer or fund’s problem.

The other issues you mentioned like revaluation rules or spousal pension are relevant. 

Optimist101

Sarahspangles said:

Optimist101 said:

Thanks all. I suspected there was something behind the reluctance of any advisor to look at it. 

In terms of the logic, GBP has depreciated 18% against the USD in last 10 years. US markets generally do better than the UK. The macro scene is more favourable there than the UK for the foreseeable future. So there are too many positives to ignore. This is basically a variant of the Yen carry trade of the last few years. 
Cheers

But those aren’t your problem, because your benefit is defined. They are the employer or fund’s problem.

The other issues you mentioned like revaluation rules or spousal pension are relevant. 

Quite right, but if you don't think they are doing a good job then why persist with mediocrity. 

QrizB

Optimist101 said:

Sarahspangles said:

Optimist101 said:

Thanks all. I suspected there was something behind the reluctance of any advisor to look at it. 

In terms of the logic, GBP has depreciated 18% against the USD in last 10 years. US markets generally do better than the UK. The macro scene is more favourable there than the UK for the foreseeable future. So there are too many positives to ignore. This is basically a variant of the Yen carry trade of the last few years. 
Cheers

But those aren’t your problem, because your benefit is defined. They are the employer or fund’s problem.

The other issues you mentioned like revaluation rules or spousal pension are relevant. 

Quite right, but if you don't think they are doing a good job then why persist with mediocrity. 

No matter how good or bad a job they do, your DB pension revalues in accordance with the scheme rules.

Cobbler_tone

On-the-coast said:

However if you’ve been deferred since 2003 you’ve likely still got some headroom for inflation since the revaluation takes into account cumulative inflation 

This stuck out for me. Is this typically true of DB schemes? I can't see any mention in mine.
e.g. if inflation year by year was 2%,2%,2%,10%,11%,2%,2% the scheme catches up to the limits of the capped increase level? I think that is what you are implying.