Is my DB Pension effectively locked in against my wishes?

scottwinner3

Greetings All.
I have an old Defined Benefits (DB) Company Pension. I have been self employed now for 15 years, and my SIPP has always earnt more interest in good years, and depreciated less in bad years.
I understand the fact that my DB Pension is a guaranteed income, and that my SIPP investments' past performance is no guarantee of future performance. Many would recommend I keep the DB pension, however I would still rather transfer it to my SIPP.
My plan is to draw down my SIPP at 4%, and therefor the transfer value of my DB Pension would give the same yearly income, with the advantage of (a) increasing at a better rate than the DB Pension, and (b) I would have all my pension money in one pot and under my control in my 'estate'.
I had previously been told by both my SIPP Platform and by an IFA that I would not be able to transfer the pension pot into my SIPP until I was 55.
I had another call with an IFA which I had set up this week. He informed me that there was almost no circumstances that he would approve / sign off this transfer, even after I am 55yrs old. Furthermore, he said he would be surprised if ANY IFA would sign it off. In which case, that means my DB Pension pot, which I have paid into for the first 20 years of my working life is effectively locked in and I will never be able to decide where my investment goes!
I really cannot believe this is legal, that I am forced to keep my DB Pension where it is?
Any advice or discussion is welcomed, Thanks in advance.

QrizB

What os the CETV of your DB pension? What annual pension is it forecast to pay? How is it index-linked, and with what cap? If your former employer was a large one, or a public service body, can you name it?

scottwinner3 said:

I really cannot believe this is legal, that I am forced to keep my DB Pension where it is?
Any advice or discussion is welcomed, Thanks in advance.

If the CETV of your DB pension is more than £30k, you are required by law to receive professional advice before transferring it. CETVs have fallen far enough, and DB pensions are usually so valuable, that most people will be advised not to transfer.

Cobbler_tone

You can search and read about loads of threads on this topic.
See what the transfer value is (a recent one) and then what guaranteed benefits/protection you are getting from it. Then compare it to buying an annuity and you probably won't feel as bad.

I would be surprised if you already have some accurate assumptions/calculations on how a transfer would match/better what you have in place.

You will have ways of forcing it out but if the strong advice is not to then I'd probably want to know why. 

DRS1

Have you read all the other threads on here where people post the same thing as you did and others explain just how difficult it will be to do it.  If you do that and still think you will get any helpful replies (that have not already been posted there) then come back here with some figures.

eskbanker

scottwinner3 said:

My plan is to draw down my SIPP at 4%, and therefor the transfer value of my DB Pension would give the same yearly income, with the advantage of (a) increasing at a better rate than the DB Pension, and (b) I would have all my pension money in one pot and under my control in my 'estate'.

It does seem likely that an adviser wouldn't recommend a transfer from that sort of rationale.

scottwinner3 said:

I had previously been told by both my SIPP Platform and by an IFA that I would not be able to transfer the pension pot into my SIPP until I was 55.

Who is your SIPP provider?  It's news to me that transfers wouldn't be possible until 55, although that's the age at which access is possible (for now).

Aylesbury_Duck

If a financial professional, fully aware of your circumstances, doesn't feel able to recommend transfer then you need to look at why that is.  I'd be pleased that they're giving you good advice, rather than taking your money in exchange for bad advice.

kipsterno1

In your post from seven years ago you said the DB pension was going to pay around £8k per year aged 65. Have you had a more recent forecast?

Marcon

scottwinner3 said:

Greetings All.
I have an old Defined Benefits (DB) Company Pension. I have been self employed now for 15 years, and my SIPP has always earnt more interest in good years, and depreciated less in bad years.
I understand the fact that my DB Pension is a guaranteed income, and that my SIPP investments' past performance is no guarantee of future performance. Many would recommend I keep the DB pension, however I would still rather transfer it to my SIPP.
My plan is to draw down my SIPP at 4%, and therefor the transfer value of my DB Pension would give the same yearly income, with the advantage of (a) increasing at a better rate than the DB Pension, and (b) I would have all my pension money in one pot and under my control in my 'estate'.
I had previously been told by both my SIPP Platform and by an IFA that I would not be able to transfer the pension pot into my SIPP until I was 55.
I had another call with an IFA which I had set up this week. He informed me that there was almost no circumstances that he would approve / sign off this transfer, even after I am 55yrs old. Furthermore, he said he would be surprised if ANY IFA would sign it off. In which case, that means my DB Pension pot, which I have paid into for the first 20 years of my working life is effectively locked in and I will never be able to decide where my investment goes!
I really cannot believe this is legal, that I am forced to keep my DB Pension where it is?
Any advice or discussion is welcomed, Thanks in advance.

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 (a 'promise' of some description), 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. Advice is still mandatory where the transfer value is at least £30K and the scheme has 'safeguarded benefits' (a DB scheme always has safeguarded benefits), because the ceding scheme cannot make a transfer payment without confirmation this has been given.
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.
6. You can then transfer on from the stakeholder pension to your SIPP with no further advice required (it's become a DC to DC transfer), and little chance the SIPP provider will decline it now that you aren't trying to transfer from a scheme with safeguarded benefits.

None of the above is to suggest that transferring is necessarily a good idea...if you've paid for advice (think upwards of £5K), it might make sense to pay heed to it!

How recently did you last get a CETV?

Sarahspangles

scottwinner3 said:

Any advice or discussion is welcomed, Thanks in advance.

I think the position is that so long as you have received advice, you can transfer to a stakeholder pension, even though the advice is that you shouldn’t transfer. You would pay for the IFA’s advice, and the IFA in turns pays their insurer. If you have regrets, the IFA will be able to point out that they advised you not to, and the stakeholder pension has a defence that they can’t decline the transfer because of the way they were set up.

So you just need to be confident that you can outperform the guaranteed benefits of the DB and recover the cost of advice in your investment gains. And that you won’t regret it later, because there will be no comeback.

Storcko14

scottwinner3 said:

Greetings All.
I have an old Defined Benefits (DB) Company Pension. I have been self employed now for 15 years, and my SIPP has always earnt more interest in good years, and depreciated less in bad years.
I understand the fact that my DB Pension is a guaranteed income, and that my SIPP investments' past performance is no guarantee of future performance. Many would recommend I keep the DB pension, however I would still rather transfer it to my SIPP.
My plan is to draw down my SIPP at 4%, and therefor the transfer value of my DB Pension would give the same yearly income, with the advantage of (a) increasing at a better rate than the DB Pension, and (b) I would have all my pension money in one pot and under my control in my 'estate'.
I had previously been told by both my SIPP Platform and by an IFA that I would not be able to transfer the pension pot into my SIPP until I was 55.
I had another call with an IFA which I had set up this week. He informed me that there was almost no circumstances that he would approve / sign off this transfer, even after I am 55yrs old. Furthermore, he said he would be surprised if ANY IFA would sign it off. In which case, that means my DB Pension pot, which I have paid into for the first 20 years of my working life is effectively locked in and I will never be able to decide where my investment goes!
I really cannot believe this is legal, that I am forced to keep my DB Pension where it is?
Any advice or discussion is welcomed, Thanks in advance.

Of this you can't be certain.  It might have done in the past but you can't be certain it will in future.  And that's the point.  Your former employer bears the risk with your DB - they'll pay you what they've guaranteed you for life (possibly with a reduced spouse pension as well) even if the markets suffer a 50% drawdown which they do from time to time.  If you were to transfer out you'd then carry all the risk.  Instead of seeing a DB as locked in see it instead as the secure part of your retirement income.  If you have a risk taking itch to scratch you could go wild with your SIPP knowing that you can still keep the lights on.

dunstonh

I have an old Defined Benefits (DB) Company Pension. I have been self employed now for 15 years, and my SIPP has always earnt more interest in good years, and depreciated less in bad years.
I understand the fact that my DB Pension is a guaranteed income, and that my SIPP investments' past performance is no guarantee of future performance. Many would recommend I keep the DB pension, however I would still rather transfer it to my SIPP.

Statistically, 9 in 10 people in DB schemes are better staying in the DB scheme.

My plan is to draw down my SIPP at 4%, and therefor the transfer value of my DB Pension would give the same yearly income, with the advantage of (a) increasing at a better rate than the DB Pension, and (b) I would have all my pension money in one pot and under my control in my 'estate'.

4% withdrawal means you are risking pessimistic to worst case scenarios of running out of money.  Something you do not have with the DB pension.

I had previously been told by both my SIPP Platform and by an IFA that I would not be able to transfer the pension pot into my SIPP until I was 55.

As that information is wrong, I suspect you have misunderstood.  Platforms do not give advice and wouldnt mention any age range where transfers may or may not be suitable.  55 is the current accessible point on a pension.  It is not to do with transfers.    That is probably what was being referred to.

I had another call with an IFA which I had set up this week. He informed me that there was almost no circumstances that he would approve / sign off this transfer, even after I am 55yrs old. Furthermore, he said he would be surprised if ANY IFA would sign it off.

He is probably right.    What you have said in your post indicates a lack of understanding about investing, a lack of understanding of what you have and nothing that suggests you are likely to be that 1 in 10 where it is suitable.

CETVs are about half what they were in 2021.    It was more viable to transfer pre-2021.  The ratio got to around half being potentially suitable to transfer but those days have gone and are unlikely to return any time soon.

 In which case, that means my DB Pension pot, which I have paid into for the first 20 years of my working life is effectively locked in and I will never be able to decide where my investment goes!

You knew what you were entering when you joined the scheme.  And you are getting what you agreed when joining the scheme.    They are called defined benefit schemes because the benefits are defined.   

I really cannot believe this is legal, that I am forced to keep my DB Pension where it is?

You are not.  The law does allow you to make stupid mistakes.  However, you will just have to jump through the hoops to get to that point.