It is about time they changed the law, requiring a FA to deal with transferring away a DB Scheme

greyscot

@HappyHarry Reading the FG21/3 document, it appears the FCA is adopting a "one size fits all" approach. In paragraph 1.3 it states "Having lost the security of a guaranteed income, consumers bear the risk of how their pension investments will perform and whether these will provide the income they need for the rest of their life. They also become responsible for paying charges that, for many, will be one of their largest monthly expenses. These charges are not obvious to many consumers because they are deducted from their pension investments." None of that applies to my circumstances: a Lifetime Annuity gives a guaranteed monthly income, so I wouldn't lose the security and there is no risk; there are no monthly charges on the Annuity; non obvious charges do not apply to an Annuity. Regarding information collecting, I didn't read anything in the document that a well structured Form could collect to help minimise the risk to the FA. For example: Please click here to confirm, you fully understand the ramifications of not linking your Annuity to the RPI index and that we have fully explained this to you. I had another non DB Pension Pot that I transfered out to purchase a Lifetime, Single Life Enhanced Annuity with Value Protection. I used a Broker to do this and they found me (very quickly) the best rate and their service did not cost me a penny, since, they earned a very nice commission from the Annuity Provider.

greyscot

@gm0 Didn't you mean: It inconveniences a lot of people.

greyscot

dunstonh said:

 It is scandalous what a FA will charge, for, basically, what is just a form filling exercise. 
<snip?

 If there are any FAs reading this, I am inviting you to justify why you feel you have to charge so much, especially, how many actual hours will be spent on a transfer.

Seeing as my accountant charges more than my fee cap, perhaps you, as an ex-accountant, can explain how you can justify an accountant's fees for doing what is just a form-filling exercise, as you put it.

@dunstonh Good question! They can easily rip you off as well. They like to give the impression, their work can be so, so complicated.

cloud_dog

As someone once said... A little bit of knowledge can be a dangerous thing.

QrizB

cloud_dog said:

As someone once said... A little bit of knowledge can be a dangerous thing.

I guess it's a step in the right direction (or a symptom of the fall in CETVs) that we're only getting one of these threads every 2-3 months now, rather than evey week.

Marcon

greyscot said:

It is scandalous what a FA will charge, for, basically, what is just a form filling exercise. 

You need to understand what's involved...and as of now you clearly don't.

greyscot said:

By the way, I am an ex Accountant, so don't really need any advice from a FA and I am quite confident in my own sums. If there are any FAs reading this, I am inviting you to justify why you feel you have to charge so much, especially, how many actual hours will be spent on a transfer. In my case, there is no risk. I am giving a specific instruction, so the excuse of requiring a high fee to match the long term risk, does not cut it with me, unfortunately. 

What ‘cuts it with you’ is neither here nor there in the eyes of the FCA or PI insurers. You may think you are giving a specific instruction, but you may not realise that the DB transfer advice process is never ‘execution only’. The adviser has to give specific advice which complies with detailed and onerous FCA requirements, not just go along with what the customer wants. 

Unless an adviser gets every last detail right, they are laying themselves open to a successful compensation claim. Even if they do get everything right, they are still open to specious claims, often made in the hope that the hapless adviser will offer some sort of settlement to avoid the costs of defending such claims. Get anything wrong…here’s a particularly unhappy example here of just how enduring the risks can be: https://www.ftadviser.com/tenet-group-ltd-/2025/9/8/complete-madness-readers-hit-out-after-ifa-told-to-pay-over-27yo-advice/

PI costs for those with the necessary FCA permissions aren’t just going up by an extra few% - increases are eyewatering. Have you stopped to ponder why, if giving DB transfer advice is such a money spinner with very little work or risk involved, so few advisers are cashing in on this goldmine? 

greyscot said:

Thanks for your feedback. The link, above, does not really apply to me, since, my DB provider has already given me a Cash Equivalent Transfer Value (CETV) that is good for 3 months. 

Anyone with a right to a CETV has a 3 month guarantee period; it’s a statutory requirement. Do you have an adviser appointed and working on the advice needed to enable the ceding scheme to release the transfer? If not, it is unlikely an adviser will be able to complete the work before the guarantee expires, and you will need a new CETV. A scheme is only required to issue one CETV in any 12 month period, so you may have to wait – or if they do agree to issue a new one, they can charge for it (£500 or so is not atypical). Do you have a receiving scheme lined up who have confirmed they will accept the transfer, even if the advice is not to transfer? 

The legislation is there to protect the vast majority who do not have a clue what they are giving up by transferring out of a DB scheme, or understand the risks of taking over responsibility for their own financial wellbeing. Trying to water down the legislation to cater for ‘certain circumstances’ isn’t viable, however annoying for those who are certain they know best and that their planned course of action is a complete no brainer. 

My earlier post linked to a particular thread because the comment; ‘….I would never dream of complaining about something going wrong as a result of losing Defined Benefits. But then I thought its free to try…’ highlights exactly why advisers don't fancy putting their livelihoods on the line. This sort of deeply unattractive attitude has been heavily fuelled by the onerous strictures and active encouragement of the FCA, aided and abetted by CMCs who were short of work once PPI opportunities had died down. 

I am not sure what sort of fees you have been quoted, but around £5K seems to be the going rate for the actual advice process/provision of a Section 48 certificate. That would only be seen as 'scandalous' by someone who is ignorant of the risks being run by the adviser and the knock-on effects to the cost of PI. You are an ex-accountant, so I trust you will not continue to reside in that under-informed camp.

Albermarle

OP
Another issue I do not think has been mentioned so far, is the situation where you pay up but the advisor gives a negative recommendation.
Legally you are still free to transfer as you have been through the advice process. On this basis the DB scheme will allow the transfer out. and legally DC schemes can accept the transferred funds. However with a negative recommendation, hardly any DC pension providers will accept the transfer in. Again in case of future legal action by the client, complaining they did not realise their money could run out, or similar.

HappyHarry

greyscot said:

@HappyHarry Reading the FG21/3 document, it appears the FCA is adopting a "one size fits all" approach. In paragraph 1.3 it states "Having lost the security of a guaranteed income, consumers bear the risk of how their pension investments will perform and whether these will provide the income they need for the rest of their life. They also become responsible for paying charges that, for many, will be one of their largest monthly expenses. These charges are not obvious to many consumers because they are deducted from their pension investments." None of that applies to my circumstances: a Lifetime Annuity gives a guaranteed monthly income, so I wouldn't lose the security and there is no risk; there are no monthly charges on the Annuity; non obvious charges do not apply to an Annuity. Regarding information collecting, I didn't read anything in the document that a well structured Form could collect to help minimise the risk to the FA. For example: Please click here to confirm, you fully understand the ramifications of not linking your Annuity to the RPI index and that we have fully explained this to you. I had another non DB Pension Pot that I transfered out to purchase a Lifetime, Single Life Enhanced Annuity with Value Protection. I used a Broker to do this and they found me (very quickly) the best rate and their service did not cost me a penny, since, they earned a very nice commission from the Annuity Provider.

Indeed. "One size fits all" is quite typical of FCA guidance, and is geared to the lowest common denominator - i.e. those clients and (and possibly some advisers) that have little understanding of the risks being undertaken with such transfers.

However, the adviser still has to do the work as per the guidance, as without doing so puts them at risk from a future complaint, PI refusal and FCA censure.

gm0

greyscot said:

@gm0 Didn't you mean: It inconveniences a lot of people.

You may be right.  And the numbers so inconvenienced higher than I perceive.  

Yet the harms done to the naive under the prior regimen included complete loss of pension to offshoring and fraud as well as double dipping and legal(ish) or legal adjacent exploitations of one kind or another. Preying on the financially less literate.  All this by "advisers" working particular employee groups.  IFAs - of a sort unwelcome to other more reputable folk in the same trade.

In the end it comes down to a libertarian approach - freedom for all to choose and bear consequences of poor choices in who they deal with. Society wide.  

Or as here - a harm reduction intervention has been stuck over it.

The FCA intermittently float the idea (consultations ibid) of "compulsory" advice for all. 

To deal with other failures.  

Perception there is too much cash (and inflation erosion).  Or people with DC pots too small for advisers to want to do the full heavy process for. But with no clue - yet facing decisions on annuties, investing - perhaps for the first time in their lives.

Fixing the advice funding gap with a "progressive" fees approach so that the bigger pensions pay for the smaller.  They haven't found another way to close it.  

But of course it could never work without compulsion - if there was any kind of option to escape it or opt out.  The financially literate to be taxed group would select out.  

People with larger DC pensions are generally not in favour of being forced into a sheep shearing pen for a "monopolistic" compulsory service - levelled down in quality and levelled up in charges.   So think they didn't get much positive feedback on the idea - from consumers.  Some in the market viewed it more as an opportunity.  Others as an unwelcome potential change to market structure.

Brie

Marcon said:

xylophone said:

I have a DC work scheme that has an underlying guarantee and cannot get an IFA of any sort to help me with it as they say it is in fact a DB scheme due to the guarantee and therefore cannot be transferred.  The problem is that the scheme administrators do not have and never had any way to payout as a DB.  So the only options are to transfer it to another DC scheme of some sort or to an annuity.

As someone who actually worked as a few years as an administrator for this same scheme I'm really rather frustrated by it all.  

I am puzzled.

Me too! 

@Brie - is this actually a hybrid scheme, or is it a cash balance scheme? If the latter, you don't need advice to transfer it. It's very curious that you  '...cannot get an IFA of any sort to help me with it as they say it is in fact a DB scheme due to the guarantee and therefore cannot be transferred'. That suggests more than one adviser has said this, which is clearly nonsense. Exactly what information are you giving them to generate such responses?

OK - so we always referred to it as a hybrid scheme.  There's a portion that guaranteed to increase every year no matter what and a portion that is straight DC. 

Because of the guaranteed usually firm I've talked to says it needs to be referred to their DB experts.  Well if it gets that far. 

The first IFA told me (aka lied) that I couldn't transfer it because I am not a British citizen. Very odd given the fact that something like 20% of the employees of this very large UK firm are not British.  The next simply never got back to me.  The third said they would pass it along to their expert who after one email disappeared from sight.  This despite chasing over a number of months.

The most recent at least was somewhat honest and gave me the standard line that it would cost something like £8k up front to look into the scheme to give advice but he had the full expectation that the answer would eventually state that it could not be transferred. 

The scheme admins have confirmed the value MUST be transferred out in order for me to access it.  Given the 5 figure value it would cost me too much in tax to simply take the money myself and it has to all be moved in one go.  

I have recently found that Aviva is willing to take a direct transfer from the scheme on a no advice basis but have yet to get through all the paperwork that I will have to complete to make that happen.  The hopeful result will be me having an enhanced annuity with Aviva.