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

Linton

AIUI the law cannot simply be changed to remove the requirement to receive IFA advice before transferring a DB pension to a DC one.....

1) You have no absolute right to transfer a DB pension to a DC one.  The only absolute right you have is to receive a monthly payment in retirement as specified by the scheme rules when you agreed to join it.
2) The trustees of the pension have the legal duty to follow trust rules, in particular they must treat all the members fairly.
3) In the past the only option for most people with DC pensions was to buy an annuity.  In general the payments from the annuity would be less than those from the DB pension so there was no advantage from transferring except in extreme cases such as terminal illness.
4) In such cases the trustees had the authority, perhaps on the grounds of fairness, to pay out an appropriate lump sum as calculated by the actuaries. 

Since the rules for DC pensions were relaxed things are very different...

5) The ££££s you could get from transfering may well look very attractive, especially to those many DB pensioners who do not understand their DB pension or the complexities and costs of financing retirement.
6) A large number of requests to transfer would be extremely expensive for the trustees to manage.
7) If the trustees approved a DB transfer that proved disastrous for the pensioner could they be liable for a claim of mis-selling?  They are simply not in a position to make decisions on an individuals personal financial circumstances that could result in very large costs to the pension fund.  Perhaps if the issue was forced the trustees could simply refuse to permit DB transfers other than extreme cases as too risky. 
8) The only people with the skills, authority, and insurance backing to advise on what could be a very risky transaction are IFAs. Using IFAs removes any financial liability from the pension trustees.   But most IFAs dont want to take on work that has the possibility of destroying their business.  The insurance companies are none to keen either.

So  what is the alternative?

Silvertabby

Go to the Pension Ombudsman's website.  Select 'Previous decisions' then filter 'pension liberation'.  Amazing number of claims on the basis that the DB scheme should have 'known' that transferring their benefits to the like of Cape Verde was a bad thing to do, and should have made more efforts to stop them, despite their insistance on going ahead with the transfer at the time.

Marcon

Linton said:

AIUI the law cannot simply be changed to remove the requirement to receive IFA advice before transferring a DB pension to a DC one.....

1) You have no absolute right to transfer a DB pension to a DC one.  The only absolute right you have is to receive a monthly payment in retirement as specified by the scheme rules when you agreed to join it.
2) The trustees of the pension have the legal duty to follow trust rules, in particular they must treat all the members fairly.
3) In the past the only option for most people with DC pensions was to buy an annuity.  In general the payments from the annuity would be less than those from the DB pension so there was no advantage from transferring except in extreme cases such as terminal illness.
4) In such cases the trustees had the authority, perhaps on the grounds of fairness, to pay out an appropriate lump sum as calculated by the actuaries. 

Since the rules for DC pensions were relaxed things are very different...

5) The ££££s you could get from transfering may well look very attractive, especially to those many DB pensioners who do not understand their DB pension or the complexities and costs of financing retirement.
6) A large number of requests to transfer would be extremely expensive for the trustees to manage.
7) If the trustees approved a DB transfer that proved disastrous for the pensioner could they be liable for a claim of mis-selling?  They are simply not in a position to make decisions on an individuals personal financial circumstances that could result in very large costs to the pension fund.  Perhaps if the issue was forced the trustees could simply refuse to permit DB transfers other than extreme cases as too risky. 
8) The only people with the skills, authority, and insurance backing to advise on what could be a very risky transaction are IFAs. Using IFAs removes any financial liability from the pension trustees.   But most IFAs dont want to take on work that has the possibility of destroying their business.  The insurance companies are none to keen either.

So  what is the alternative?

A few misunderstandings here:

1. Virtually all members of DB schemes have a statutory right to a transfer out provided that they have at least 12 months to go before they reach the scheme's Normal Retirement Age. There are exceptions (eg the ban introduced on members of unfunded public sector schemes transferring to a scheme which would allow them to flexibly access their benefits). A member would need to comply with any relevant legislation (eg receiving regulated advice where this is mandatory) before the transfer could proceed.
4. Only if the rules of the DB scheme permitted 'full commutation on grounds of serious ill health'. They couldn't do so just on the grounds of 'fairness' if the rules didn't allow it.
6. True, but tough. If a member has a statutory right to do something (whether obtain a free CETV once every 12 months, or actually pursue a transfer out) then they are entitled to do so. Ultimately the cost falls back on the sponsoring employer.
7. It's not for the trustees to 'approve' transfers if a member has a statutory right to transfer and chooses to exercise it. There are limited instances where trustees can - and should - block a transfer, such as red flags suggesting the transfer may be to a 'suspect' scheme.
8. The trustees could still be roped in if a transfer to an 'obviously' dodgy scheme is allowed, whatever advice has been given and whoever gave that advice.

Linton

Marcon said:

Linton said:

AIUI the law cannot simply be changed to remove the requirement to receive IFA advice before transferring a DB pension to a DC one.....

1) You have no absolute right to transfer a DB pension to a DC one.  The only absolute right you have is to receive a monthly payment in retirement as specified by the scheme rules when you agreed to join it.
2) The trustees of the pension have the legal duty to follow trust rules, in particular they must treat all the members fairly.
3) In the past the only option for most people with DC pensions was to buy an annuity.  In general the payments from the annuity would be less than those from the DB pension so there was no advantage from transferring except in extreme cases such as terminal illness.
4) In such cases the trustees had the authority, perhaps on the grounds of fairness, to pay out an appropriate lump sum as calculated by the actuaries. 

Since the rules for DC pensions were relaxed things are very different...

5) The ££££s you could get from transfering may well look very attractive, especially to those many DB pensioners who do not understand their DB pension or the complexities and costs of financing retirement.
6) A large number of requests to transfer would be extremely expensive for the trustees to manage.
7) If the trustees approved a DB transfer that proved disastrous for the pensioner could they be liable for a claim of mis-selling?  They are simply not in a position to make decisions on an individuals personal financial circumstances that could result in very large costs to the pension fund.  Perhaps if the issue was forced the trustees could simply refuse to permit DB transfers other than extreme cases as too risky. 
8) The only people with the skills, authority, and insurance backing to advise on what could be a very risky transaction are IFAs. Using IFAs removes any financial liability from the pension trustees.   But most IFAs dont want to take on work that has the possibility of destroying their business.  The insurance companies are none to keen either.

So  what is the alternative?

A few misunderstandings here:

1. Virtually all members of DB schemes have a statutory right to a transfer out provided that they have at least 12 months to go before they reach the scheme's Normal Retirement Age. There are exceptions (eg the ban introduced on members of unfunded public sector schemes transferring to a scheme which would allow them to flexibly access their benefits). A member would need to comply with any relevant legislation (eg receiving regulated advice where this is mandatory) before the transfer could proceed.
4. Only if the rules of the DB scheme permitted 'full commutation on grounds of serious ill health'. They couldn't do so just on the grounds of 'fairness' if the rules didn't allow it.
6. True, but tough. If a member has a statutory right to do something (whether obtain a free CETV once every 12 months, or actually pursue a transfer out) then they are entitled to do so. Ultimately the cost falls back on the sponsoring employer.
7. It's not for the trustees to 'approve' transfers if a member has a statutory right to transfer and chooses to exercise it. There are limited instances where trustees can - and should - block a transfer, such as red flags suggesting the transfer may be to a 'suspect' scheme.
8. The trustees could still be roped in if a transfer to an 'obviously' dodgy scheme is allowed, whatever advice has been given and whoever gave that advice.

Then why wont most pension companies accept DB transfer-ins without IFA approval.  What are they afraid of?

DRS1

OK I suspect I am going to get shot down here but I think the OP has identified an area where the rules on transfers could have a carve out.

Yes by all means regulate the position where you are transferring from apples to oranges (DB to DC).  But an annuity is very much a DB arrangement.  You know what the benefit will be.  So a transfer from a DB scheme to an annuity could be regarded as apples to apples (DB to DB).

Indeed if the trustees were to wind up the DB scheme they would be buying bulk annuities from an insurance company to secure their liabilities.

If they can do that why should the member not be allowed to do it?

OK with individual annuities the member has choices about how the annuity is structured (single/joint, level or increasing, what rate of increases, guarantee periods value protection enhanced or not).  But do those sort of choices require IFA advice? 

Marcon

Linton said:

Marcon said:

Linton said:

AIUI the law cannot simply be changed to remove the requirement to receive IFA advice before transferring a DB pension to a DC one.....

1) You have no absolute right to transfer a DB pension to a DC one.  The only absolute right you have is to receive a monthly payment in retirement as specified by the scheme rules when you agreed to join it.
2) The trustees of the pension have the legal duty to follow trust rules, in particular they must treat all the members fairly.
3) In the past the only option for most people with DC pensions was to buy an annuity.  In general the payments from the annuity would be less than those from the DB pension so there was no advantage from transferring except in extreme cases such as terminal illness.
4) In such cases the trustees had the authority, perhaps on the grounds of fairness, to pay out an appropriate lump sum as calculated by the actuaries. 

Since the rules for DC pensions were relaxed things are very different...

5) The ££££s you could get from transfering may well look very attractive, especially to those many DB pensioners who do not understand their DB pension or the complexities and costs of financing retirement.
6) A large number of requests to transfer would be extremely expensive for the trustees to manage.
7) If the trustees approved a DB transfer that proved disastrous for the pensioner could they be liable for a claim of mis-selling?  They are simply not in a position to make decisions on an individuals personal financial circumstances that could result in very large costs to the pension fund.  Perhaps if the issue was forced the trustees could simply refuse to permit DB transfers other than extreme cases as too risky. 
8) The only people with the skills, authority, and insurance backing to advise on what could be a very risky transaction are IFAs. Using IFAs removes any financial liability from the pension trustees.   But most IFAs dont want to take on work that has the possibility of destroying their business.  The insurance companies are none to keen either.

So  what is the alternative?

A few misunderstandings here:

1. Virtually all members of DB schemes have a statutory right to a transfer out provided that they have at least 12 months to go before they reach the scheme's Normal Retirement Age. There are exceptions (eg the ban introduced on members of unfunded public sector schemes transferring to a scheme which would allow them to flexibly access their benefits). A member would need to comply with any relevant legislation (eg receiving regulated advice where this is mandatory) before the transfer could proceed.
4. Only if the rules of the DB scheme permitted 'full commutation on grounds of serious ill health'. They couldn't do so just on the grounds of 'fairness' if the rules didn't allow it.
6. True, but tough. If a member has a statutory right to do something (whether obtain a free CETV once every 12 months, or actually pursue a transfer out) then they are entitled to do so. Ultimately the cost falls back on the sponsoring employer.
7. It's not for the trustees to 'approve' transfers if a member has a statutory right to transfer and chooses to exercise it. There are limited instances where trustees can - and should - block a transfer, such as red flags suggesting the transfer may be to a 'suspect' scheme.
8. The trustees could still be roped in if a transfer to an 'obviously' dodgy scheme is allowed, whatever advice has been given and whoever gave that advice.

Then why wont most pension companies accept DB transfer-ins without IFA approval.  What are they afraid of?

The FCA and FoS roping them in to a complaint from a member when things don't turn out as the member hoped.