Drawdown Pensions

Fenners123

I will be moving my pension to a drawdown pension as my concerns are my defined benefit scheme only pays 50% on my death and does not pass to my children if both pass away. Why do I have to pay for a financial advisor to say that I am in a position to move my pension when it is my pension.

flaneurs_lobster

Because the law says you have to.

Please see one of the existing threads on cashing-in DB pensions fo an explanation as to why it is hard.

Isthisforreal99

Partly to protect people from themselves

Albermarle

https://forums.moneysavingexpert.com/discussion/6671080/drawdown-pensions

Because normally it is bad idea to give up a guaranteed income for a potentially unstable drawdown fund.

Protections are in place due to misselling scandals/fraud in the past.

There is a search box at the top of the forum, so suggest you type in 'DB Transfer' into it and read all the past threads on the subject. You may notice the frequency of threads on the subject has dropped of in the last 3 years, as transfer values have dropped significantly in that period, making it even less attractive to transfer out.

SVaz

The outdated limit of £30k for mandatory advice is far too low, anything under, say, £120-150k / £5k a year income should be allowed to be transferred without advice.

dunstonh

https://forums.moneysavingexpert.com/discussion/6671080/drawdown-pensions

Because the transaction you want to do is statistically unlikely to be suitable for you. Nine out of ten DB pensions are unsuitable for transfer.

Because of historical transfers, when people were more freely able to move the pensions, which led to compensations and redress schemes, there were protections put in place to stop people making costly mistakes. One of those is mandatory advice.

If you are genuinely in the one in ten where it is suitable to transfer, then it can seem unnecessary. However, for the nine in ten where it is unsuitable to transfer, it acts as a safety guard.

LHW99

An a DB pension is a promise to pay an income, there is no individual pot. The CETV offered is how much the pension admin think it will cost them to provide the promised pension, presumably while not disadvantaging those who are left.

Marcon

I will be moving my pension to a drawdown pension as my concerns are my defined benefit scheme only pays 50% on my death and does not pass to my children if both pass away.

Your DB pension also pays out for life, for you and then for your spouse.

Putting the money in drawdown means you have to be constantly vigilant about the possibility of running out of cash. You could have a very cash strapped old age…

Why do I have to pay for a financial advisor to say that I am in a position to move my pension when it is my pension.

That's not the role of the financial adviser and you haven't a hope of finding one who will say that unless you have very substantial assets in addition to the DB pension and it can be shown (as required by the FCA rulebook) that a transfer would be in your best financial interests.

The law is there to protect people who don't realise that transferring isn't the marvellous move so many fondly believe, dazzled as they are by the transfer value. Pound signs whizzing before the eyes can have a mesmerising effect!

Albermarle

A recent thread on the same subject.

Financial adviser for a DB transfer — MoneySavingExpert Forum

Cobbler_tone

I always look at this the other way. These are people who had (for example) £400k in a DC pension would never buy an annuity. I think it is an understandable emotional reaction, without full appreciating the potential consequences. It can be difficult to visualise 10, 20, 30 years into the future. Hence why some don't contribute a reasonable amount to pensions in the first place.

MEM62

Why do I have to pay for a financial advisor to say that I am in a position to move my pension when it is my pension.

As others have alluded, to prevent people from their own poor, and sometimes disastrous, decision making.