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  • FIRST POST
    • phykell
    • By phykell 10th Sep 18, 12:23 PM
    • 20Posts
    • 3Thanks
    phykell
    IFA Rubber Stamp
    • #1
    • 10th Sep 18, 12:23 PM
    IFA Rubber Stamp 10th Sep 18 at 12:23 PM
    Hi,

    I have a final salary pension but its ongoing management is an issue as any queries I have are dealt with very slowly, if at all. Although I may, in theory, lose some value if I transfer it out, Im certain that I want to consolidate it with one of my other pensions. Unfortunately, its claimed that because the transfer value exceeds a specific amount, legislation applies which requires me to show that I have taken the advice of an IFA. Can anyone suggest the quickest and most effective route? I imagine there will need to be a charge involved even if an IFA is effectively just rubber-stamping the transfer process.

    Thanks
Page 4
    • WillowCat
    • By WillowCat 14th Sep 18, 9:05 PM
    • 859 Posts
    • 1,031 Thanks
    WillowCat
    You don't feel that might have encouraged them to find reasons to recommend a transfer?
    Originally posted by Dox
    As I wanted a transfer anyway it was pretty irrelevant. For me, it was a box ticking exercise.
    • phykell
    • By phykell 17th Sep 18, 4:58 PM
    • 20 Posts
    • 3 Thanks
    phykell
    Yes, some final salary schemes have more generous transfer values than others.

    But, and this is the important bit, you can't transfer your final salary scheme to a different final salary scheme offering a higher transfer value.
    Originally posted by HappyHarry
    It wouldn’t be another final salary scheme - I was planning to move it to my company’s defined contribution workplace pension scheme or perhaps a SIPP (most likely). What I want is a pension that pays something more in accordance with the transfer value because, with my current DB scheme, it would take over forty years to recoup the transfer value at a retirement age of sixty; I’m sure I can do better with a SIPP, etc.
    Last edited by phykell; 17-09-2018 at 5:02 PM.
    • Malthusian
    • By Malthusian 18th Sep 18, 3:11 PM
    • 5,600 Posts
    • 9,273 Thanks
    Malthusian
    Is sixty the Normal Retirement Age?

    If not the annual pension at the NRA is what you should be comparing with. Given that you also have DC pensions, you will have the option of retiring at 60 and spending those down until the DB pension kicks in with no actuarial penalty.
    • phykell
    • By phykell 18th Sep 18, 5:29 PM
    • 20 Posts
    • 3 Thanks
    phykell
    Is sixty the Normal Retirement Age?

    If not the annual pension at the NRA is what you should be comparing with. Given that you also have DC pensions, you will have the option of retiring at 60 and spending those down until the DB pension kicks in with no actuarial penalty.
    Originally posted by Malthusian
    Yes - the NRA is 60 according to the transfer valuation.

    The transfer value does seem to be very generous at approximately 40x what the annual pension would be so I think now is definitely the right time to transfer out. It's a shame the need for IFA advice for values exceeding 30k isn't obviated when the transfer value exceeds a given multiple (say 30x) of the annual pension. Consequently, it looks as though it will cost me upwards of 1% of the transfer value to transfer out.
    • Malthusian
    • By Malthusian 20th Sep 18, 9:44 AM
    • 5,600 Posts
    • 9,273 Thanks
    Malthusian
    It's a shame the need for IFA advice for values exceeding 30k isn't obviated when the transfer value exceeds a given multiple (say 30x) of the annual pension.
    Originally posted by phykell
    Not really. The higher the transfer value, the more you stand to lose. The CETV multiple has very little to do with whether a DB transfer is a good idea or not.

    Consequently, it looks as though it will cost me upwards of 1% of the transfer value to transfer out.
    If 1% is the difference between the transfer being a good idea or not, then it's a bad idea.

    If you will be that much better off by transferring, 1% of the value should be trivial. It's like buying a Lambo and complaining about the cost of the gold-plated door handles.

    I'm not saying it's a bad idea - 40x of the pension at NRA is superficially attractive. But that in itself does not make it a good idea to transfer.

    There is an alternative that doesn't involve shelling out for advice you believe you don't need - get the qualifications yourself and authorise your own pension transfer. I believe in total, it costs around 1,600 to get the necessary qualifications from the CII (other gatekeepers are available). Add some time cost for attending the exams and applying for FCA registration and you should still be well under the amount an IFA would charge. I'm not adding any time cost for studying for the exams as if you don't need advice you already know that stuff.

    There is no requirement for IFA advice, incidentally. The requirement is for regulated advice independent of the scheme. A restricted adviser not linked to the scheme is fine.
    • phykell
    • By phykell 23rd Sep 18, 2:54 PM
    • 20 Posts
    • 3 Thanks
    phykell
    Not really. The higher the transfer value, the more you stand to lose. The CETV multiple has very little to do with whether a DB transfer is a good idea or not.
    Originally posted by Malthusian
    The multiple, as I understand it, is based on the annual value that the DB scheme will pay so the closer you are to the stipulated retirement, the more relevant the multiple is. For example, if Im fifty years old and my multiple is forty then to break even, Id have to live to age ninety (a simplification of course) and Id have to hope that the pension fund itself would be able make the payments (without collapsing, etc.).

    If you will be that much better off by transferring, 1% of the value should be trivial. It's like buying a Lambo and complaining about the cost of the gold-plated door handles.
    More like buying the car and being told I have to then pay extra for a high performance driving test which I would need to pass before I could take the car
    • Thrugelmir
    • By Thrugelmir 23rd Sep 18, 4:52 PM
    • 62,850 Posts
    • 55,830 Thanks
    Thrugelmir
    Im sure I can do better with a SIPP
    Originally posted by phykell
    Complancey is an investors worst enemy.

    Bull markets are born on pessimism, grow on scepticism,
    mature on optimism and die on euphoria.

    Sir John Templeton
    "The most dangerous thing is to buy something at the peak of its popularity. At that point, all favourable facts and opinions are already factored into its price and no new buyers are left to emerge." - Howard Marks
    • Malthusian
    • By Malthusian 24th Sep 18, 9:04 AM
    • 5,600 Posts
    • 9,273 Thanks
    Malthusian
    The multiple, as I understand it, is based on the annual value that the DB scheme will pay so the closer you are to the stipulated retirement, the more relevant the multiple is. For example, if Im fifty years old and my multiple is forty then to break even, Id have to live to age ninety (a simplification of course)
    Originally posted by phykell
    You wouldn't have to live to age 90 as the DB pension is inflation-linked. If you have a spouse, or will have one in the future, then he/she needs to die early as well for the pair of you to not break even.

    If someone cashes in their DB pension and either spunks it up the wall or invests in Cape Verde storage pods and loses the lot, then the break even point is whenever they would have lost all their money - probably day 1. Obviously, this doesn't apply to you specifically. However, if a few hundred people cash in DB pensions then it is a fact that some of them will blow the lot.

    In its wisdom the Government says that all few hundred of them have to take advice, in part to deter those few of them from losing all their money. It may be annoying if you know you are not one of those people who will lose the lot, but this is one of those cases where the many have to pay to save the few from themselves and so that the many can enjoy living in a civilised society, like FSCS levies, or compulsory car insurance, or the NHS.

    and Id have to hope that the pension fund itself would be able make the payments (without collapsing, etc.).
    There is very little you need to hope for. If the fund collapses while you are already receiving payments, you will receive 100% of your pension from the PPF.

    If the fund was in great danger of collapsing then it's unlikely they would be offering you a 40x CETV multiple.
    Last edited by Malthusian; 24-09-2018 at 9:08 AM.
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