[Closed] IFA recommendation for DB Pension transfer

Problem you'll have is for a fund under £200k, the fee to advise will be a big percentage.

Given the IFA is potentially liable for miss-advising you etc, they have to cover their arses which costs money.

Also the FCA is clamping down on DB transfers. The default assumption is that its best to stay as is and the IFA has to prove its worth transfering, which is quite hard as it probably is best to leave it.

https://www.fca.org.uk/news/press-releases/fca-sets-out-next-steps-improve-defined-benefit-pension-transfer-market

The FCA will implement the ban on contingent charging in most circumstances. The ban will remove the conflicts of interest which arise where a financial adviser only gets paid if a transfer goes ahead. It will also help good advisers, who will often advise to stay put, to compete. To address ongoing conflicts, advisers must now consider an available workplace pension as a receiving scheme for a transfer and, if they recommend an alternative solution, demonstrate why that alternative is more suitable. This will help reduce the need and costs for ongoing advice.

How do you prove a SIPP (with no guarentees) is better than a DB pension (with guarentees)...

As footflaps, a lot of firms have given up their DB transfer licences or had them taken away. You may be able to get someone to do it but they'll charge you loads as the liability is on them.

Also they now need to charge up front the full cost of the assessment with the risk it will be rejected

I have a big DB pension but with no spouse the benefits aren't necessarily that great,having a pot that can be invested and inherited has it's attractions. The IFA thinks the clamp down is a lot to do with being able to use the pension income as a contribution to future care costs.

The IFA thinks the clamp down is a lot to do with being able to use the pension income as a contribution to future care costs.

There have been a huge number of miss-selling cases recently where unscrupulous IFAs advised on big DB schemes eg British Steel and took large cuts advising people to transfer to worse schemes.

The clampdown has been long overdue.

It's also shown the IFA world in a very bad light, without heavy regulation a good chunk of them just rip customers off.

https://citywire.co.uk/new-model-adviser/news/fca-to-contact-7700-steelworkers-after-finding-half-of-transfers-unsuitable/a1364548

Anybody take a guess at what "charge you loads" might be?
If its a couple of grand its still worth doing.
I understand all the mis selling problems but this one seems to be a no-brainer to me
In order to be worse off I would have to live for 50 years post normal retirement age AND manage to invest with zero growth (above inflation) between now and my 115th birthday

Yes, yes there are unscrupulous folk who would have you invest in Tibetan rain forests or something and lose all/most of your money but come on

Anybody take a guess at what “charge you loads” might be?

At a guess £3k-£5k...

but this one seems to be a no-brainer to me

Have you modelled both scenarios? Can you prove your SIPP will outperform the DB?

I dont know what standard of proof would be required. But as I outlined above the chances of me living to 115 AND managing to get zero growth over 60 years in a balanced portfolio seems remote. Yes, Armageddon might mean that the worlds stock markets all crash forever but it seems equally (un)likely that the DB pension scheme is unable to meets it liabilities.
Even with a modest 3% CAGR the SIPP would throw off about double the income with no erosion of capital

Any credible IFA will give you a free initial consultation but they will give you limited information.
Suggest you search local market and research those IFAs who appear suitable.
Shortlist three and arrange a session with each; be prepared - what are your objectives, what is your attitude to risk, what is their track record with pots and preferred risk profile, where do they invest?
The size of your pot will rule out some IFAs.
As above ^^^ just because you want to make the transfer is not an acceptable reason.
You will need to make a (very) strong case to make any progress.

Highly unlikely the transfer value is better than the DB as they normally calculate the TV based on buying an annuity to deliver the DB.

You'll be lucky to get one to touch it if it is under 200k
I had real issues getting a 750k one transferred a few months ago.

You'll also struggle to find an IFA as most are restricted for DB transfer purposes.

IFA's have brought it on themselves. They were appalling to deal with. Once mine was through it was moved and I am saving thousands a year in fees.

I was quoted a flat fee of £4k for a transfer of £230k. Chances are they will say don't transfer, but there are SIPP providers such as AJ Bell who will take a transfer even if the IFA says don't transfer.

I know an IFA who is trustworthy and has got into this area in the last few years.

He is really busy with this sort of thing but as has been mentioned before there is a lot of work to do to be able to properly advise and the risks of claims it high - that seems to be what you are paying for.

If you are interested OP - send me a private note and I will share his details.

Interestingly I was having a similar conversation with my IFA around a couple of old DB schemes and his advice was to leave well alone as it's as good as guaranteed income and would make no real difference to my overall position. Current fee is .75% (+ VAT) annually to manage my portfolio

but there are SIPP providers such as AJ Bell who will take a transfer even if the IFA says don’t transfer.

I'm very surprised by that, when I was looking the SIPP provider wanted the IFA's recommendation to explicitly mention their platform by name so as to avoid any liability for miss-selling down the line...

There are plenty who will accept insistent clients.
Your issue will be finding an IFA who will give you a statement saying you have had advice if they say don't do it.

All you need is a statement saying you have taken advice, no one cares if it is positive or negative advice.
If all they provided was a letter and a form of indemnity signed by you it would cost about £300.
The fact they could hold you to ransom for thousands is why it's falling apart around them.

They were banned from taking commission for DB transfers, so now they charge a percentage based fee ! Says it all really.

There are plenty who will accept insistent clients.

Not sure its that simple given they could be held liable for losses in the 10s of £k further down the line.

When I transferred mine the DB provider needed to see a +ve recommendation and the SIPP provider wanted to see the same. Makes sense as that puts all the liability on the IFA for 'advising' me to transfer.

NB My case was unusual, the DB has fallen into the pension protection fund and then exited it minus all the normal DB guarantees. It still wasn't a very good case to transfer but as it wasn't a big chunk of my overall pension I was happy to take a risk on it.

Not correct I'm afraid. The IFA indemnifies themselves by advising against. You cannot sue him for bad advice if you have ignored it.
The SIPP company have no liability, they are simply acting on your instruction.
The DB provider is also acting on your instruction and you have fulfilled you requirement to seek advice.

All the sued IFA's were sued for advising to move when it was a poor choice, not the other way round.
I was a deferred protected pensioner, but when the transfer amount was over 40 x the DB pension it made sense for me.
There are also inheritance benefits and the fact that your money doesn't disappear into a black hole if you die is handy as well.

Maybe I’m being simplistic but if it’s worth 50,000 to transfer but only 1k a year then even with fees it woujj mu d be worthwhile, since the average pot should be able to release 4% per year whilst maintaining value, ie a 50k fund should be worth 2k a year. Or something.

The IFA indemnifies themselves by advising against.

Well mine advised to transfer although his case was very weak.

The SIPP company have no liability, they are simply acting on your instruction.

Well the SIPP companies I was dealing with would only accept a transfer is there was a positive recommendation to transfer and they were explicitly named in the recommendation, which was pretty impressive IMO as it shows a real duty of care even if its based on not being sued down the line.

Maybe I’m being simplistic but if it’s worth 50,000 to transfer but only 1k a year then even with fees it woujj mu d be worthwhile, since the average pot should be able to release 4% per year whilst maintaining value, ie a 50k fund should be worth 2k a year. Or something.

The 4% figure is often quoted, but its by no means guaranteed. It also came from a period before massive quantitive easing which has surpassed interest rates and guilt yields. Most insurance companies, who offer annuities, are currently struggling to find investments which can guarantee long term (40+ years) returns anything like 4%. Which is why annuity rates are so poor right now.

We're also in a period of dividend reductions, with many of the staple dividend providers cutting back quite harshly, so the natural yield on a FTSE100 portfolio has fallen quite a bit.

This has the consequence of boosting transfer values right up, as they are based on buying an insurance policy to pay out the equivalent benefits.

The key difference is a DB pension is guaranteed, with inflation lined raises, for potentially 60 years. If you take the cash there are no guarantees and you're either looking at guilts with very low returns or taking a punt on stocks and shares. You might do great, but you could easily do badly (see Rolls Royce thread).

It's also worth checking what the spousal benefit is, if you're married / civil partnership you normal buy an annuity with a 50% benefit for the surviving partner. As women generally outlive men and men generally marry younger women, this is fairly standard. However, it reduces the annuity rate as it costs more to offer. What is in your DB pension?

NB By all means transfer is you can, its just probably not the great deal it appears to be.....

Well the SIPP companies I was dealing with would only accept a transfer is there was a positive recommendation to transfer and they were explicitly named in the recommendation, which was pretty impressive IMO as it shows a real duty of care even if its based on not being sued down the line.

It surprised me that AJ Bell would accept transfers against an IFA's advice. Even more surprising was the person at AJ Bell I spoke with put me onto the IFA I used.

Sounds exactly like the behaviour the FCA is trying to prevent!

If a DB pension is converted to a CETV does that lump sum have to be invested or is it possible to simply draw down on the fund? Asking for a friend...

If a DB pension is converted to a CETV does that lump sum have to be invested or is it possible to simply draw down on the fund? Asking for a friend…

It has to go into a pension AIUI, which could be a SIPP. You can only drawdown if you're 55 or over (although that age limit will rise in 7 years time). If you're under 55 you can't touch it until you're old enough.

Thanks FF. In 7 years I intend on converting my DB to a CETV and then drawing down on that fund. TBH, I'd be quite happy not getting any interest on the amount if I could put it into a SIPP or similar where basically I want no risk and simply drawing down on the pot. I'm still waiting on governmental clarity on the change to pension age of 57 whether it'll be a taper or a cliff edge. I turn 55 September 2027 so am hoping for a cliff edge rather than taper.

Good luck trying to transfer in 7 yrs time.

I was planning to take my CETV from 40 yrs of DB pension and retire in June. In January I spoke to my IFA who said " Not looking likely" I spoke to him again in July . Still the same .. Retirement at 57 looks a long way away ☹️☹️☹️

I did this earlier this year, after retiring last September

My reasoning: My DB pension wouldn't give me quite enough to retire comfortably, and it would only give my wife 60% if I died first

What I wanted: £300 p/m more than DB pension for 10.5 years, then reduce when the state pensions kick in for both of us. My wife to get 100% if I die first.

By the time I applied for this, my DB pension had been reduced, due to a time limit on claiming it (another IFA had dropped out of transferring DB pensions, so I had to start again with another IFA) This helped strengthen my case, and it was approved.

I used  Paul Richardson at www.amethyst-ifa.com, and it was transferred to a Royal London pension

I've been tracking my CETV monthly for the past year which has been insightful. Fortunately its available on demand on my employer's www so it's been interesting to track the CETV against gilts and general FTSE.

I want the flexibility of a cash pot and the ability for it to endure once I'm offski. If I get made redundant next month (as were all under consultation) I'm seriously contemplating binning it all but wish for clarity on future access.

I was planning to take my CETV from 40 yrs of DB pension and retire in June. In January I spoke to my IFA who said ” Not looking likely” I spoke to him again in July . Still the same .. Retirement at 57 looks a long way away

Sack him. It's NOT his choice whether he tries to convince you it is or not.
I hated IFA's making out they had sway over whether I transferred or not.
Tell him he either does the report and transfers or you will find an IFA who will. They are ten a penny and are all the same.

It's your pension and your money so it's your choice. If you want to do it no one can stop you.

I will be investigating a few other avenues . The big problem seems to be getting a Compliance company to approve the transfer. They have been decimated by the huge increases in their insurance. The fear of a PPI style claims rush has reduced their numbers dramatically..