How to transfer a DB pension with minimal/no advice
Discussion
I have a smallish DB pension from a previous employer for which I've just received a CETV quote. I'm pretty happy (as a pensions actuary) that I can transfer it to a DC pension fund and with pretty low returns achieve a bigger income at retirement.
But my Fidelity SIPP won't accept transfers from DB plans.
Does anyone have any tips on how I can transfer?
But my Fidelity SIPP won't accept transfers from DB plans.
Does anyone have any tips on how I can transfer?
As I understand I it you are required by law to obtain advice when transferring out of a DB fund if the transfer value exceeds £30k.
Iif the receiving scheme will not accept transfers in from a DB scheme then you could transfer to a scheme that does accept them, and then transfer the now DC funds into the target scheme. In addition to the advice fees this will probably incur charges from the 'intermediary' provider, and will also extend the length of time your funds are uninvested (which of course is irrelevant to you when you're In a DB scheme, but could make a difference, depending on fund performance, for a DC scheme).
Iif the receiving scheme will not accept transfers in from a DB scheme then you could transfer to a scheme that does accept them, and then transfer the now DC funds into the target scheme. In addition to the advice fees this will probably incur charges from the 'intermediary' provider, and will also extend the length of time your funds are uninvested (which of course is irrelevant to you when you're In a DB scheme, but could make a difference, depending on fund performance, for a DC scheme).
Current rules say that the holder of a DB fund wishing to transfer out of, where a saver is transferring a fund valued at over £30,000, must receive financial advice. The pension provider receiving the transfer doesn’t need to stipulate that this advice is received, but I only know of one provider which doesn't insist that not only has the advice been received (and evidence of the audit trail is requested), but that the advice is also in favour of a transfer.
These days, transferring out of a DB scheme is a lot easier to argue and justify - it's not 'just' about assessing critical yield - pension freedoms, gilt yields and other factors can make the case logical and irresistible. But the responsibility on the adviser who underwrites the advice is just as onerous. Advisers, these days for instance, refer to hyperbolic discounting (how people value money), so the process is just as tough and from a indemnifying perspective, just as potentially harmful to any business.
These days, transferring out of a DB scheme is a lot easier to argue and justify - it's not 'just' about assessing critical yield - pension freedoms, gilt yields and other factors can make the case logical and irresistible. But the responsibility on the adviser who underwrites the advice is just as onerous. Advisers, these days for instance, refer to hyperbolic discounting (how people value money), so the process is just as tough and from a indemnifying perspective, just as potentially harmful to any business.
PurpleMoonlight said:
You are a pensions actuary and you can't think of an alternative course of action?
Nope - hence my question. I deal with large corporate pension plans not individual advice. So, while I might understand the maths behind projecting benefits, mortality stats, etc, I have little experience of the practicalities behind transferring DB pensions into DC environments.Thanks to the rest of you (especially Ginge R).
The CETV is a little over £55k, so not trivial but not large. Given how low yields are (and, as a pensions actuary, I do understand how those feed into CETVs) that CETV is pretty high given my age and deferred benefit. It has an NRA of 65 and I'm intending to retire before then and it has a pretty penal early retirement factor. So, particularly with pensions freedom, it seems sensible to transfer it.
But, as you say, advisers generally view it as high risk so not a trivial piece of advice for them to confirm what I already know.
The CETV is a little over £55k, so not trivial but not large. Given how low yields are (and, as a pensions actuary, I do understand how those feed into CETVs) that CETV is pretty high given my age and deferred benefit. It has an NRA of 65 and I'm intending to retire before then and it has a pretty penal early retirement factor. So, particularly with pensions freedom, it seems sensible to transfer it.
But, as you say, advisers generally view it as high risk so not a trivial piece of advice for them to confirm what I already know.
When I was investigating a transfer I found that the majority of advisers wanted 3% of the fund value, so that would translate to around £1,500 in your case.
I had a relatively large fund so ended up finding someone who was able to advise for a fixed fee.
The reason I transferred via an intermediary scheme was that my 'target' scheme wasn't able to pay the fees out of the transfered funds, which meant I would have had to pay them out of taxed income. The intermediary scheme was willing to pay out of the transfered funds which got me around that problem.
I had a relatively large fund so ended up finding someone who was able to advise for a fixed fee.
The reason I transferred via an intermediary scheme was that my 'target' scheme wasn't able to pay the fees out of the transfered funds, which meant I would have had to pay them out of taxed income. The intermediary scheme was willing to pay out of the transfered funds which got me around that problem.
Zigster said:
Thanks to the rest of you (especially Ginge R).
The CETV is a little over £55k, so not trivial but not large. Given how low yields are (and, as a pensions actuary, I do understand how those feed into CETVs) that CETV is pretty high given my age and deferred benefit. It has an NRA of 65 and I'm intending to retire before then and it has a pretty penal early retirement factor. So, particularly with pensions freedom, it seems sensible to transfer it.
But, as you say, advisers generally view it as high risk so not a trivial piece of advice for them to confirm what I already know.
My pleasure. You're correct, it's an area which only results in increased levies for the vast majority of good advisers. This, published today, shows how four firms account for nearly 75% of claims. Although transferring out of a SIPP is not directly relating to your DB-DC/SIPP question, a scam invariably starts by someone naive transferring into a SIPP. The whole area has become conflated as good practice gets caught up by bad practice.The CETV is a little over £55k, so not trivial but not large. Given how low yields are (and, as a pensions actuary, I do understand how those feed into CETVs) that CETV is pretty high given my age and deferred benefit. It has an NRA of 65 and I'm intending to retire before then and it has a pretty penal early retirement factor. So, particularly with pensions freedom, it seems sensible to transfer it.
But, as you say, advisers generally view it as high risk so not a trivial piece of advice for them to confirm what I already know.
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