DB Pension Transfer Advice (SIPP)

[Talksteer]

I have a defined benefit scheme which is now closed to further contributions and will if I leave it for my 25 years to retirement devalue itself as it is inflated by CPI with a 2% cap.

I would like to shift this to a SIPP, ideally just to a mobile investment platform like IG (or Hargreaves Landsdown) which I use for my ISA share dealing. Unfortunately it looks like I have to waste about £3k on financial advice to do this.

Does anyone know of a streamlined financial advice service that will tick enough boxes to let me move the pension over?

I'm a big boy I understand exponentials and I plan to keep my new DC pension going until I retire or my SIPP exceeds the tax free allowance limits.

[LeoSayer]

Question was asked last week:
https://www.pistonheads.com/gassing/topic.asp?h=0&...

[LeoSayer]

Big boy or not this will never be a tick-box exercise and based on what you have said, you have no chance of getting a positive recommendation to transfer. I'm aware of one firm AJ Bell that will take transfers from insistent clients.

See the link below to see the 92 page guidance for firms offering advice on pension transfers. That should give you an idea of what you will be paying well north of £3k for.

https://www.fca.org.uk/publication/finalised-guida...

You have mentioned one potential negative with your DB scheme and none of the benefits. Having a combination of DB and DC is an enviable position to be in and with so many years to go before you retire, it gives you a huge amount of flexibility.

[DoubleSix]

Talksteer said:

I have a defined benefit scheme which is now closed to further contributions and will if I leave it for my 25 years to retirement devalue itself as it is inflated by CPI with a 2% cap.

I would like to shift this to a SIPP, ideally just to a mobile investment platform like IG (or Hargreaves Landsdown) which I use for my ISA share dealing. Unfortunately it looks like I have to waste about £3k on financial advice to do this.

Does anyone know of a streamlined financial advice service that will tick enough boxes to let me move the pension over?

I'm a big boy I understand exponentials and I plan to keep my new DC pension going until I retire or my SIPP exceeds the tax free allowance limits.

lol

[Talksteer]

DoubleSix said:

Talksteer said:

I have a defined benefit scheme which is now closed to further contributions and will if I leave it for my 25 years to retirement devalue itself as it is inflated by CPI with a 2% cap.

I would like to shift this to a SIPP, ideally just to a mobile investment platform like IG (or Hargreaves Landsdown) which I use for my ISA share dealing. Unfortunately it looks like I have to waste about £3k on financial advice to do this.

Does anyone know of a streamlined financial advice service that will tick enough boxes to let me move the pension over?

I'm a big boy I understand exponentials and I plan to keep my new DC pension going until I retire or my SIPP exceeds the tax free allowance limits.

lol

Took financial advice, financial advice say's I'm a big boy and can do what I want, transferring out.

lol

WPS advisory for all those trying to find an advisor willing to work with transferring out of a DB scheme.

[supersport]

Talksteer said:

Took financial advice, financial advice say's I'm a big boy and can do what I want, transferring out.

lol

WPS advisory for all those trying to find an advisor willing to work with transferring out of a DB scheme.

A quick google does not inspire confidence, quite the opposite.

[Meeten-5dulx]

Talksteer said:

Took financial advice, financial advice say's I'm a big boy and can do what I want, transferring out.

lol

WPS advisory for all those trying to find an advisor willing to work with transferring out of a DB scheme.

Are you managing the SIPP yourself or getting advice?

I took mine out near darn 2yrs ago, yunno, just before Rona obliterated the markets……
But I’m glad to say that the portfolio has increased 40pc… after extortionate fees…. I don’t think I would have been able to get that level of performance.

[rlg43p]

supersport said:

Talksteer said:

Took financial advice, financial advice say's I'm a big boy and can do what I want, transferring out.

lol

WPS advisory for all those trying to find an advisor willing to work with transferring out of a DB scheme.

A quick google does not inspire confidence, quite the opposite.

We used WPS and they were incredibly conservative. Not impressed. Recommended we stay put for a trivial monthly pension. I'd have to be an insistent client to get the money out.

[LeoSayer]

OP please can you post the rationale used by the firm to recommend the transfer?

[Guyr]

I've done two transfers from DB to SIPP.

First one was about 5 years ago and required formal advice, but was relatively easy.

Second was about a year ago and took incredible efforts to get done. Very few advisors will even consider doing this now, as their professional indemnity insurance for doing it is so expensive. I found one eventually and they cost me £15k. Even they stopped doing it last year-end as it wasn't worth them renewing their insurance.

It was also very hard to convince their own compliance people that it was ok, even though I have been personally registered with the FCA as an Investment Advisor in the past and had spent 20 years working in finance and investment and have a Degree in Finance.

The entire world is compliance mad, partly from fear, but mainly as a result of numerous successful claims against firms that gave bad advice.

[Carbon Sasquatch]

Inflation risk is starting to worry me with the DB schemes.

Capped at CPI up to 2.5% used to feel OK - not so much any more......

[rfisher]

Carbon Sasquatch said:

Inflation risk is starting to worry me with the DB schemes.

Capped at CPI up to 2.5% used to feel OK - not so much any more......

Which DB schemes are capped at 2.5%?

[LeoSayer]

rfisher said:

Which DB schemes are capped at 2.5%?

A relatively small portion of my deferred DB scheme increases in line with price inflation or 2.5% a year whichever is lower.

A much larger part increases with price inflation or 5% a year whichever is lower.

[PM3]

rfisher said:

Carbon Sasquatch said:

Inflation risk is starting to worry me with the DB schemes.

Capped at CPI up to 2.5% used to feel OK - not so much any more......

Which DB schemes are capped at 2.5%?

Mine . ( a deferred DB )

[Carbon Sasquatch]

DB schemes are a mix but most have some cap on the inflation increases - older ones may be uncapped, then it seems RPI capped at 5% or later CPI capped at 2.5% or some other variation.

Don't just look at the percentage - whether it increases with RPI or CPI is also significant.

[SunsetZed]

PM3 said:

rfisher said:

Carbon Sasquatch said:

Inflation risk is starting to worry me with the DB schemes.

Capped at CPI up to 2.5% used to feel OK - not so much any more......

Which DB schemes are capped at 2.5%?

Mine . ( a deferred DB )

Mine also, another reason I'd like to transfer out of it but due to the stupid rules no chance of finding an advisor to allow me to make that transfer.

[Talksteer]

LeoSayer said:

OP please can you post the rationale used by the firm to recommend the transfer?

Obviously not going to post actual documents as they contain large amounts of personal information including conversations with the advisor.

TBH I did most of the heavy lifting:

My situation is 40 y/o - £440k pot = £13k pa DB pension (all numbers rough rounding except age).

I have a wife and 2 children, £400k house, £280k mortgage, my other DC scheme would on retirement be expected to pay £19k pa. I have £240k in stocks which I built from ~£10k.

DB Scheme was closed to further payments and benefits were scheduled to increase by CPI capped at 2.5%.

My analysis:

Looking back at CPI data, over any given 25 year span from 1960 to the present that would result in a loss of purchasing power of 13-79% relative to today’s money. Ergo over the timescales I have to wait a DB pension with a 2.5% cap as actually not guaranteed income.

For 25 year holding periods starting in 1960 the purchasing power of the pension would be compared to inflation:

Median	49.5%
Mean	51.7%
Maximum	87.1%
Minimum	21.4%

If we limit the starting point to 1980 to avoid generally poor handling of the UK economy in the 70’s then the following numbers would come out.

Median	76.5%
Mean	78.7%
Maximum	87.1%
Minimum	68.0%

However the opposite is true for most stock index based investments. If we look at the FTSE 100 since 1984 if we take any 15 year period it never loses money. For any given 25 year period is make a minimum annual return is 6% and the maximum is 10%, admittedly there is only 10 data points in that example.

Ergo my intent is to take the pot, put it in an AJ Bell SIPP put most of it in index funds tracking major indices and take a small portion of it that I will invest in technologies that I understand better than MBA's do. If the global indices fail to out perform my DB fund over a 25 year period I suspect that we are all in substantially greater trouble than a slight loss of pension income!

Basically I convinced the advisor that, I knew what I was doing with investments and broader long term economics and I showed that I would not be penniless if my investments under performed and more importantly wouldn't be too pissed off (and sue him) if they went down for many years over that 25yr period,

Edited by Talksteer on Thursday 16th December 15:38

[Zigster]

Bear in mind that revaluation increase caps in deferment are over the total period rather than applied annually. So inflation would have to stay high for quite a long period to cap the overall revaluation between leaving pensionable service and retirement. A north period of higher inflation is unlikely to be a problem.

Pension increase caps in payment are applied annually.

[Meeten-5dulx]

Talksteer said:

LeoSayer said:

Ergo my intent is to take the pot, put it in an AJ Bell SIPP put most of it in index funds tracking major indices and take a small portion of it that I will invest in technologies that I understand better than MBA's do. If the global indices fail to out perform my DB fund over a 25 year period I suspect that we are all in substantially greater trouble than a slight loss of pension income!

Basically I convinced the advisor that, I knew what I was doing with investments and broader long term economics and I showed that I would not be penniless if my investments under performed and more importantly wouldn't be too pissed off (and sue him) if they went down for many years over that 25yr period,

Edited by Talksteer on Thursday 16th December 15:38

Not the same timespan or pot size, but I have a 10yr window in which to maximise my pot. Using AJ Bell to hold the SIPP
It's up 40% in approx 2yrs.
I'd happily have this sum now and work off a 4% dividend....
I decided I was too reckless to manage it myself and am paying someone to do it for me. Granted the fees are eye watering, but ultimately, they are bringing in a larger return than I think I could have managed.

Along side that I have a DC scheme that I pay 6% and company adds 12% - even after considering a punitive tax for being over the lifetime limit, it is a gain and will help me retire as early as possible.

[Talksteer]

Zigster said:

Bear in mind that revaluation increase caps in deferment are over the total period rather than applied annually. So inflation would have to stay high for quite a long period to cap the overall revaluation between leaving pensionable service and retirement. A north period of higher inflation is unlikely to be a problem.

Pension increase caps in payment are applied annually.

This adjusts the calculation slightly, obviously inflation is at historically low levels for the past 25 years. Though current conditions, the fact that Donald Trump was US president and Jeremy Corbyn wasn't that far away from being UK PM does go to show that unpredictable events like hyper inflation aren't impossible.

	Since 1960	Since 1980
Min	21.46%	70.85%
Max	100.00%	100.00%
Median	53.06%	90.14%
Mean	57.41%	90.62%
Win/Loss	"6 / 29"	6/7

It doesn't affect the upside however which is potentially quite substantial. I've refined my previous estimates on FTSE 100 returns as I was applying 2.2% inflation to all the returns rather than the specific inflation over each 25 year period. In which case the FTSE 100 total return beat inflation by 4.6-7.11%, that would result in a pot £1.35-2.45 million in today's money after 25 years invested.

Min	4.60%
Max	7.11%
Median	6.05%
Mean	6.04%

Obviously other index funds are available.

Does anyone know a good source for long term total returns of NASDAQ, S&P, MCI global etc?

Edited by Talksteer on Friday 17th December 12:41

Edited by Talksteer on Friday 17th December 19:54