Final Salary Scheme Transfer Advice - how much?
Discussion
I have 2 final salary scheme pensions and I am looking to transfer out, in order to take the 25% tax free sums, and then utilise flexible draw-down arrangements on the balance.
I am planning to do this, because the transfer values (confirmed) are high, versus the annual pension offers. Respectively, 20 times, and 60 times the quoted annual pension payments.
I do not expect to be drawing a pension in 20 years time, let alone 60 years (I will be dead...!) so it makes sense to utilise the funds in a much shorter timeframe.
I have multiple other (Defined Contribution) schemes, which I have not touched yet.
My Question:
In order to get approval for the transfers, I have to show evidence of paid-for financial advice which supports the transfer (from an FCA approved independent advisor).
How much should I expect to pay for this advice?
I am planning to do this, because the transfer values (confirmed) are high, versus the annual pension offers. Respectively, 20 times, and 60 times the quoted annual pension payments.
I do not expect to be drawing a pension in 20 years time, let alone 60 years (I will be dead...!) so it makes sense to utilise the funds in a much shorter timeframe.
I have multiple other (Defined Contribution) schemes, which I have not touched yet.
My Question:
In order to get approval for the transfers, I have to show evidence of paid-for financial advice which supports the transfer (from an FCA approved independent advisor).
How much should I expect to pay for this advice?
I was quoted about 2k for the advice alone. My understanding is that if you go with the recommendations of the IFA then it will cost a lot to do. It's also my understanding that as long as you have taken the advice then you can transfer out against the advice of the IFA and in that case I think the IFA isn't liable (but I could be wrong)
I have much the same expectation as you when I get nearer to retirement. If multiples are more than about 20 then it will be transferred as I want to access a good portion of the before I reach 70!
I have much the same expectation as you when I get nearer to retirement. If multiples are more than about 20 then it will be transferred as I want to access a good portion of the before I reach 70!
I've done this with two of my pensions. Price has increased steadily over the years, and that's mainly because poor advice was given in the past, which led to claims being made, and thus the indemnity insurance costs for the IFAs have gone through the roof.
It's not a short process; you can expect a number of long meetings over several weeks, with your financial situations and plans combed over in great depth (including those of your partner if you have one) and there will be a lot of collateral required from your current pensions.
Costs are not IME related to your pension value. Abut 4 years ago it cost me c. £10k for the first pension, and for the second (about 6 months later) I did push quite hard for a discount; they advised me that a large chunk was due to the insurance costs, which they had to pass on, but I did get it down a fair bit.
Also just bear in mind that the IFA who does this work for you is not allowed to advise you on anything to do with your pensions after this process is completed, you'll need to find another one (if you need advice).
I was successful in gaining authorisation to transfer my pensions out, and for me it was a game changer; I was able to retire almost immediately the process was completed, aged 59, on a very satisfactory pension.
I've no affiliation whatsoever to the company who did the work for me (in fact I can't even remember where I got them from) but they were thorough and efficient and very decent to deal with. If you need their details drop me a note.
ETA: PS - I'm sure someone will be along shortly to tell us how it cost them 50p and took 5 minutes, but please ignore them!
It's not a short process; you can expect a number of long meetings over several weeks, with your financial situations and plans combed over in great depth (including those of your partner if you have one) and there will be a lot of collateral required from your current pensions.
Costs are not IME related to your pension value. Abut 4 years ago it cost me c. £10k for the first pension, and for the second (about 6 months later) I did push quite hard for a discount; they advised me that a large chunk was due to the insurance costs, which they had to pass on, but I did get it down a fair bit.
Also just bear in mind that the IFA who does this work for you is not allowed to advise you on anything to do with your pensions after this process is completed, you'll need to find another one (if you need advice).
I was successful in gaining authorisation to transfer my pensions out, and for me it was a game changer; I was able to retire almost immediately the process was completed, aged 59, on a very satisfactory pension.
I've no affiliation whatsoever to the company who did the work for me (in fact I can't even remember where I got them from) but they were thorough and efficient and very decent to deal with. If you need their details drop me a note.
ETA: PS - I'm sure someone will be along shortly to tell us how it cost them 50p and took 5 minutes, but please ignore them!
Edited by -Cappo- on Wednesday 14th February 14:43
-Cappo- said:
I've done this with two of my pensions. Price has increased steadily over the years, and that's mainly because poor advice was given in the past, which led to claims being made, and thus the indemnity insurance costs for the IFAs have gone through the roof.
It's not a short process; you can expect a number of long meetings over several weeks, with your financial situations and plans combed over in great depth (including those of your partner if you have one) and there will be a lot of collateral required from your current pensions.
Costs are not IME related to your pension value. Abut 4 years ago it cost me c. £10k for the first pension, and for the second (about 6 months later) I did push quite hard for a discount; they advised me that a large chunk was due to the insurance costs, which they had to pass on, but I did get it down a fair bit.
Also just bear in mind that the IFA who does this work for you is not allowed to advise you on anything to do with your pensions after this process is completed, you'll need to find another one (if you need advice).
I was successful in gaining authorisation to transfer my pensions out, and for me it was a game changer; I was able to retire almost immediately the process was completed, aged 59, on a very satisfactory pension.
I've no affiliation whatsoever to the company who did the work for me (in fact I can't even remember where I got them from) but they were thorough and efficient and very decent to deal with. If you need their details drop me a note.
ETA: PS - I'm sure someone will be along shortly to tell us how it cost them 50p and took 5 minutes, but please ignore them!
Reiterates the experience I had. It's not a short process; you can expect a number of long meetings over several weeks, with your financial situations and plans combed over in great depth (including those of your partner if you have one) and there will be a lot of collateral required from your current pensions.
Costs are not IME related to your pension value. Abut 4 years ago it cost me c. £10k for the first pension, and for the second (about 6 months later) I did push quite hard for a discount; they advised me that a large chunk was due to the insurance costs, which they had to pass on, but I did get it down a fair bit.
Also just bear in mind that the IFA who does this work for you is not allowed to advise you on anything to do with your pensions after this process is completed, you'll need to find another one (if you need advice).
I was successful in gaining authorisation to transfer my pensions out, and for me it was a game changer; I was able to retire almost immediately the process was completed, aged 59, on a very satisfactory pension.
I've no affiliation whatsoever to the company who did the work for me (in fact I can't even remember where I got them from) but they were thorough and efficient and very decent to deal with. If you need their details drop me a note.
ETA: PS - I'm sure someone will be along shortly to tell us how it cost them 50p and took 5 minutes, but please ignore them!
Edited by -Cappo- on Wednesday 14th February 14:43
Various conversations, some in depth.
Conversations with my partner as well, it was important for me that she be agreeable and fully understand.
Cost was circa £8k and that was back in 2020.
My chap was really good. I still keep in touch and am happy to share details (pm me if you want),
Not sure if he still does final salary transfers as insurance was a huge issue.
I’m sure you’ve calculated this but a couple of thoughts. Although if the cash is 60 times it is very high so probably ignore what’s below!
1) Doesn’t your DB pot allow you to take a tax free sum and then a reduced pension, most do?
And
2) Related to this never underestimate compound interest. You say you won’t be around in 20 years, hope that is wrong BTW. Your DB pension will keep going up every year both before and after you retire. It would be worth looking at what that yearly raise is capped at compared to inflation.
It means it does not take 20 years to “break even” on the commuted value. DB also gives you a guaranteed income giving you flexibility with the DC pots draw depending how they are performing.
I think having a DB and DC pensions is ideal as it gives you the best of both worlds.
1) Doesn’t your DB pot allow you to take a tax free sum and then a reduced pension, most do?
And
2) Related to this never underestimate compound interest. You say you won’t be around in 20 years, hope that is wrong BTW. Your DB pension will keep going up every year both before and after you retire. It would be worth looking at what that yearly raise is capped at compared to inflation.
It means it does not take 20 years to “break even” on the commuted value. DB also gives you a guaranteed income giving you flexibility with the DC pots draw depending how they are performing.
I think having a DB and DC pensions is ideal as it gives you the best of both worlds.
Mr Dendrite said:
I’m sure you’ve calculated this but a couple of thoughts. Although if the cash is 60 times it is very high so probably ignore what’s below!
1) Doesn’t your DB pot allow you to take a tax free sum and then a reduced pension, most do?
And
2) Related to this never underestimate compound interest. You say you won’t be around in 20 years, hope that is wrong BTW. Your DB pension will keep going up every year both before and after you retire. It would be worth looking at what that yearly raise is capped at compared to inflation.
It means it does not take 20 years to “break even” on the commuted value. DB also gives you a guaranteed income giving you flexibility with the DC pots draw depending how they are performing.
I think having a DB and DC pensions is ideal as it gives you the best of both worlds.
Might also be worth consideration about any potential partners / widows benefit should that be the case ie most DB schemes only seem to pay say 60% of what the pension originally was. 1) Doesn’t your DB pot allow you to take a tax free sum and then a reduced pension, most do?
And
2) Related to this never underestimate compound interest. You say you won’t be around in 20 years, hope that is wrong BTW. Your DB pension will keep going up every year both before and after you retire. It would be worth looking at what that yearly raise is capped at compared to inflation.
It means it does not take 20 years to “break even” on the commuted value. DB also gives you a guaranteed income giving you flexibility with the DC pots draw depending how they are performing.
I think having a DB and DC pensions is ideal as it gives you the best of both worlds.
In addition some may want to think about the Inheritance benefits etc.
Having full control of a transferred pot also allows flexibility of drawdown potentially.
Not just about the CETV multiple ie it’s not the simplest or easiest of decisions !
4 years ago I paid 1%. Should be looking somewhere around that. Some advisors cap it eg max 5k.
I didn't swap advisers afterwards, the same advice company ran my pension for a year until I moved it again as DIY is a lot cheaper. True Potential is one large advisor/wealth manager that gives advice on transferring out.
I didn't swap advisers afterwards, the same advice company ran my pension for a year until I moved it again as DIY is a lot cheaper. True Potential is one large advisor/wealth manager that gives advice on transferring out.
alscar said:
Might also be worth consideration about any potential partners / widows benefit should that be the case ie most DB schemes only seem to pay say 60% of what the pension originally was.
In addition some may want to think about the Inheritance benefits etc.
Having full control of a transferred pot also allows flexibility of drawdown potentially.
Not just about the CETV multiple ie it’s not the simplest or easiest of decisions !
All very good points. It’s a minefield. There’s no right answer only your individual answer, but I wish there was a lot better education on pensions. In addition some may want to think about the Inheritance benefits etc.
Having full control of a transferred pot also allows flexibility of drawdown potentially.
Not just about the CETV multiple ie it’s not the simplest or easiest of decisions !
Amateurish said:
Forgive my ignorance, but how can the transfer value be 60X the annual pension?
There is a simple answer (i.e. it is clear, by comparing the current annual pension figure, with the transfer value).As to why the multiple is so high - I do not know. Pensionable salary at the time I left was low by today's standards (I left that job nearly 30 years ago) and I was with the company for 8 years, so that determines the annual pension. 8/40 or 20% of pensionable salary.
Actuaries do their spreadsheet thing and come up with a CETV.
Even with compound inflation, I cannot see any reason to do anything other than transfer out to an approved scheme, take 25% tax free and flexible drawdown on the balance.
20x isn't that high by traditional standards. 60x is.
The short answer is the FCA hate people transferring people out of FS pensions. They've witch hunted the profession to the extent advisers and especially their insurers hate doing them. To help the FCA, some unscrupulous advisers absolutely milked the high 'CETV' values of the past 8-10 years by doing large volumes of unsuitable transfers (the best known being the British Steel debacle, though others were probably worse considering that scheme was about to fall into the protection fund).
Most (not all) advice from an IFA is on a contingent basis- you don't pay them unless you decide to go with their recommendation. In other words, the advisor does all the work up front and hopes it shows you should move your funds somewhere else (you can kind of guess how that's likely to go in many cases). For FS transfers, the FCA banned this practice (that guess you just did, you were right).
Now IFAs who a) have the relevant permissions/qualifications to do FS transfers and b) are willing to is quite small. They'll have quite tight screening criteria (e.g. age, reason for wanting to leave and size of the fund) before asking you to pay out of your own pocket for abridged advice. That advice will lead to an indication that if you go through the full advice process, it's more or less likely to lead to a recommendation to transfer out. Then you have to jump into the unknown. The recommendation might be to stay put. If your pension trustees are hell bent on you receiving a recommendation to transfer out, you've got yourself a problem!
The short answer is the FCA hate people transferring people out of FS pensions. They've witch hunted the profession to the extent advisers and especially their insurers hate doing them. To help the FCA, some unscrupulous advisers absolutely milked the high 'CETV' values of the past 8-10 years by doing large volumes of unsuitable transfers (the best known being the British Steel debacle, though others were probably worse considering that scheme was about to fall into the protection fund).
Most (not all) advice from an IFA is on a contingent basis- you don't pay them unless you decide to go with their recommendation. In other words, the advisor does all the work up front and hopes it shows you should move your funds somewhere else (you can kind of guess how that's likely to go in many cases). For FS transfers, the FCA banned this practice (that guess you just did, you were right).
Now IFAs who a) have the relevant permissions/qualifications to do FS transfers and b) are willing to is quite small. They'll have quite tight screening criteria (e.g. age, reason for wanting to leave and size of the fund) before asking you to pay out of your own pocket for abridged advice. That advice will lead to an indication that if you go through the full advice process, it's more or less likely to lead to a recommendation to transfer out. Then you have to jump into the unknown. The recommendation might be to stay put. If your pension trustees are hell bent on you receiving a recommendation to transfer out, you've got yourself a problem!
Tony B2 said:
Amateurish said:
Forgive my ignorance, but how can the transfer value be 60X the annual pension?
There is a simple answer (i.e. it is clear, by comparing the current annual pension figure, with the transfer value).Even with compound inflation, I cannot see any reason to do anything other than transfer out to an approved scheme, take 25% tax free and flexible drawdown on the balance.
I'll bet you £100,000 your CETV is not 60 times the current annual pension value. Why? Because you're looking at the CETV and it states the pension as at the date of leaving, which is almost 30 years out of date and doesn't include all of the revaluation since you left...
By the same token, the other one probably isn't 20 times either, although probably less out of date.
If you're advised against transferring then you'll find it all but impossible to transfer. Virtually all companies will only be willing to accept a DB transfer if the advice is positive. However, you will still have to pay the charges in full, plus VAT.
Take a long hard think before going any further. A few years ago there was some sense in transferring when the CETV was high if you never intended to annuitise. Now you'll struggle to get 20x and you're getting a much smaller pot of cash for the same annual income. This income is guaranteed, usually increases and has spousal/dependant benefits. As mentioned, short of serious ill health it's a very good idea to have a mixture of DB and DC.
It's a bad time to transfer and there's a high chance you'll be advised against it but having spent thousands in fees.
NB: There's no requirement to take abridged advice before full advice.
There isn't a requirement, but not many advisers/punters are willing to jump right in for the full cost of an advised recommendation. Hence many/most offer an abridged process beforehand.
Transferring out can make sense to some people, even without death benefit considerations. For example, being offered a £900k CETV when, under ordinary financial conditions, it would have been £300k (and could be again within a short period of time). At the opposite end of the spectrum, someone with expensive unsecured debt who can look forward to £100 a month for life beginning in 10yrs time or if they could release the whole 'pot' could make their lives bearable now. And so on.
People rightly need protecting from themselves and silly decisions (and rogue advisers/scammers) on one hand but, on the other, it's a their money and they should be free to do what they want with it. The current regime suits absolutely nobody.
Transferring out can make sense to some people, even without death benefit considerations. For example, being offered a £900k CETV when, under ordinary financial conditions, it would have been £300k (and could be again within a short period of time). At the opposite end of the spectrum, someone with expensive unsecured debt who can look forward to £100 a month for life beginning in 10yrs time or if they could release the whole 'pot' could make their lives bearable now. And so on.
People rightly need protecting from themselves and silly decisions (and rogue advisers/scammers) on one hand but, on the other, it's a their money and they should be free to do what they want with it. The current regime suits absolutely nobody.
Forester1965 said:
It's their money and they should be free to do what they want with it. The current regime suits absolutely nobody.
When you joined up you were promised an annual income for life, you weren't promised a pot of money.The current regime feels about finalised, they've stitched it up as tight as possible and there's no reason to unwind it. There aren't that many people left with DB to transfer anyway, enquiries have gone off a cliff. That's partly down to transfer values tanking but also because many have reached/are reaching retirement age.
PistonHead007 said:
When you joined up you were promised an annual income for life, you weren't promised a pot of money.
So much is true. If you have an unfunded gov scheme you're stuck with it. If you worked elsewhere, though, seems unfair to penalise people who worked for companies who happened to have a DB scheme, that they can't enjoy the same level of freedom as those with DC ones. Most consumers don't appreciate the difference, until they need some flexibility and they're told the advice/money isn't available...
PistonHead007 said:
When you joined up you were promised an annual income for life, you weren't promised a pot of money.
From a DB pension fund trustee point of view it is net neutral whether they eventually pay you an income for life or you prefer to exit now with a lump sum. No, you weren't promised a pot of money. That's true. But, in reality, they literally have a number (liability) with your name against it so it makes no difference to them whether they retain that liability or settle it by paying the same sum away to a new scheme of the members choice.
OddCat said:
From a DB pension fund trustee point of view it is net neutral whether they eventually pay you an income for life or you prefer to exit now with a lump sum.
No, you weren't promised a pot of money. That's true. But, in reality, they literally have a number (liability) with your name against it so it makes no difference to them whether they retain that liability or settle it by paying the same sum away to a new scheme of the members choice.
Not true. Each person does not have an allocated pot. They have scheme assets and these are used to cover liabilities (paying pensions/death benefits) as they arise. Why do you think they constantly have to reassess the scheme funding and frequently have to add more in, because their actuarial assumptions used for calculating their somewhat open ended liabilities change, as do things like actual investment returns.No, you weren't promised a pot of money. That's true. But, in reality, they literally have a number (liability) with your name against it so it makes no difference to them whether they retain that liability or settle it by paying the same sum away to a new scheme of the members choice.
Sometimes, the scheme will reduce a CETV if the scheme is too badly underfunded so everyone shares the pain, that's not your pot ringfenced in a corner. It costs more now to give someone a big lump sum, than drip feed it over many years. The reason some are keen to do so is because they no longer have that member as a lifetime liability and it's cheaper than doing a bulk annuity buyout.
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