DB Pension Transfer
Discussion
My recent experience:
My IFA / Financial Planner introduced me to a DB transfer advisor (Gold Standard / Chartered Financial Planner) to deal with my case. I waited 5 months for my DB advisor before he could commence my review due to his backlog of work! From my advisor search, a potential advisor pulled out of the DB market citing PI increase, so this market is definitely shrinking by the day. However, the delay worked in my favour as the long term gilt yield dropped further resulting in a higher CETV (I did incur £250 expense for the second transfer value, but it's immaterial compared the CETV increase). My case eventually closed after 3 months where I was given the green light to transfer to my own SIPP pension.
The DB advisor assessment was far more in-depth than I anticipated, which I guess show his thoroughness and diligence reviewing my pension benefits and my own personal financial position. I cannot fault the DB advisor for his actual assessment, plus his fixed fee (equate to 0.45% of pension pot) was extremely competitive given other DB advisors charge the usual 1%-3% of the pension pot. Edit to add: There was also a fixed drop dead fee payable if his assessment state not to proceed, or I decide not to proceed with the transfer which all seem fair to me.
Frustratingly, I am still awaiting (near 3 months now) for the pension administrator to release the fund as they are awaiting independent HMRC verification / covering their back-side given the high CETV value involved. Currently my hand are tied, so patience is the key, but still really frustrating as the pension platform is legit / well know and clearly listed on the FCA website for all to see.
Can't comment on CETV value as these are determined by various factors e.g. terms of pension scheme, age, long term gilt yield, pension funding position etc..
Finally, any decent DB advisor will explain all the risks, but make sure you fully understand the risks as there will be no turning back!
My IFA / Financial Planner introduced me to a DB transfer advisor (Gold Standard / Chartered Financial Planner) to deal with my case. I waited 5 months for my DB advisor before he could commence my review due to his backlog of work! From my advisor search, a potential advisor pulled out of the DB market citing PI increase, so this market is definitely shrinking by the day. However, the delay worked in my favour as the long term gilt yield dropped further resulting in a higher CETV (I did incur £250 expense for the second transfer value, but it's immaterial compared the CETV increase). My case eventually closed after 3 months where I was given the green light to transfer to my own SIPP pension.
The DB advisor assessment was far more in-depth than I anticipated, which I guess show his thoroughness and diligence reviewing my pension benefits and my own personal financial position. I cannot fault the DB advisor for his actual assessment, plus his fixed fee (equate to 0.45% of pension pot) was extremely competitive given other DB advisors charge the usual 1%-3% of the pension pot. Edit to add: There was also a fixed drop dead fee payable if his assessment state not to proceed, or I decide not to proceed with the transfer which all seem fair to me.
Frustratingly, I am still awaiting (near 3 months now) for the pension administrator to release the fund as they are awaiting independent HMRC verification / covering their back-side given the high CETV value involved. Currently my hand are tied, so patience is the key, but still really frustrating as the pension platform is legit / well know and clearly listed on the FCA website for all to see.
Can't comment on CETV value as these are determined by various factors e.g. terms of pension scheme, age, long term gilt yield, pension funding position etc..
Finally, any decent DB advisor will explain all the risks, but make sure you fully understand the risks as there will be no turning back!
Edited by chip* on Wednesday 23 September 16:39
In nearly 25 years In the industry I’ve only 2 I’ve come across that made sense.
Both HNW, excluding pensions, with no need for the pension as a pension as it were, experienced investors and with other reasons for the switches.
A large transfer value isn’t a reason to switch, despite it being alluring. People underestimate their longevity, the income and guarantees that a DB scheme offers at their peril.
If the fees are contingent on making a transfer I’d be wary of the advice offered. This is one of the areas where a true fixed fee for a dispassionate perspective make sense.
Both HNW, excluding pensions, with no need for the pension as a pension as it were, experienced investors and with other reasons for the switches.
A large transfer value isn’t a reason to switch, despite it being alluring. People underestimate their longevity, the income and guarantees that a DB scheme offers at their peril.
If the fees are contingent on making a transfer I’d be wary of the advice offered. This is one of the areas where a true fixed fee for a dispassionate perspective make sense.
worsy said:
Usually a no no but I have a valuation of 38xCETV with 11 years to retirement age (60). I do have an IFA who is advising but wondered what other people's experiences of DB transfers and CETV valuations were?
Probably no reference point but I have been offered a similar multiplierellroy said:
In nearly 25 years In the industry I’ve only 2 I’ve come across that made sense.
Both HNW, excluding pensions, with no need for the pension as a pension as it were, experienced investors and with other reasons for the switches.
A large transfer value isn’t a reason to switch, despite it being alluring. People underestimate their longevity, the income and guarantees that a DB scheme offers at their peril.
.
I'm interested to understand your point better. Particularly in respect of those circumstance you believe it does make sense as I am actively considering the option myself at present. Both HNW, excluding pensions, with no need for the pension as a pension as it were, experienced investors and with other reasons for the switches.
A large transfer value isn’t a reason to switch, despite it being alluring. People underestimate their longevity, the income and guarantees that a DB scheme offers at their peril.
.
I know a fair few people who have transferred out of a DB pension, talking OLD school aerospace 1.25% - 2% pension pa served.
Various reasons that they’ve been willing to share;
Expected longevity
Divorce (no need for spousal element) and off to the Far East!
Inheritance, you can’t leave a DB to your children and the chap had additional income streams.
A chap in my team transferred his out a couple of years ago as he wanted to leave at 55 and the penalty at the time was iirc 4% reduction per early year (not of the pot but of the pension amount), he’s just applied for VR so will probably get an additional 98 weeks pay to walk out of the door (30 years x 3 + 8 for volunteering!) at 55.
Various reasons that they’ve been willing to share;
Expected longevity
Divorce (no need for spousal element) and off to the Far East!
Inheritance, you can’t leave a DB to your children and the chap had additional income streams.
A chap in my team transferred his out a couple of years ago as he wanted to leave at 55 and the penalty at the time was iirc 4% reduction per early year (not of the pot but of the pension amount), he’s just applied for VR so will probably get an additional 98 weeks pay to walk out of the door (30 years x 3 + 8 for volunteering!) at 55.
Hope you've got lots of stamina. I got 7 months through the process before throwing in the towel.
I spoke to several experts, took a while to find an IFA who would take it on (there's a thread on here somewhere about it). Finally had one recommended to me so started passing him info then got a few weeks in and he admitted he wasn't even qualified to do the work and had to farm it out vastly increasing the initial cost estimate. This took so long that the CETV (valid for 3 months) timed out. I then decided to move to another IFA who did a more thorough assessment and recommended I transfer but wouldn't allow me to transfer into a SIPP.
I'm still a couple of years off retiring and 5 years away from being able to access my pensions so I might get back to it but, from a first attempt, it proved much more difficult than I expected.
I spoke to several experts, took a while to find an IFA who would take it on (there's a thread on here somewhere about it). Finally had one recommended to me so started passing him info then got a few weeks in and he admitted he wasn't even qualified to do the work and had to farm it out vastly increasing the initial cost estimate. This took so long that the CETV (valid for 3 months) timed out. I then decided to move to another IFA who did a more thorough assessment and recommended I transfer but wouldn't allow me to transfer into a SIPP.
I'm still a couple of years off retiring and 5 years away from being able to access my pensions so I might get back to it but, from a first attempt, it proved much more difficult than I expected.
i asked about this during lockdown as i was doing a review of my finances/ pensions etc...... for me, i’m too young to move what I have in DB pension pot. nobody is able to advise on this. I’ve just copy/ pasted one of my posts from back then that kinda summarises where i got too:
I asked this a few weeks ago, if you search my history there were quite a few useful posts from people. altho julian has already provided good information.
I struggled to get anywhere because of my age, at 35 it’s deemed too big a risk to take me away from a guaranteed amount and invest myself. Which I completely understand as if i had access to the balance after transfer there is nothing to stop me gambling it all away chasing the next greatest AIM shares!
anyway, I actually got very straight forward advice from hargreaves lansdown. they were upfront and charge £1,250 (plus vat) for the advice/ report to confirm/ reject the transfer, then 2% of any transfer value up to £250k. from all the companies I spoke to these were some of the most competitive. Although bear in mind that the upfront fee may report that you shouldn’t transfer the funds!
I asked this a few weeks ago, if you search my history there were quite a few useful posts from people. altho julian has already provided good information.
I struggled to get anywhere because of my age, at 35 it’s deemed too big a risk to take me away from a guaranteed amount and invest myself. Which I completely understand as if i had access to the balance after transfer there is nothing to stop me gambling it all away chasing the next greatest AIM shares!
anyway, I actually got very straight forward advice from hargreaves lansdown. they were upfront and charge £1,250 (plus vat) for the advice/ report to confirm/ reject the transfer, then 2% of any transfer value up to £250k. from all the companies I spoke to these were some of the most competitive. Although bear in mind that the upfront fee may report that you shouldn’t transfer the funds!
- - after this post, it was pointed out that even if the report advises that you shouldn’t move/ transfer the value, you CAN still move it. however you may then struggle to find someone willing to accept the money after being advised it’s a bad idea.
I moved mine out recently.
Few reasons for the move for me - there were others ;
1) my DB was based on a lower salary than my current earnings - c.50% - due to the way the company cap worked so the pension was poor really
2) early retirement had large penalties. I want to retire at 50 (I have a protected age) and penalties there were prohibitive
3) the scheme keep getting worse making planning difficult
4) I'd hit the pension lifetime allowance
5) my wife has a good DB pension so as a family we had the certainty of that
6) inheritance better coming out of the scheme
7) I'm young enough to work if things are not working out
Edit - my tax free amount is a lot more post the move and I can draw more at a younger age. Both these are important to me
I'm likely to be made redundant this year so will use that money for a while before I draw my pension
It's a big decision!
Few reasons for the move for me - there were others ;
1) my DB was based on a lower salary than my current earnings - c.50% - due to the way the company cap worked so the pension was poor really
2) early retirement had large penalties. I want to retire at 50 (I have a protected age) and penalties there were prohibitive
3) the scheme keep getting worse making planning difficult
4) I'd hit the pension lifetime allowance
5) my wife has a good DB pension so as a family we had the certainty of that
6) inheritance better coming out of the scheme
7) I'm young enough to work if things are not working out
Edit - my tax free amount is a lot more post the move and I can draw more at a younger age. Both these are important to me
I'm likely to be made redundant this year so will use that money for a while before I draw my pension
It's a big decision!
Edited by CAH706 on Thursday 24th September 09:33
Many advisors are pulling out of market for this type of advice. (See link).
As Ellroy said it very often doesn’t make sense unless you have enough assets outside the pension to not even touch the pot and are doing it as an IHT exercise.
https://www.moneymarketing.co.uk/news/190-advisers...
As Ellroy said it very often doesn’t make sense unless you have enough assets outside the pension to not even touch the pot and are doing it as an IHT exercise.
https://www.moneymarketing.co.uk/news/190-advisers...
ellroy said:
If the fees are contingent on making a transfer I’d be wary of the advice offered. This is one of the areas where a true fixed fee for a dispassionate perspective make sense.
Agree. I am glad FCA have banned contingent fee as I feel it's not serving the interest of the retail consumers. I was glad to be introduced to an advisor who offered to charge a fixed fee for either 1) recommendation to transfer 2) recommendation not to transfer / I decide to pull out. The DB advisor was getting paid whatever the result + there was no condition for him to manage the pension pot, so I had some comfort that he was giving me fair impartial advice. Also, I made it clear to him that if he said "no", I would happily accept his decision and go back to my merry ways.
Edited by chip* on Thursday 24th September 12:58
GT03ROB said:
I'm interested to understand your point better. Particularly in respect of those circumstance you believe it does make sense as I am actively considering the option myself at present.
2nd paragraph gives the reasons it largely made sense, their ages, family circumstances and investment/financial experience & acumen also impacted. If you want a specific answer for your own situation seek out a firm that offers that service. My current employers don’t, and it’s a decision I’m comfortable with. I can point you in the way of one decent outfit, I’m not linked to them in any way, that do and will charge a flat agreed up front fee for that advice if you need it. It doesn’t come cheap, and that’s to a good extent because of the risk of that type of business and the PI costs resulting.
Good luck, but for me the starting point of a conversation, like the FCA, is don’t.
I recently got a letter from the company that manages the db pension for a previous employer. Basically going to get offered an enhanced transfer value and the cost of the financial advisor will be met by the company. I'm assuming the enhanced value will be high enough for the financial advisor to advise that I take it and put into my sipp. Or am I being overly optimistic.
murray said:
I recently got a letter from the company that manages the db pension for a previous employer. Basically going to get offered an enhanced transfer value and the cost of the financial advisor will be met by the company. I'm assuming the enhanced value will be high enough for the financial advisor to advise that I take it and put into my sipp. Or am I being overly optimistic.
As posters have pointed out, the value shouldn't be the overriding consideration. It's a balance based on what other provisions you have.I transferred a DB pension out this year, having been given a CETV of 43x pension. I had to go through the very thorough rigmarole in order to get it transferred, I started it in January and the funds finally landed with the selected provider in July.
They ask you lots of questions, they explain the risks in great detail, and to an extent they try to talk you out of it, but only inasmuch as ensuring that you know what you are doing and why.
I've completed some extensive pension planning with two providers and with Intelligent Money. My retirement date is 2 weeks today
They ask you lots of questions, they explain the risks in great detail, and to an extent they try to talk you out of it, but only inasmuch as ensuring that you know what you are doing and why.
I've completed some extensive pension planning with two providers and with Intelligent Money. My retirement date is 2 weeks today
worsy said:
As posters have pointed out, the value shouldn't be the overriding consideration. It's a balance based on what other provisions you have.
I’m assuming the advisor would only advise a transfer if they thought the amount offered was greater/equal to the benefits of the dB scheme. And that the company that I previously worked for wouldn’t be doing this unless they thought there was a more than reasonable chance that this would be the case otherwise why go to the expense of offering it. I transferred out....funds eventually hit my SIPP account in January. Was a long process, I’ve worked as a fund manager/in finance so have a fairly good understanding of the risks and benefits. The main driver for me was the fact my kids will hopefully eb able to inherit my pension tax free so as much part of IHT planning as anything else. I think if you’re reliant on your pension in retirement income it’s going to be Very hard to justify to yourself purely on that basis though things like what the Spouse benefits are do matter and was a consideration for me. i.e. My wife would have got 50 % of my pension when I died....that should be a consideration for a lot of people.
murray said:
worsy said:
As posters have pointed out, the value shouldn't be the overriding consideration. It's a balance based on what other provisions you have.
I’m assuming the advisor would only advise a transfer if they thought the amount offered was greater/equal to the benefits of the dB scheme. And that the company that I previously worked for wouldn’t be doing this unless they thought there was a more than reasonable chance that this would be the case otherwise why go to the expense of offering it. Your ex-employer is providing the opportunity to transfer the risk/liability from themselves to you. In that scenario, whether the new scheme offers greater benefits to you will only be truly revealed with the passing of time - you now carry that risk. What is a certainty, however, is that if you chose not to transfer the benefits the DB scheme is liable to pay the calculable amount to you.
Whether a transfer is ultimately recommended or not will depend on much more than the mathematics of the situation (TVAS), including and not limited to your ability to bear the aforementioned risk. The FCA has recently attempted to put more emphasis on the importance of other factors via a move towards Appropriate Pension Transfer Analysis (APTA).
Edited by DoubleSix on Friday 25th September 18:12
I understand that I would be facing uncertainty (risk) vs the current situation of certain dB benefits if the advisor recommended transfer. But my point is, and I’m probably being pretty naive here, is that the offer has to be good enough for the advisor to recommend transfer. From what I’ve read this is unusual and that, in the vast majority of cases, you are better sticking with your db. But in that case why is the company proposing this enhanced transfer value unless it’s likely that the advisor would recommend transfer. The company are paying for the advisor which I assume is going to cost them quite a bit.
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