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Final Salary Pension Advice
Posted: 23 March 2017 16:47:51(UTC)

Joined: 23/03/2017(UTC)
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My wife has recently received a transfer value for her DBS pension of just over £600K (includes £25K in AVCs). More than we anticipated. We are both reasonably savvy investors (aged 59 and 53) and are not so naïve as to not consider the option of leaving the pension where it is.

We have the following assets:
Cash ISAs £50K
Stock/Share ISAs £80K
House £450K (mortgage to be cleared May next year)

We have other pensions totalling £30K (£25k in payment and £5k anticipated) and both currently work part-time – income £50K. In due course will also get our state pensions.

The plan would be to switch the DBS pension pot to a SIPP – draw £150K as tax free lump sum when she is 55 – spend some and add the balance to existing investments. The balance of £450K she would invest for income drawdown. Probably low drawdown whilst both still working, increasing when fully retired.

I’m not looking for specific investment advice but more advice about the process – obtaining IFA advice and then potentially disregarding this and investing in a SIPP. Also any thoughts about which SIPPs will accept the transfer of a DBS pot – I am aware some won’t, irrespective of the IFA advice.

My wife does not enjoy the best of health (another reason to switch to a SIPP) and we have no children to leave this too.

Any thoughts or advice. Thanks
Keith Cobby
Posted: 27 March 2017 13:40:12(UTC)

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I transferred my DB scheme to Alliance Trust Savings. You will have to have it signed off by a suitably qualified IFA. I negotiated a flat fee as a one-off advice. I think I found a local IFA through the Unbiased site.
2 users thanked Keith Cobby for this post.
Stevie123 on 30/03/2017(UTC), Alan M on 03/04/2017(UTC)
Adrian Bowen
Posted: 28 March 2017 09:12:05(UTC)

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In my experience, it is hard work trying to take the CTV from a DB pension entitlement. Very few IFAs will recommend it, since they are afraid of subsequent legal action for 'bad advice'. If they don't supply a positive recommendation, then many SIPPs won't accept the transfer. And even if you find one that does, it is possible that the original pension trustee will refuse the transfer.
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Stevie123 on 30/03/2017(UTC), Alan M on 03/04/2017(UTC)
Posted: 28 March 2017 13:26:50(UTC)

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I also recently transferred from a DB scheme to a SIPP with Alliance Trust. I would think about advice as two separate decisions:-

1) Advice on transfer

No getting around this if pot is more than 30K - you need to see an IFA.

Initially my worry (and I am still not sure if it was valid) was that the advice might recommend not transferring but that I might still want to i.e, incurring a cost to be blocked from doing what I wanted to.

I was able to reduce this risk by personally understanding my figures and early informal engagement with the IFA. I am also not 100% sure that you need to actually follow the advice - it is more the concept of taking it.

My personal issue though is that I don't like the Government insisting on protecting me from myself and making me pay for the pleasure of doing it. To be clear my issue is not with the IFA re this process - they have to produce standard detailed minimum reports as well as cover themselves from a regulatory perspective.

2) Advice on investing the money

This is your choice so you can choose to pay an IFA (the same on or different) for initial and ongoing investment advice, or just manage your own SIPP and investments.

I was initially leaning towards doing it all myself given that I had some experience managing mine and my wifes existing SIPPs and ISAs but in the end I decided (for first year at least) to maintain the relationship with the IFA - for which there is of course an additional charge...BUT I am far clearer on why I am paying this and it is my decision.

General point

As you will have picked up from this forum on other threads "Euphoria" for instance it isn't currently the easiest time to invest a big slug of money given asset prices so perhaps take that into account when you look at the overall options and figures.
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Stevie123 on 30/03/2017(UTC), Alan M on 03/04/2017(UTC)
Posted: 28 March 2017 15:23:10(UTC)

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Most IFA's do not offer "execution only".

If causation can be proved, where the individual down the line makes a complaint, this will let the IFA off the hook where the IFA originally recommended not to transfer.

In general, unless those in ill-health cannot get enhanced early retirement terms under the DB scheme, it is bats for

anyone between 40- 50 with more than 10-15 years pensionable service to transfer

those aged 50+ with more than 5 - 10 years
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Stevie123 on 30/03/2017(UTC)
Keith Cobby
Posted: 28 March 2017 15:48:39(UTC)

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The IFA will produce a comprehensive report which will include a figure for 'critical yield' which seems to be the most important figure. Even with a background in finance I struggled to reconcile my high figure with my own calculations on producing an income from the transfer value. I was slightly concerned that the IFA wouldn't recommend a transfer but we were able to agree that it was the right option.

I went into drawdown and took the tax free cash which I am reinvesting.

I invested the remainder between growth and income IT's and am fully invested as always.
3 users thanked Keith Cobby for this post.
Kenpen2 on 29/03/2017(UTC), Stevie123 on 30/03/2017(UTC), Alan M on 03/04/2017(UTC)
Mark Barrett
Posted: 29 March 2017 16:32:37(UTC)

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Kevin Cobby,

Ah, a tame IFA... me, struggling to find one. My situation a little bit, but not hugely. different. I have two relatively small but well over £30k tfer value DB pension schemes from the old days. My SIPP is £550k backed up by a £600k+ ISA and £300k still in the dealing account. Both mortgages (mine and the ex's) both shipped years ago. Kids, yes, love them both but now of age.

So, assume this boy probably won't spend all the money on himself and, given the low annuity rates, transferring a significant multiplier of the 'DB annual pension' into the IHT free SIPP seems like a complete no-brainer.

But how do you find a tame IFA to sign-off on what is the most obviously correct thing to do without him wanting a %age and trying to sell me a completely inappropriate 'platform'?

Don't suppose you have a phone number of someone who'll do ExeOnly for £100 of his time - it will only be minutes but I guess they'll be legally obliged to jump through the hoops and produce the completely redundant paperwork.
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Stevie123 on 30/03/2017(UTC), Alan M on 03/04/2017(UTC)
Law Man
Posted: 29 March 2017 16:39:13(UTC)

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IT used to be the case that you would be mad to give up a DB pension. However, I believe that now the scheme actuary calculates the transfer value on the basis of the very low gilts yield I.e. the transfer value is high.

Given that Mrs Investor is in weak health, it is more attractive to have capital than an annuity. So it could be better to take the transfer value.

For investment in the new SIPP:

(1) think carefully before taking a front end 25% TFLS.

(a) what will you do with the money outside a tax free wrapper?

(b) you lose the ability to take 25% of rising values of the SIPP fund by Uncrystallized Pension Fund Lump Sum Draw Down.

(2) Given investment assets are highly priced, consider phasing the cash into purchases over a period of a year or so.
4 users thanked Law Man for this post.
Alan Selwood on 29/03/2017(UTC), Stevie123 on 30/03/2017(UTC), Stephen Garsed on 30/03/2017(UTC), Alan M on 03/04/2017(UTC)
Posted: 29 March 2017 16:52:41(UTC)

Joined: 24/09/2012(UTC)
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I have just started the process to request a transfer my DB pension (approx. £530k). I had a meeting with my IFA and he agreed that in my case there is a good case to argue for the transfer.

My IFA's company have elected to deal with a third party specialising in this process - OM Pensions. I am not specifically recommending them as I have not been through the process yet, but readers may want to check out their offering as an example of what service is available. They will draw up a case based on detailed information you provide and their own analysis to either leave the DB pension in place or transfer. The more information you are able to provide yourself the better a case they can build up. They have their own recommended managers (Scottish Widows and Royal London I seem to remember, but don't quote me on that), but I am only interested in adding to my own SIPP and maybe splitting some of the pot for my IFA to manage. The process could take some time - 4-6 months - depending on individual situations. They charge according to individual stages of the process, £420 for the initial stage and up to approx. £2k if you get to the final stage of the process. Its better than a percentage of the pot! I am not clear if the pension trustees can refuse the transfer even if the recommendation is positive, I guess I may find out!

Hope this helps a little. Good luck.
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Stevie123 on 30/03/2017(UTC), Andrew Collier on 30/03/2017(UTC), Alan M on 03/04/2017(UTC)
Posted: 29 March 2017 17:46:52(UTC)

Joined: 09/02/2017(UTC)
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I also faced this situation about six months ago and obtained a transfer value of 48 times the annual pension and so decided to go ahead.

Trying to find an IFA willing to produce the required report for a reasonable fee proved very difficult and time-consuming. I must have approached about 10 IFAs before finding somebody who was prepared to go ahead on a reasonable basis. In my situation, proceeding with the transfer seemed the obvious thing to do and I didn't really need a report to tell me this. I had also done a lot of my own research into the pros and cons of transferring.

Despite this being a relatively straightforward case, some of the IFAs I approached would only act on my behalf if I agreed to using them to subsequently manage the funds released through the transfer; others wanted to charge a fee for their services of 1-2% of the transfer value. Worst of all, several IFAs wanted an outrageously high fee but clearly didn't have much expertise in advising on the pros and cons of a transfer. My impression is that IFAs know they are in a strong position because of the requirement to obtain advice and some exploit this.

I eventually found an IFA who charged a fixed fee of £1,500. The report 'sat on the fence' as regards transferring or not but was sufficient to enable the transfer to go ahead.

The lesson for me is that there is a case for closer regulation of IFA services in this field.
4 users thanked JMM2 for this post.
Stevie123 on 30/03/2017(UTC), Andrew Collier on 30/03/2017(UTC), Alan M on 03/04/2017(UTC), Tim D on 29/09/2017(UTC)
Keith Hilton
Posted: 29 March 2017 17:50:49(UTC)

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Law Man;45237 wrote:

(1) think carefully before taking a front end 25% TFLS.

You need to consider carefully the likelihood of exceeding the LTA at 75 years of age. If you have a large pension pot, then it's possibly better to take the 25% TFLS.
3 users thanked Keith Hilton for this post.
Stevie123 on 30/03/2017(UTC), Law Man on 02/04/2017(UTC), Alan M on 03/04/2017(UTC)
Cheshire Man
Posted: 29 March 2017 18:23:51(UTC)

Joined: 04/07/2012(UTC)
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My advice is not to go there and don't listen to anyone who tells you otherwise.

I transferred from a DB sceme about ten years ago and it was a disaster. I was screwed for fees and bought into what I now know were totally unsuitable investments. All because I actually trusted a guy who I paid to be my financial adviser. My losses were at least half a million quid.

I have tried to recover my losses from the firm of financial advisers, operating in Cheshire, who are still in business. They have hired expensive lawyers so they can hang onto my money. They have not argued against the substance of my case but have relied on the statute of limitations argument. In effect saying " we know that we conned you but it is too late to complain".

3 users thanked Cheshire Man for this post.
Stevie123 on 30/03/2017(UTC), Joe Soap on 30/03/2017(UTC), Alan M on 03/04/2017(UTC)
Mark Barrett
Posted: 30 March 2017 11:05:41(UTC)

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Cheshire Man,

Sorry to hear your (all too familiar) story. I guess that's why HMG make it so difficult to do because of so many horror stories. Very cynical of me to suggest that some (many) IFAs seem to only provide advice that will generate significant income for themselves.

However each case should be considered on it's own merits. If there's real risk them you are probably right to suggest extreme caution.

Me though.... I have no real ongoing financial liabilities (other than the kids and they are both working adults so any 'liability' would be my choice). A small regular monthly income from the DB schemes doesn't help me much as a) it would be taxed and b) it looks significantly less than I could reasonable generate from taking the transfer value and investing it in 'low risk' shares (utilities etc). I know, there is capital risk but I've been doing it for years consistently beating the market, not by much, but a percent here, a few there.

Anyway there's a significant sum in shares in my own name, the dividend on which now subject to additional tax (thank you Mr Osborne and Mr Hammond - I love your double taxation you thieves though I guess it was inevitable given you had promised no VAT, NI or Income Tax rises so were bound to have to go and raid every other potential source). That also subject to IHT so spend all that first.

Backed up by a £600k+ ISA. No tax but subject to IHT so start spending that if/when the 'cash' runs out.

Backed up by the substantial SIPP. Tax free if I don't withdraw. Outside IHT but which can be left to the kids. Not quite gold dust but pretty close.

So rather than a small monthly sum subject to tax that dies with me, take a substantial lump sum (low interest rates mean low annuity rates mean large transfer value multipliers - basic fixed interest arithmetic in which I am very, very well versed) in a tax fee environment that doesn't die with me, can be passed on to the kids and is not part of my estate.

I'm 56. Pensions due at 60. Me, thinking interest rates are likely to rise so annuity rates will rise so the transfer multiplier will fall. I do realise they will offer the minimum transfer value they can get away with and that some fees to transfer it are inevitable (hence me looking for a 'tame' IFA who'll do what I tell him for a modest fee) but, unless those fees are outrageous, it's a complete no brainer.

Might not be appropriate for many but, given the relatively small tfer value relative to the total available assets, that the SIPP is already in place so no additional ongoing fees, a proven track record of being able to take care of my own money and the fact that's there's more than I'm likely to ever spend then getting it transferred is the right thing to do. A question of when is appropriate. Now or when I'm 59 and 11 months old? Unfortunately I don't have a crystal ball - personally, if there were no fees, I'd like to do 1/4th this year, 1/4th next etc so spread the risk.

I think you are right to shout beware, be careful. Definitely be aware that self interest is still a huge motivator for many IFAs so don't rely blindly on them. You have to do your own homework, you have to have an idea of what you want to do and how to get it done, enough to understand the implications of acting on any advice you receive - if you don't understand, don't do it; wait, read, listen, learn until you do understand, then do it - or do something else.

Crazy that many people spend more time reading up about a new car (always interesting) than they are prepared to spend learning finance basics let alone pensions (dull, boring)..... but critical given the amount of money involved and the implications of getting it wrong. Hey, if it turns out you don't like the car you can always get something else later; not necessarily true about pensions.

My advice is be very careful if you go 'here' and, having done lots of your own research, listen very carefully with a certain degree of scepticism to what anyone has to say, whatever advice they give.

The biggest risk for me lies elsewhere - this one could easily hit the £1.25m lifetime pension limit (nasty tax implications) if I live for any length of time but, at the moment, I consider that a 'nice problem' to have. I'll worry about it when I'm a lot closer

Times like this I sort of think I should have kept my old SFA registration from the 80s and early 90s up-to-date but way to late for that now.

4 users thanked Mark Barrett for this post.
Alan Selwood on 30/03/2017(UTC), Steve G on 02/04/2017(UTC), Alan M on 03/04/2017(UTC), gillyann on 20/01/2018(UTC)
Posted: 29 September 2017 19:58:27(UTC)

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Thanks for all your previous comments and I think it would be useful to update on the process:

1. After consulting some of my ex banking colleagues, who are still involved in financial services, we opted to use Tideway as our IFA.

2. Their fee was 1% of the transfer value (£5700 ish) – based on the value of the final salary part of the fund, only payable if we opted to transfer.

3. Tideway duly produced a report – we thought this was fairly neutral and was based partly on our “lifestyle” wishes and partly on the financial risk aspect. This part was fairly straightforward with correspondence by email and the “interview” over the phone. To an extent we were always sure what we going to do but had to go through the process – deep down I would always object to paying this fee as I feel I was more than capable of understanding the risks and the financial implications.

4. We opted for AJ Bell as our SIPP platform – it was probably between them and Hargreaves Lansdown. We wanted a broker that provided an easy to use platform and good source of information and research. Honestly not sure if we picked the best one but not hung up by this.

5. The transfer of the final salary value went through smoothly enough into the AJ Bell SIPP. Timescale from start to finish was around 6 months.

6. A small portion (£2,000) of the AVC fund is held in a property fund and has had to go into a queue to be disinvested. The remainder of the AVC fund (£24,000) will not be encashed until the property fund is sorted and the overall AVC value cannot be transferred until this is completed. We are relaxed about this as this is invested in funds that have so far produced a good return.

7. We have opted to manage the SIPP portfolio ourselves – I object to paying somebody 1%. I have a good working knowledge of investments and have done research over the last six months to set up a diverse portfolio covering UK, overseas, fixed interest and alternative funds. The difficulty I will have is stepping away from daily reviews of price movements, as I do with our ISA, and leave the investments in place for the longer term.

8. Have we made the correct decision – who knows – from a financial perspective I think you will only know in say 20 years time but I’m comfortable where we are.
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