The Lemon Fool

Hi,

Had my first contact with an IFA today about a DB pension transfer. The IFA works for a reputable firm and from some online research he is legit and qualified/experienced with pension transfers. After he learnt I am not yet close to retirement, he said his firm was unlikely to want to provide advice as (in my words) it fell outside their risk appetite. When I queried the criteria, he indicated that their position is changing every few weeks in light of what they are gleaning from FCA activity/commentary (I assume directly and from other advisors), but they are now only advising on DB pension transfers for those already in retirement. He's going to double-check with HQ and confirm back but my expectations were well set...

Somewhat kicking myself for not transferring this a year or so ago...

From other threads I have a couple of IFA names/firms to follow up with. But if you've completed a DB pension transfer of a material amount to a SIPP in 2021, I'd be grateful if you'd respond here or privately message me.

Thanks
-b

ReallyVeryFoolish wrote:He means retired as in not working, but not yet drawing the DB pension?

He didn't make that distinction, but I would suppose so, yes.

bofh wrote:their position is changing every few weeks in light of what they are gleaning from FCA activity/commentary (I assume directly and from other advisors)

Argh, my timing is particularly off - yesterday the FCA released a 90 page pension transfer block(er)buster aptly named "Finalised guidance FG21/3: Advising on pension transfers"
https://www.fca.org.uk/publication/finalised-guidance/fg21-3.pdf

I imagine firms not directly involved in the review process are busy trying to figure out what this means for them...

bofh wrote:Hi,

Had my first contact with an IFA today about a DB pension transfer. The IFA works for a reputable firm and from some online research he is legit and qualified/experienced with pension transfers. After he learnt I am not yet close to retirement, he said his firm was unlikely to want to provide advice as (in my words) it fell outside their risk appetite. When I queried the criteria, he indicated that their position is changing every few weeks in light of what they are gleaning from FCA activity/commentary (I assume directly and from other advisors), but they are now only advising on DB pension transfers for those already in retirement. He's going to double-check with HQ and confirm back but my expectations were well set...

Somewhat kicking myself for not transferring this a year or so ago...

From other threads I have a couple of IFA names/firms to follow up with. But if you've completed a DB pension transfer of a material amount to a SIPP in 2021, I'd be grateful if you'd respond here or privately message me.

Thanks
-b

There was an article in the FT in Feb about the reducing number of IFAs offering DB transfer advice and the increasing fees (due to litigation/insurance costs) which may be of interest: see https://lemonfool.co.uk/viewtopic.php?f=17&t=26419&p=388354&hilit=ifa#p388354

ReallyVeryFoolish wrote:I think it's probable that sometime in the next decade there's going to be another pension misselling scandal. This time involving DB > DC pension transfers. (I have first hand experience of it in the 1990's the first time round).

I think it unlikely that there could be a repeat of the 1988 to 1994 frenzy of transfers and opt outs. There aren't the same numbers of out of control salesman able to quote phantom returns with regulator approval and there aren't the same number of DB members able to be hoodwinked. For that matter, the transfer values out should better reflect the value of benefits being given up.

ReallyVeryFoolish wrote:

bofh wrote:

ReallyVeryFoolish wrote:He means retired as in not working, but not yet drawing the DB pension?

He didn't make that distinction, but I would suppose so, yes.

Very small target demographic then. I recall it is the norm for DB schemes to refuse any request to transfer out within 1 year of the plan retirement date anyway.

RVF

Had a callback from the IFA who confirmed that his firm are no longer giving advice to individuals who are not yet an age when they could exercise their DB pension on the basis of "why give up pension benefits prior to being in a position to exercise them?". So in his firms case that means no DB pension advice to under 55s.

I've just emailed the pension scheme administrator to ask for the names of advisors/firms who are familiar with their pension scheme and who help with DB pension transfers. I've explicitly stated I'm not asking for recommendations or advice from the Scheme administrators. Let's see if this is a shortcut...

For anyone interested, this is a useful resource for DB pension news: https://citywire.co.uk/new-model-adviser/search?q=db+transfer

bofh wrote:From other threads I have a couple of IFA names/firms to follow up with. But if you've completed a DB pension transfer of a material amount to a SIPP in 2021, I'd be grateful if you'd respond here or privately message me.

I don't know if you picked this one up from other threads, but I and a few others got DB->SIPP transfers via SIPPclub (Better Retirement Group). https://sippclub.com/why-a-final-salary-transfer-could-be-best-now/

However, mine was in 2018 and I see their structure and fees have changed considerably since. Then they did it on a no-transfer-no-fee basis, and the fee if you did transfer was 1% min £2k max £7.5k. As you'll see, they're no longer no-transfer-no-fee (although I suspect they will always OK a transfer) and it's now £4k + 1%, max £25k. Still, the Initial Check is free, and you can always call them to try and suss out if my always-OK suspicion is correct....

mc2fool wrote:

bofh wrote:From other threads I have a couple of IFA names/firms to follow up with. But if you've completed a DB pension transfer of a material amount to a SIPP in 2021, I'd be grateful if you'd respond here or privately message me.

I don't know if you picked this one up from other threads, but I and a few others got DB->SIPP transfers via SIPPclub (Better Retirement Group). https://sippclub.com/why-a-final-salary-transfer-could-be-best-now/

However, mine was in 2018 and I see their structure and fees have changed considerably since. Then they did it on a no-transfer-no-fee basis, and the fee if you did transfer was 1% min £2k max £7.5k. As you'll see, they're no longer no-transfer-no-fee (although I suspect they will always OK a transfer) and it's now £4k + 1%, max £25k. Still, the Initial Check is free, and you can always call them to try and suss out if my always-OK suspicion is correct....

Thanks mc2fool. I have them at the top of my list, although admit I got a bit put off by this report from 29/10/2020:

Northampton-based IFA Better Retirement Group has lost its defined benefit (DB) pension transfer permissions after failing to renew its professional indemnity (PI) insurance, New Model Adviser has learned.

A notice on the FCA register says the firm must cease advising on pension transfers from 14 October 2020.

It says: ‘Effective from 14 October 2020, the firm must immediately cease: advising on conversion or transfer of pension benefits, completing pipeline business in relation to the conversion or transfer of pension benefits and providing any confirmation that independent advice has been provided for the purposes of section 48 of the Pension Schemes Act 2015.’

The firm has also received an asset retention requirement, which is also effective from 14 October 2020. Asset retention requirements prevent firms from selling business assets, such as client books, without the regulator’s approval.

Source: https://citywire.co.uk/new-model-adviser/news/pi-costs-force-better-retirement-out-of-db-transfer-market/a1418384

I've checked the FCA register for BRG and the asset retention is still in place, but the restriction around advice for DB pension transfers seems to have disappeared:

Customer Type
Professional
Retail (Investment)
Investment Type
Life Policy
Personal pension scheme
Rights to or interests in investments (Contractually Based Investments)
Rights to or interests in investments (Security)
Stakeholder pension scheme
Unit
Limitation
Limited Pension Transfer Activity
This activity is limited to the provision of advice in relation to the conversion or transfer of benefits from pension policies with a Guaranteed Annuity Rate
Rights to or interests in (both).
Investment activity in "rights to or interests in investments (security)" and "rights to or interests in investments (contractually based investment)" is limited to the investment types granted for this activity.

Source: https://register.fca.org.uk/s/firm?id=001b000000MfGkJAAV

I haven't dug any further yet, but as you suggest its probably worth calling them to get the lay of the land.

bofh wrote:Thanks mc2fool. I have them at the top of my list, although admit I got a bit put off by this report from 29/10/2020:
:
I haven't dug any further yet, but as you suggest its probably worth calling them to get the lay of the land.

Yeah, I was aware of that. I suspect their no-transfer-no-fee offering was what the regulator objected to. I note that their webpage now says "we'll introduce you to the most appropriate firm on our panel and provide you with all their details. They are all authorised and regulated by the Financial Conduct Authority to provide pension and investment advice, and they work alongside pension transfer specialists who have permission to provide pension transfer advice", so it may not be Better Retirement Group that's actually doing the work now, and they're just referring you to someone else.

I also note that "You'll be expected to commit to ongoing advice for at least a year", which wasn't the case when I used them, so all-in-all it's a different offering, but it is, at least, worth the phone call to suss out what's what.

If you haven't found it already, the experiences of those here that have used them (which may not be appropriate now) starts at viewtopic.php?f=17&t=10528#p127599

ReallyVeryFoolish wrote:I am not casting aspersions per se, but SIPP Club are known to have facilitated individuals who lost very large sums of money through an advisor who placed investors money with Dolphin, the failed German property business. Be very, very careful.

Hmmm. My experience was a totally "execution only" one, with only vague recommendations of ii or AJ Bell for the SIPP (I chose IWeb) and a very general suggestion that market trackers were best.

Just to update anyone who is considering seeking advice for a DB pension transfer which if transferred they would self-invest....good luck getting that (mandatory) advice .

Have spoken with 3 different advisors and their insurers won't cover them. One stated it was due to my pending non-UK-residence and the other two it was related to the self-investing part.

This is what I call a dysfunctional market...

bofh wrote:Just to update anyone who is considering seeking advice for a DB pension transfer which if transferred they would self-invest....good luck getting that (mandatory) advice .

Have spoken with 3 different advisors and their insurers won't cover them. One stated it was due to my pending non-UK-residence and the other two it was related to the self-investing part.

This is what I call a dysfunctional market...

Did you try contacting SIPP Club? As I said above, their offering looks different to when I went through them, but I am a little curious as to what the state of play with them is now....

Have spoken with 3 different advisors and their insurers won't cover them. One stated it was due to my pending non-UK-residence and the other two it was related to the self-investing part.

I whizzed that message off too quickly and accuracy suffered. So treat this as a correction...

The first advisor stated it was my age that was the reason for declining giving advice (late forties). The second advisor - who formerly gave advice to self-investing DB transferees - stated that the self-investing part was the deal breaker (liability) and then third advisor initially cited my pending non-residence as the major factor but then subsequently came back (an hour ago) and stated he thinks its my age. So two advisors suggesting it was age related, the other not advising self-investors. A forth (informally contacted by the second) also declined to have a conversation with me based on age.

Sorry for any confusion.

mc2fool wrote:Did you try contacting SIPP Club? As I said above, their offering looks different to when I went through them, but I am a little curious as to what the state of play with them is now....

Not yet as after reading recent coverage on SIPP Club, it suggested they had materially changed trajectory. It seems a lot has changed in this area.... I may give them a call when I muster some motivation

Did you try First Equitable ? They worked well for me a couple of years ago.

https://www.first-equitable.co.uk/final ... er-advice/

bofh wrote:

mc2fool wrote:Did you try contacting SIPP Club? As I said above, their offering looks different to when I went through them, but I am a little curious as to what the state of play with them is now....

Not yet as after reading recent coverage on SIPP Club, it suggested they had materially changed trajectory. It seems a lot has changed in this area.... I may give them a call when I muster some motivation

Yes, it does look like that -- and I now note that their website says, "You will need to be at least age 50 unless you have exceptional circumstances.".

You did say in your OP that you were "not yet close to retirement" but now I learn you are just in your late forties I would ask what the expected rate of increase in deferment of your DB pension is.

While none are going to shoot the lights out, in general DB schemes usually offer a quite reasonable almost risk free rate of increase in deferment, and unless you are expecting to pop your clogs beforehand, waiting to close to or at your retirement before transferring out is probably the best idea. YMMV of course.

mc2fool wrote:While none are going to shoot the lights out, in general DB schemes usually offer a quite reasonable almost risk free rate of increase in deferment

The benefit is defined when the scheme is left. Admittedly the rules would require a revaluation to match an inflation index but that's not anything to do with investment return.

The transfer value on the other hand would be calculated by discounting the value of the benefits given up and it's the rate of interest used therein which determines how generous or otherwise the transfer value offered is. What the typical transfer value analysis does is attempt to second guess the rate of interest used. Why the whole process couldn't be simplified by requiring disclosure of the interest rate in the calculations of the ceding scheme has long been a mystery.

Alaric wrote:

mc2fool wrote:While none are going to shoot the lights out, in general DB schemes usually offer a quite reasonable almost risk free rate of increase in deferment

The benefit is defined when the scheme is left. Admittedly the rules would require a revaluation to match an inflation index but that's not anything to do with investment return.

The transfer value on the other hand would be calculated by discounting the value of the benefits given up ...

I didn't say investment return, I said rate of increase in deferment, and yes, that refers to the benefit and, as you say, the value of the benefit is part of what goes into determining transfer value.

It may also be that once the likely rate of increase (of the benefit) in deferment is examined the idea of transferring out, even if possible, becomes less attractive. E.g. if the scheme was left in 1996 and has a large GMP component then that part of the benefit will be increasing at 7%pa. As I also say, YMMV; there's a lot of variables.

Apologies if this is considered slightly off topic but I'm looking to transfer one of my defined contribution pension pots into a SIPP. As it will be over 30K am I obliged to get an IFA involved ? I really would rather not. I intend buying a few dividend paying shares for the SIPP, which seems fairly benign.

CautiousPaul wrote: I'm looking to transfer one of my defined contribution pension pots into a SIPP. As it will be over 30K am I obliged to get an IFA involved ?

It is likely to depend whether the defined contribution scheme had any bells and whistles attached. If it was an off the shelf SIPP or Personal Pension, then not. If it was something concocted by a former employer then possibly. Features that can have a hidden value that you would be required to take advice on would be any guarantees such as rates for conversion of funds to annuity, minimum growth rates for accumulation, or benefits not less than some previous scheme.