Have you moved a company pension

[Cirrus]

An old company pension (defined benefits) I'd more-or-less forgotten about, recently turned out to have a £52000 transfer value, much to my surprise. So I set about moving it onto my SIPP.

Fortunately the company offered a free IFA consultation. An IFA consultation is mandatory over £30000. The company would release the money as long as I got a signature that I had recieved IFA advice. They didn't want to know what it was. The IFA made a specific recommendation that I stay with the company pension. I couldn't imagine they would ever do anything as long as they were going to pick one thing rather than just highlight what the pluses and minuses are of my options. Their recommendation was based on the lower risk of a company pension.

My calculations show that with conservative assumptions I would most likely get significantly greater pension income from a SIPP. However Hargreaves Lansdown announced they will not accept a transfer unless the IFA specifically recommends it. The same constraint will apply to the new Vanguard SIPP. I hoped my accountant might have a more tame IFA contact but his feeling was you will always hit this stumbling block.

Have you managed to find a pliant IFA or a SIPP that accepts transfers without looking for specific recommendations?

[sludgesurfer]

Take a look here. The comments might be of interest also.

Defined Benefit to Defined Contribution pension transfers

I do know two guys that have done it that got the nod from an IFA. I don't know anyone who has transferred to a SIPP without advice (below £30k) or without approval from an IFA.

[Lance]

the reason for needing an IFA for this is because it is mostly a really dumb idea.

A £52k pension may get you £2,600 a year depending on when you retire and how unhealthy you, as an annuity.
If the defined benefit is say £5k per year then moving it is probably a daft idea. Depending on circumstances.

I'd leave any defined benefit pensions alone as they give you cash for life, and use extra money in a SIPP.



No matter what. You erally should get an IFA to help and not try to just get it rubber stamped.

[Cirrus]

A £52k pension may get you £2,600 a year depending on when you retire and how unhealthy you, as an annuity.
If the defined benefit is say £5k per year then moving it is probably a daft idea.

The pension is £2200 (indexed). I make that a return of £49k. By contrast a SIPP should deliver between £58k and £79k (1% and 4% net real return).

[Amanensia]

the reason for needing an IFA for this is because it is mostly a really dumb idea.

A £52k pension may get you £2,600 a year depending on when you retire and how unhealthy you, as an annuity.
If the defined benefit is say £5k per year then moving it is probably a daft idea. Depending on circumstances.

I'd leave any defined benefit pensions alone as they give you cash for life, and use extra money in a SIPP.



No matter what. You erally should get an IFA to help and not try to just get it rubber stamped.

For a long long time, this would have been universally correct advice. However, it's not necessarily that simple any more.

Given the extremely low interest rates (and yield curve) in recent years, along with the possible pricing-in to the transfer basis of very optimistic future mortality improvements and a general wish to remove DB liabilities from balance sheets, there are circumstances where taking a transfer value can give you quite extraordinary multiples of the defined benefit. I'm not lucky enough to have any DB benefits but a contractor friend of mine took a TV from his previous employer's scheme a few years ago and ended up with somewhere in the region of 40 times the annual benefit on retirement. He worked out he only needed to earn something like -6% pa going forward to break even! So even sticking the whole amount in cash would make him significantly better off than leaving it in the scheme.

Not all schemes will offer terms as amazingly generous as this, and I'm certainly not saying it's a no-brainer to transfer out. It isn't, and there's a very good reason why you MUST take advice before proceeding. But under the right circumstances it can be a very good idea.

(FWIW, the friend I refer to above is an actuary, as am I. I might talk some tosh on here occasionally but not in this instance.)

[Lance]

The pension is £2200 (indexed). I make that a return of £49k. By contrast a SIPP should deliver between £58k and £79k (1% and 4% net real return).

So moving it may well be better.
Or leaving for 10 years and moving may be even better.
Or maybe annuity rates will change.
We're into crystal ball gazing now.
And I don't know how old you are

For a long long time, this would have been universally correct advice. However, it's not necessarily that simple any more.

Indeed. Although it didn't stop lots of public sector people in the 80s make some really dumb choices on the advice of less than scrupulous IFAs.

Given the extremely low interest rates (and yield curve) in recent years, along with the possible pricing-in to the transfer basis of very optimistic future mortality improvements and a general wish to remove DB liabilities from balance sheets, there are circumstances where taking a transfer value can give you quite extraordinary multiples of the defined benefit. I'm not lucky enough to have any DB benefits but a contractor friend of mine took a TV from his previous employer's scheme a few years ago and ended up with somewhere in the region of 40 times the annual benefit on retirement. He worked out he only needed to earn something like -6% pa going forward to break even! So even sticking the whole amount in cash would make him significantly better off than leaving it in the scheme.

Not all schemes will offer terms as amazingly generous as this, and I'm certainly not saying it's a no-brainer to transfer out. It isn't, and there's a very good reason why you MUST take advice before proceeding. But under the right circumstances it can be a very good idea.

(FWIW, the friend I refer to above is an actuary, as am I. I might talk some tosh on here occasionally but not in this instance.)

Agreed. I think the best advice is still to seek advice from a professional, who is accountable to the FCA.

[Cirrus]

I think the best advice is still to seek advice from a professional, who is accountable to the FCA.

I did that. The problem is IFAs are heavily influenced by two factors which don't make for balanced statements. The first is they exist in a world of extremely high charges. If you said "Will you set me up in an HL SIPP?" they would fall over themselves to do it and charge you £x000. When you say "Give me advice", there is a lot less in for them so they succumb to influence number two: play absolutely safe, safe, safe. Take the money and put yourself at the lowest possible risk of any come-back.

You can get a mortgage at the drop of a hat. If however you were forced to get 'advice' from a mortgage broker (who you weren't going to buy anything off) I wonder how many would say "Investing in property has significant risk. You could get into negative equity and become bankrupt. So best advice is to put your money in the bank".

For many people an IFA brings knowledge they don't possess but if you know about investment options and the typical patterns of market returns then an IFA adds nothing and in general is going to be a negative influence. The reason is that it has been proven that no experts can manage investments better than a monkey but since they suck money out of your portfolio you will finish up with less in your pocket. Using an IFA is like letting a career criminal look after your valuables. They'll know what might happen and may be able to protect things more effectively but they also know what are the best things to nick.

[IR35 Avoider]

There was a thread on moneysavingexpert a few months ago where someone paid for advice from a Hargreaves Lansdown adviser, who advised against transfer, and consequently HL refused to allow transfer to themselves. However that was not the issue: HL also refused to sign a form confirming they had given advice, so that OP could transfer to someone else. (It was irrelevant what the advice was, the alternative provider did not care, they only required that the person had been advised.) The ombudsman upheld HL decision not so sign the form, as apparently the mere fact of signing the form to say that had give advice would be facilitating the OP in doing something stupid, and create a potential liability for them.

Don't use Hargreaves Lansdown - MoneySavingExpert.com Forums

From that thread I learned that what you need to google is "site:forums.moneysavingexpert.com insistent client sipp provider"

The first link I followed from that brought up the following thread, which may be helpful:-

Who will accept a DB to SIPP transfer from "insistent client" - Page 2 - MoneySavingExpert.com Forums

Apparently most SIPP providers will refused to accept a transfer against advice, but (according to my second thread link) stakeholder schemes are not allowed to refuse transfers, so you could transfer to one of those then from there to a SIPP.

Whether it's worth doing for 50K is another question. Maybe it would be better to treat the 50K as a bit of diversity in your retirement provision, even if on paper it looks like a worse deal. (It's probable that most people don't place a proper premium on the security and lack of volatility of the income stream.)

[Lance]

There was a thread on moneysavingexpert a few months ago where someone paid for advice from a Hargreaves Lansdown adviser, who advised against transfer, and consequently HL refused to allow transfer to themselves. However that was not the issue: HL also refused to sign a form confirming they had given advice, so that OP could transfer to someone else. (It was irrelevant what the advice was, the alternative provider did not care, they only required that the person had been advised.) The ombudsman upheld HL decision not so sign the form, as apparently the mere fact of signing the form to say that had give advice would be facilitating the OP in doing something stupid, and create a potential liability for them.

Don't use Hargreaves Lansdown - MoneySavingExpert.com Forums

From that thread I learned that what you need to google is "site:forums.moneysavingexpert.com insistent client sipp provider"

The first link I followed from that brought up the following thread, which may be helpful:-

Who will accept a DB to SIPP transfer from "insistent client" - Page 2 - MoneySavingExpert.com Forums

Apparently most SIPP providers will refused to accept a transfer against advice, but (according to my second thread link) stakeholder schemes are not allowed to refuse transfers, so you could transfer to one of those then from there to a SIPP.

Whether it's worth doing for 50K is another question. Maybe it would be better to treat the 50K as a bit of diversity in your retirement provision, even if on paper it looks like a worse deal. (It's probable that most people don't place a proper premium on the security and lack of volatility of the income stream.)

This is good advice I think. It’s just £50k and adds diversity.
Stick £1,000 a month into a SIPP as well and you’ll have the same in 4 years.

[JohntheBike]

For a long long time, this would have been universally correct advice. However, it's not necessarily that simple any more.

Given the extremely low interest rates (and yield curve) in recent years, along with the possible pricing-in to the transfer basis of very optimistic future mortality improvements and a general wish to remove DB liabilities from balance sheets, there are circumstances where taking a transfer value can give you quite extraordinary multiples of the defined benefit. I'm not lucky enough to have any DB benefits but a contractor friend of mine took a TV from his previous employer's scheme a few years ago and ended up with somewhere in the region of 40 times the annual benefit on retirement. He worked out he only needed to earn something like -6% pa going forward to break even! So even sticking the whole amount in cash would make him significantly better off than leaving it in the scheme.

Not all schemes will offer terms as amazingly generous as this, and I'm certainly not saying it's a no-brainer to transfer out. It isn't, and there's a very good reason why you MUST take advice before proceeding. But under the right circumstances it can be a very good idea.

(FWIW, the friend I refer to above is an actuary, as am I. I might talk some tosh on here occasionally but not in this instance.)

There is also the option of transferring the funds to a draw down trust fund. Like any choice, there are pros and cons. The cons are that the fund will be subject to stock market fluctuations, but in the long term these tend to even out. The pros are that from maturity until death, as long as the fund isn't depleted, unlike an annuity, whatever funds are left can be transferred to the fund holder's estate.

I have a substantial amount invested is Standard Life's Elevate draw down scheme and in the last 6 years it has averaged 9%+ per annum, which is considerably better than the annuity rates that were on offer 6 years ago. So this option cannot be dismissed.

But I concur with all the advice here, the advice of a certified IFA is essential as each person's circumstances will be different. The income from my draw down scheme will represent only 30% of my total income, the remainder coming from guaranteed sources. So using draw down was a low risk option for me.