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Alymac

Financial advice for a final salary pension transfer

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Morning,

I have an old final salary pension when I started work, 9 years with an insurance company - I have a transfer value which is circa £135K which I would like to move into my other current pension to create a bigger pot.

I know the risks and have been considering this for a while now.

Has anyone else moved a final transfer pension? If so what level of fees were you hit for when getting advice?

Ally

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You might try asking on the pension board on lemonfool.co.uk.

You will not be surprised that my first reaction was DON'T but then I do not know your circumstances and I imagine the comment about knowing the risks was designed to stop people telling you not to do it.

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Pension transfers are high risk for advisers. The network / indemnity insurance that covers them is expensive on a case by case basis and then it’s hours and hours of work to complete the advice process. They need to study for a year for a special qualification too. They also have to cover their backs because people want to do this and then 20 years later want to complain about being allowed to do it if they lost money invested in the markets.

I feel you get better value from IFAs than you do from solicitors and estate agents however. 

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19 hours ago, Alymac said:

Morning,

I have an old final salary pension when I started work, 9 years with an insurance company - I have a transfer value which is circa £135K which I would like to move into my other current pension to create a bigger pot.

I know the risks and have been considering this for a while now.

Has anyone else moved a final transfer pension? If so what level of fees were you hit for when getting advice?

Ally

I wouldn’t pay more than £1,500 for the advice fee. Once transferred your overall management fees on a decent size pot should repay this cost in a few years.

Interestingly the Royal Mint has a physical gold pension scheme. Unless gold moonshot though, most likely best invested in the markets with everyone else. However it should of course maintain real value. Risk:Reward

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16 hours ago, Alymac said:

it is the fee aspect that annoys me, I get people want to protect themselves from any future litigation but costs are a joke!

As @MancunianStacker said this is a specialist area.  Having said that you would think in this day and age that a lot of it could be automated.

I confess I don't like the notion of fees being a percentage of the transfer value - a fee based on time spent seems fairer.  If the SIPPClub (mentioned in the thread I quoted) has a minimum charge of £2k then that would be 10 hours work at £200 per hour.  Would the adviser really spend 10 hours on this - I have no idea.

The best thing would be if your old employer wanted to close the DB scheme and offered to provide free advice to encourage people to transfer out.  It may be cheeky but you could always ask them if they have a tame adviser who could offer the service.

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6 hours ago, MancunianStacker said:

Once transferred your overall management fees on a decent size pot should repay this cost in a few years.

I am not sure I follow that - if he has a deferred pension in an employer sponsored DB scheme then the employer is ultimately paying the admin and investment management fees.  So taking a transfer out to a personal pension just gets you an added cost of paying your own fees. 

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The problem with DB pension schemes is that there is no guarantee you will receive the pension you have been promised. The actuarial assessments of the schemes are allowed to assume a 7.5% rate of return on investments, which is unrealistic, so the schemes are often underfunded. Some pensioners have ended up being forced to accept a huge reduction in their benefits. If you take the money out, at least you know exactly what you have, and you can invest it somewhere you consider safe. Whether it is worthwhile for you depends on the scheme and how well funded and well managed it is.

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Another problem in the past is the amount of pensions a person could amount it can easily be 5 or 6 pensions i have seen one person who moved jobs a lot he had 11 pensions  If you leave it each one will charge minimum fees each year eating into your money.  My advise would be to get hold of your employment history, check with the following sites

  https://www.gov.uk/find-pension-contact-details

https://www.moneyadviceservice.org.uk/en/articles/trace-lost-pensions-and-request-pension-forecasts

 

 

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As a general rule, I would leave the DB pension where it is - unless you have legitimate serious concerns about the company's future viability, or you have been offered a very generous multiple of the annual pension value as a transfer value.  Instead, think of it as another solid building block in your retirement plan foundation, alongside your state pension.

You can then entertain more risk/volatility with other elements of your retirement planning, whether in pensions,, ISAs, PMs or whatever.

Even then, most financial advisers would apparently refuse your application to transfer your own money at your own risk, even if you completely understood the risks and were happy to make your own decisions.  That's the only bit I don't agree with!

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