Jump to content
House Price Crash Forum
Sign in to follow this  
InvestmentQuestions

IFA advice on DB Final Salary scheme

Recommended Posts

Hi I have about £650 k in a  SIPP and a final salary scheme which would pay me £1k per annum in 5 years  , the transfer value is £30.5k

I am still paying in £40k each year into my SIPP

I need to get an IFA to say that is a good idea and after calling 10 this morning the best quote was £1,150

I think that is probably good value but would welcome anyone who knows I can get better to comment

 

 

Share this post


Link to post
Share on other sites

You haven't actually asked the question I think you're asking; are you looking to transfer the DB pension into your SIPP?

I would pay that amount to transfer if I was determined to, though for that small a percentage of your overall portfolio, I wouldn't bother. I'd rather keep it as DB, seeing as it's guaranteed income.

Is it index-linked? Are there any other benefits from the scheme that are worth taking into consideration?

Share this post


Link to post
Share on other sites

Thanks for your advice Bumblebee  I have most of my savings in Equities mostly In Pensions and also ISAs . The reason for transfering my money to a SIPP is the income multiple is over 30 and I read an article in the FT that said unless you live to 110 or the real return on equities is less than 1% transfering a Defined Benefits policy is the way to go.

The Life time Allowance is going to be linked to inflation from 2018 and If I get about 7% in the next 6 years or so I would expect thepot  to be about 1,065k in the pot which should be about the LTA allowance by then so i would enter into drawdown then which would be 100% of my LTA.

Then I would need to make sure the pot is less than 1,065k when I am 75 by taking out enough to ensure that.

Off course the way markets move it could be less than 6 years or more before I hit the LTA

i have no intention of stopping work though for at least 10 years , I am starting too think 1,150 is great value after a few converstaions with various IFAs 

 

Share this post


Link to post
Share on other sites
3 hours ago, InvestmentQuestions said:

Thanks for your advice Bumblebee  I have most of my savings in Equities mostly In Pensions and also ISAs . The reason for transfering my money to a SIPP is the income multiple is over 30 and I read an article in the FT that said unless you live to 110 or the real return on equities is less than 1% transfering a Defined Benefits policy is the way to go.

The Life time Allowance is going to be linked to inflation from 2018 and If I get about 7% in the next 6 years or so I would expect thepot  to be about 1,065k in the pot which should be about the LTA allowance by then so i would enter into drawdown then which would be 100% of my LTA.

Then I would need to make sure the pot is less than 1,065k when I am 75 by taking out enough to ensure that.

Off course the way markets move it could be less than 6 years or more before I hit the LTA

i have no intention of stopping work though for at least 10 years , I am starting too think 1,150 is great value after a few converstaions with various IFAs 

 

I found c. 1% of the pot was about normal, with the proviso that there must be a minimum below which it doesn't cover the work involved. Some may offer a per hour fee too. 

The issue seems to be the 'risk' involved for the IFA. They are professionally obliged to undertake significant work assessing your current scheme, the benefits offered, your personal financial situation and so on, some of which may need to be outsourced to an actuarial firm. By undertaking the work they could also be held liable for the advice provided if/when they are assessed by the regulator at some future point. 

Taking all this into account I doubt anyone offering to do the work for less than you've been quoted is likely to be credible. It's a pity your transfer value quote isn't below the £30,000 threshold for mandatory advice, although it appears many SIPP providers will still require a positive recommendation irrespective so in practice it may not matter. At the end of the day with the history of litigation in the financial services industry everyone appears primarily to want to cover their own ar5e.

 

Share this post


Link to post
Share on other sites

I could probably knock £20 off that initial quote, but it is at the edges of what can be done.  Let me know if you are interested.  I could only do it via phone, post and email etc,as any expenses incurred would destroy profitability.

Share this post


Link to post
Share on other sites
On 08/03/2017 at 1:42 PM, InvestmentQuestions said:

There is a SIPP provider who will take a DB transfer value without  a positive recommendation I may end up there if I have a problem, Can I mention the name of the provider here ? some forums do not like this 

I'd love to know...still struggling to get my final salary pot into a SIPP, because of fear of litigation as outlined above presumably. 

 

Thanks in advance!

Share this post


Link to post
Share on other sites
On 3/8/2017 at 9:24 AM, InvestmentQuestions said:

Thanks for your advice Bumblebee  I have most of my savings in Equities mostly In Pensions and also ISAs . The reason for transfering my money to a SIPP is the income multiple is over 30 and I read an article in the FT that said unless you live to 110 or the real return on equities is less than 1% transfering a Defined Benefits policy is the way to go.

The Life time Allowance is going to be linked to inflation from 2018 and If I get about 7% in the next 6 years or so I would expect thepot  to be about 1,065k in the pot which should be about the LTA allowance by then so i would enter into drawdown then which would be 100% of my LTA.

Then I would need to make sure the pot is less than 1,065k when I am 75 by taking out enough to ensure that.

Off course the way markets move it could be less than 6 years or more before I hit the LTA

i have no intention of stopping work though for at least 10 years , I am starting too think 1,150 is great value after a few converstaions with various IFAs 

 

Was it this article?

Best of Money: Should you cash in your final salary pension?  Transfer values are hitting record highs after Brexit vote

Question I would ask: can you take those £30.5k and buy yourself £1k annuity on exactly the same terms as the benefits transferred out?

Share this post


Link to post
Share on other sites

As I understand it if I were to buy an annuity the two sums would be about the same ie. the amount the pension fund pays you is equal to what they would pay to but the benefits so they do not care what you do.

I believe this means when  you take out an annuity the cash flow is the same a if you were to buy two seperate things bundled together in the annuity

(1) index linked gilts yourself 

PLUS 

(2) A form of insurance that pays out more the longer you live

 

I think Index linked gilts are way overvalued due to QE.     As for the insurance element I can see that if I was likely to run out of money an annuity may be the way to go

Share this post


Link to post
Share on other sites
8 hours ago, InvestmentQuestions said:

As I understand it if I were to buy an annuity the two sums would be about the same ie. the amount the pension fund pays you is equal to what they would pay to but the benefits so they do not care what you do.

That is possible but is unlikely.  Whatever benefits the insurer would offer, could be reduced to allow some profit for the insurer, and reduced further to allow for selection against them.  I.e. if someone is unhealthy, they may not bother buying an annuity as they know they are unlikely to need long term payments.  Someone extra fit, however, could buy the annuity as they expect to live long and get their money's worth back.  

But all depends on a person, e.g. if one is absolutely sure they will never need spouse's pension, they could possibly transfer out from DB which probably offers spouse's benefits and buy (possibly) higher single life benefits instead.  

 

Share this post


Link to post
Share on other sites

 

I think someone with very  poor health would do better buying an annuity and someone with very good health would do worse

The FT had an article giving a breakeven point an it said unless the real return on investments were extremely low or you lived to a very great age you were better off transferring 

 

Share this post


Link to post
Share on other sites
1 hour ago, InvestmentQuestions said:

I think someone with very  poor health would do better buying an annuity and someone with very good health would do worse

No. Someone in poor health may get higher monthly amount paid to them. This does not necessarily make them better off, as their pension will be paid for a shorter period, and overall value of the benefits they receive may end up being lower than if they were in good health.

Edited by Bear Hug

Share this post


Link to post
Share on other sites

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
Sign in to follow this  

  • Recently Browsing   0 members

    No registered users viewing this page.

  • The Prime Minister stated that there were three Brexit options available to the UK:   28 members have voted

    1. 1. Which of the Prime Minister's options would you choose?


      • Leave with the negotiated deal
      • Remain
      • Leave with no deal

    Please sign in or register to vote in this poll. View topic


×

Important Information

We have placed cookies on your device to help make this website better. You can adjust your cookie settings, otherwise we'll assume you're okay to continue.