Low value DB pension transfer? Please sign a petition

[Tinsey]

Having battled unsuccessfully the problem of my low value pension transfer, I have created a government petition to allow an opt-out of the financial advice for low value DB pensions transfers.

There has been something in the news they are trying to simplify consolidation in 2030 but not sure I will live long enough as I am in my 60s (my pension transfer is about £100k but I was also told that most providers don't accept new funds under £250k).

Can I please ask you to sign and share if possible. I will also post it on MSE at some point but any ideas where else to go with it gratefully received.

petition.parliament.uk/petitions/652230

https://petition.parliament.uk/petitions/652230

You've been given completely duff info about pension providers not accepting new funds below £250k. They do.

I definitely won't be signing as I disagree with the premise of the petition. Unfortunately many, many people don't really understand their DB pensions at all and many who want to transfer out don't have any idea what they are giving up. This is why regulated financial advice is essential IMO.

The petition doesn't provide any persuasive argument. The below extract shows exactly why advice is needed. A DB pension is not the same as an annuity, plus there is a presumption that a transfer option is more beneficial, when it frequently (almost always) is not.

We shouldn’t be forced to accept a small income from annuity which is lost on death when a transfer option is more beneficial and we shouldn’t be forced to pay for services we don’t want or need as no financial advisor can predict the future.

@Chewbecca could you please explain the difference?

Here is the definition I am familiar with - which is exactly what DB pension offers:

An annuity exchanges a cash lump sum for a guaranteed income until death.

A annuity can have so many different variations so I guess you could get one that replicates your DB terms but it would be unusual and almost certainly cost MUCH more. My DB is payable early without reduction if made redundant after 50, has guaranteed increases linked to inflation (costly for an annuity), discretionary further increases if needed, pays until death (many annuities are fixed term otherwise very costly), widow’s benefits (again costly for an annuity), a payout if I died in the first couple of years and more.

There is no cash lump sum to be exchanged in a DB pension, merely a promise to pay an income plus other benefits in accordance with scheme terms.

OP I don’t really understand the economics behind it but apparently this isn’t the best time to transfer out as transfer values are so low.

Whilst I do agree with opting out of advice for low value funds I do think that you should probably get some advice or look into it some more.

@Chewbecca yes, no cash lump sum is visible as such, the calc is based on salary/years etc, but it's the same principle as annuity, U get a set amount and in my case the max uplift is 5% so nowhere near inflation.

@OldLabMummy I have been looking into it for a long while and I would prefer to take responsibility for my own decisions (as have done for decades).

I tried to get the advice at a few companies but I am not comfortable disclosing my details online, inc bank statements, IDs, lifestyle etc to a stranger.

I would be happy to accept whatever it is at my age I don't expect to live another 30 years.

‘Nowhere near inflation’ - this year only. Pension decisions shouldn’t be made on such limited info.
It’s really, really unusual that transferring out is in an individual’s best interests. People doing it are usually looking very short term and, as I say, often do not fully understand what they’re giving up. The requirement for advice is there for sound reasons.

Who knows, maybe my TV is now £50k and I would be ok with that but I can only ask for it once a year or they charge £250 (or maybe £350 by now).

@Sunseed thank you for the explanation, I expect it's never £3k as have been quoted 6-8k +vat by everyone I contacted.

All I want is pension freedom that all DC members have. How come no such advice is needed to stop people for getting mortgages and losing homes if they can't afford it

I expect FAs must be lobbying to stop DC members from accessing their pensions the way it suits them?

Mortgages and pensions are different beasts. Advice will be given with a residential mortgage and lenders were required to tighten up their affordability tests some years ago.

I said £3k is my minimum fee. Generally it's about 1% to 2% of the transfer value, but the minimum fee recognises that on values below £100k the % would be disproportionate to the work involved.

Are you going directly to firms where the adviser is in-house? It's possible you're being quoted high fees because the firm is outsourcing the work to a third party and taking their cut for the introduction. I also have a perception that firms based in London and south-east tend to be more expensive than elsewhere.

Why don’t you use this free service? https://www.moneyhelper.org.uk/en/pensions-and-retirement/pension-wise

Pension wise are only able to give guidance (not advice) on DC pensions, not DB. And most definitely can't help with a transfer out of a DB pension which requires regulated advice.

@Sunseed yes, I am near London although my enquiries have been mostly on the phone/email.

@itsmeagainagain it's only when u try to do it I realise how difficult it is - at the same time everywhere u read about more recent pension freedoms for DC pensions whilst us oldies are left behind and forced to accept to pay extortionate fees or take annuity version.

I am sure there would be an outcry if these were introduced for DC schemes.

Whatever side you are on, I would be grateful if you support the petition to initiate a discussion of fairness of choice and pension freedom for ALL pensions

With reduced life expectancy b/c of COVID fallout and cancer rates rising and economy faltering the last thing we want is to lose pension to the fund on death - it would never even reach economy or taxman.

DB transfer advice is costly I think is mostly due to the FAs insurance providers wanting high premiums to cover the risk. If you get advised to transfer, and then years down the line that turns out to be a bad decision, then you could claim against the FA.

I a rule was imposed that meant no future claim could be made, maybe that would lower the cost of advice.

FCA has decided on the £30k threshold, not sure how they came up with that but I expect there was some logic to it.

@nannynick exactly my point, hence in the petition I said option to opt out.
Old DB pensions deferred for many decades are quite small and many of us would be happy to decline this advice.

I a rule was imposed that meant no future claim could be made, maybe that would lower the cost of advice.
You just can't do this. People (especially vulnerable people) will sign anything if there is money that they can't have (now) unless they sign. The adviser would still be liable.

I know, the protections need to be in place. So we have the situation we are in with the advice costing a lot.

Or just keep the blimmin' DB pension (which many people would bite your hand off for!), then you won't need any advice!

@Chewbecca is speaking huge amounts of sense. A DB pension is a massive asset, one that DC pensions rarely replicate for the same level of contribution from the member.

I do think it should be very very hard to transfer them (not impossible) as there are so many vulnerable people who don't fully understand what they have. DB schemes would typically love to get rid of the liability, advisers would be only to happy to charge the fees, DC schemes more than happy to accept the funds. But typically none of that is actually in the individual's interest.

Well, my DB pension would never pay for my trip to Switzerland for assisted living or my funeral at £200p/month.