Those who work in the industry or have their own experience of taking the CETF from a DB pension scheme. A few years back I was looking at taking a cash offer instead of my Lloyds bank pension, they basically offered me £32,000 in cash for each £1000 of pension I was entitled to.
A friend has just received and offer his pension trustees that is £211,000 if he gives up a £3000 annual pension. So that’s £70,000 cash for each £1,000 of pension. I’m astounded is that really the sort of figures that are currently being offered…. ???
It does seem a huge amount but DB schemes are trying to get the liability off their books & as Glits have dropped to their lowest values ever then I'm not surprised to see schemes offering "incentives" to get people to transfer away.
However, I will caveat that with this. Your friend will need to take advice from a DB Pension Specialist & this will not come cheap. Our firm offers this advice (I dont personally) but I'd imagine you are looking at a £10k fee.....and that has to be paid even if the advice is not to proceed (which is the FCA's starting point) and the FCA have made it very difficult to transfer out of DB schemes.
Golfie, yes as you say he has been told that no transfer can take place until he has taken advice from an IFA. However, his pension fund trustees are offering him a free advice appointment with WPSA an advisor they have arrangement with.
Whilst £2984 per year RPI linked is ok, he is single with no dependants. The £211,000 looks a far better option. Appreciate he will have set up and drawdown fees, and the risk is completely his once transferred out. But, even if he just took double his DBA offer of £3000 per year and took £6,000 a year, surely he can expect his pot to last for over 30 years and still have money left over. Looks a no brainier to me. Or am I looking at this to simply.
Those who work in the industry or have their own experience of taking the CETF from a DB pension scheme. A few years back I was looking at taking a cash offer instead of my Lloyds bank pension, they basically offered me £32,000 in cash for each £1000 of pension I was entitled to.
A friend has just received and offer his pension trustees that is £211,000 if he gives up a £3000 annual pension. So that’s £70,000 cash for each £1,000 of pension. I’m astounded is that really the sort of figures that are currently being offered…. ???
It does seem a huge amount but DB schemes are trying to get the liability off their books & as Glits have dropped to their lowest values ever then I'm not surprised to see schemes offering "incentives" to get people to transfer away.
However, I will caveat that with this. Your friend will need to take advice from a DB Pension Specialist & this will not come cheap. Our firm offers this advice (I dont personally) but I'd imagine you are looking at a £10k fee.....and that has to be paid even if the advice is not to proceed (which is the FCA's starting point) and the FCA have made it very difficult to transfer out of DB schemes.
Golfie, yes as you say he has been told that no transfer can take place until he has taken advice from an IFA. However, his pension fund trustees are offering him a free advice appointment with WPSA an advisor they have arrangement with.
Whilst £2984 per year RPI linked is ok, he is single with no dependants. The £211,000 looks a far better option. Appreciate he will have set up and drawdown fees, and the risk is completely his once transferred out. But, even if he just took double his DBA offer of £3000 per year and took £6,000 a year, surely he can expect his pot to last for over 30 years and still have money left over. Looks a no brainier to me. Or am I looking at this to simply.
It is a simple way of looking at things. However the big thing you miss is inflation. This can seriously damage a non inflation based drawdown (ie the £6k in your example). We have had a period of low inflation but things are changing, We forget how damaging inflation is to fixed income. Lot of things to consider.
Those who work in the industry or have their own experience of taking the CETF from a DB pension scheme. A few years back I was looking at taking a cash offer instead of my Lloyds bank pension, they basically offered me £32,000 in cash for each £1000 of pension I was entitled to.
A friend has just received and offer his pension trustees that is £211,000 if he gives up a £3000 annual pension. So that’s £70,000 cash for each £1,000 of pension. I’m astounded is that really the sort of figures that are currently being offered…. ???
It does seem a huge amount but DB schemes are trying to get the liability off their books & as Glits have dropped to their lowest values ever then I'm not surprised to see schemes offering "incentives" to get people to transfer away.
However, I will caveat that with this. Your friend will need to take advice from a DB Pension Specialist & this will not come cheap. Our firm offers this advice (I dont personally) but I'd imagine you are looking at a £10k fee.....and that has to be paid even if the advice is not to proceed (which is the FCA's starting point) and the FCA have made it very difficult to transfer out of DB schemes.
Golfie, yes as you say he has been told that no transfer can take place until he has taken advice from an IFA. However, his pension fund trustees are offering him a free advice appointment with WPSA an advisor they have arrangement with.
Whilst £2984 per year RPI linked is ok, he is single with no dependants. The £211,000 looks a far better option. Appreciate he will have set up and drawdown fees, and the risk is completely his once transferred out. But, even if he just took double his DBA offer of £3000 per year and took £6,000 a year, surely he can expect his pot to last for over 30 years and still have money left over. Looks a no brainier to me. Or am I looking at this to simply.
It is a simple way of looking at things. However the big thing you miss is inflation. This can seriously damage a non inflation based drawdown (ie the £6k in your example). We have had a period of low inflation but things are changing, We forget how damaging inflation is to fixed income. Lot of things to consider.
Yes, inflation is a major factor, but this £3000 pension in 2010 would be £3933 today. So let’s say in 20 years it’s become £5,500. That’s still below what he could have been drawing for the entire 20 years. An iv left a margin for £30,000 loss over the period, with no gains at any point. Which would be a pretty unlikely scenario….
So this is what I don't quite get...why do the DB owners want to get it off their books at such a generous multiple if the market place can relatively easily support the pension commitment they have to their employee/ex employee?
Does that not suggest the long term forecast is that meeting that projected pension is going to get more expensive and the multiple may therefore not be as generous as it seems?
So this is what I don't quite get...why do the DB owners want to get it off their books at such a generous multiple if the market place can relatively easily support the pension commitment they have to their employee/ex employee?
Does that not suggest the long term forecast is that meeting that projected pension is going to get more expensive and the multiple may therefore not be as generous as it seems?
Too simplistic?
Not too simplistic just the wrong investments. DB schemes have to invest in Gilts for their pensionable members. If DB schemes had the option to invest in all the asset classes available then I'm pretty sure they would nit be offering large incentives for members to transfer out
With regard to @ralphmilne's friend. It really is a no brainer & you would have to be either risk adverse or stupid not to take the transfer. I usually use 4% as a rate for Drawdown plans & all my clients funds are comfortably ahead of their original starting point.
Assuming the tax free cash has already been taken from the £211k figure then 4%pa would pay just under £8500pa......almost 3x the DB payment. Even, as @ralphmilne says you start off with a lower figure than this (say £6k) you could then factor in inflation and increase the annual pension over the years.
Fwiw - I expect that the 25% tfc has not been taken out of the £211k & so the member would have over £50k tax free to work with too, before even thinking about Drawdown.
So this is what I don't quite get...why do the DB owners want to get it off their books at such a generous multiple if the market place can relatively easily support the pension commitment they have to their employee/ex employee?
Does that not suggest the long term forecast is that meeting that projected pension is going to get more expensive and the multiple may therefore not be as generous as it seems?
Too simplistic?
Not too simplistic just the wrong investments. DB schemes have to invest in Gilts for their pensionable members. If DB schemes had the option to invest in all the asset classes available then I'm pretty sure they would nit be offering large incentives for members to transfer out
With regard to @ralphmilne's friend. It really is a no brainer & you would have to be either risk adverse or stupid not to take the transfer. I usually use 4% as a rate for Drawdown plans & all my clients funds are comfortably ahead of their original starting point.
Assuming the tax free cash has already been taken from the £211k figure then 4%pa would pay just under £8500pa......almost 3x the DB payment. Even, as @ralphmilne says you start off with a lower figure than this (say £6k) you could then factor in inflation and increase the annual pension over the years.
Fwiw - I expect that the 25% tfc has not been taken out of the £211k & so the member would have over £50k tax free to work with too, before even thinking about Drawdown.
Thanks and very helpful - so just to validate my understanding of your reply:
1. DB scheme can only invest in Gilts for those members receiving a pension but it can invest in other asset classes for its other members? 2. Gilts paying closer to 1% (I guess) than your 4% forecast if across a range of asset classes? 3. The 4% you reference is what you'd expect a portfolio in partial drawdown to still be able to return i.e. presumably having switched to a relatively moderate risk type profile?
Those who work in the industry or have their own experience of taking the CETF from a DB pension scheme. A few years back I was looking at taking a cash offer instead of my Lloyds bank pension, they basically offered me £32,000 in cash for each £1000 of pension I was entitled to.
A friend has just received and offer his pension trustees that is £211,000 if he gives up a £3000 annual pension. So that’s £70,000 cash for each £1,000 of pension. I’m astounded is that really the sort of figures that are currently being offered…. ???
It does seem a huge amount but DB schemes are trying to get the liability off their books & as Glits have dropped to their lowest values ever then I'm not surprised to see schemes offering "incentives" to get people to transfer away.
However, I will caveat that with this. Your friend will need to take advice from a DB Pension Specialist & this will not come cheap. Our firm offers this advice (I dont personally) but I'd imagine you are looking at a £10k fee.....and that has to be paid even if the advice is not to proceed (which is the FCA's starting point) and the FCA have made it very difficult to transfer out of DB schemes.
Golfie, yes as you say he has been told that no transfer can take place until he has taken advice from an IFA. However, his pension fund trustees are offering him a free advice appointment with WPSA an advisor they have arrangement with.
Whilst £2984 per year RPI linked is ok, he is single with no dependants. The £211,000 looks a far better option. Appreciate he will have set up and drawdown fees, and the risk is completely his once transferred out. But, even if he just took double his DBA offer of £3000 per year and took £6,000 a year, surely he can expect his pot to last for over 30 years and still have money left over. Looks a no brainier to me. Or am I looking at this to simply.
It is a simple way of looking at things. However the big thing you miss is inflation. This can seriously damage a non inflation based drawdown (ie the £6k in your example). We have had a period of low inflation but things are changing, We forget how damaging inflation is to fixed income. Lot of things to consider.
Yes, inflation is a major factor, but this £3000 pension in 2010 would be £3933 today. So let’s say in 20 years it’s become £5,500. That’s still below what he could have been drawing for the entire 20 years. An iv left a margin for £30,000 loss over the period, with no gains at any point. Which would be a pretty unlikely scenario….
We have had a period of very low inflation. It is forecast by actuaries to be higher in the future while guilt yields remain low. It's certainly not the only factor but one that must not be forgotten. valleynick66 said:
So this is what I don't quite get...why do the DB owners want to get it off their books at such a generous multiple if the market place can relatively easily support the pension commitment they have to their employee/ex employee?
Does that not suggest the long term forecast is that meeting that projected pension is going to get more expensive and the multiple may therefore not be as generous as it seems?
Too simplistic?
There are several factors. Ultimately the sponsoring employer has ultimate liabilty. This liabilty is estimated and can vary considerably taking into account life expectancy, investment returns, inflation etc. Life expectancy has risen significantly in the last 30 years and given companies a shock at the extra amounts needed to pay into a scheme. Likewise gilt yields have fallen. Ironically the PPF have been putting heavy pressure on schemes to invest in gilts rather than equities, which widens pension scheme deficits and forces companies to pay more. The result of all this is that some companies like to incentivise members of the scheme to transfer their benefits out. Sometimes significantly just so they have a certain liability rather than estimated. Because all schemes act differently it makes it crucial an individual takes advice before taking action
Those who work in the industry or have their own experience of taking the CETF from a DB pension scheme. A few years back I was looking at taking a cash offer instead of my Lloyds bank pension, they basically offered me £32,000 in cash for each £1000 of pension I was entitled to.
A friend has just received and offer his pension trustees that is £211,000 if he gives up a £3000 annual pension. So that’s £70,000 cash for each £1,000 of pension. I’m astounded is that really the sort of figures that are currently being offered…. ???
It does seem a huge amount but DB schemes are trying to get the liability off their books & as Glits have dropped to their lowest values ever then I'm not surprised to see schemes offering "incentives" to get people to transfer away.
However, I will caveat that with this. Your friend will need to take advice from a DB Pension Specialist & this will not come cheap. Our firm offers this advice (I dont personally) but I'd imagine you are looking at a £10k fee.....and that has to be paid even if the advice is not to proceed (which is the FCA's starting point) and the FCA have made it very difficult to transfer out of DB schemes.
Golfie, yes as you say he has been told that no transfer can take place until he has taken advice from an IFA. However, his pension fund trustees are offering him a free advice appointment with WPSA an advisor they have arrangement with.
Whilst £2984 per year RPI linked is ok, he is single with no dependants. The £211,000 looks a far better option. Appreciate he will have set up and drawdown fees, and the risk is completely his once transferred out. But, even if he just took double his DBA offer of £3000 per year and took £6,000 a year, surely he can expect his pot to last for over 30 years and still have money left over. Looks a no brainier to me. Or am I looking at this to simply.
It is a simple way of looking at things. However the big thing you miss is inflation. This can seriously damage a non inflation based drawdown (ie the £6k in your example). We have had a period of low inflation but things are changing, We forget how damaging inflation is to fixed income. Lot of things to consider.
Yes, inflation is a major factor, but this £3000 pension in 2010 would be £3933 today. So let’s say in 20 years it’s become £5,500. That’s still below what he could have been drawing for the entire 20 years. An iv left a margin for £30,000 loss over the period, with no gains at any point. Which would be a pretty unlikely scenario….
We have had a period of very low inflation. It is forecast by actuaries to be higher in the future while guilt yields remain low. It's certainly not the only factor but one that must not be forgotten. valleynick66 said:
So this is what I don't quite get...why do the DB owners want to get it off their books at such a generous multiple if the market place can relatively easily support the pension commitment they have to their employee/ex employee?
Does that not suggest the long term forecast is that meeting that projected pension is going to get more expensive and the multiple may therefore not be as generous as it seems?
Too simplistic?
There are several factors. Ultimately the sponsoring employer has ultimate liabilty. This liabilty is estimated and can vary considerably taking into account life expectancy, investment returns, inflation etc. Life expectancy has risen significantly in the last 30 years and given companies a shock at the extra amounts needed to pay into a scheme. Likewise gilt yields have fallen. Ironically the PPF have been putting heavy pressure on schemes to invest in gilts rather than equities, which widens pension scheme deficits and forces companies to pay more. The result of all this is that some companies like to incentivise members of the scheme to transfer their benefits out. Sometimes significantly just so they have a certain liability rather than estimated. Because all schemes act differently it makes it crucial an individual takes advice before taking action
Yes, Liability Driven Investment has been a nice merry-go-round for the bond market (and the government, who, err, ultimately make the rules). You HAVE to match potential out-goings and the only instruments that can guarantee long-term payments are bonds. The safest bonds are government bonds. Demand for bonds therefore goes up, forcing prices up, yields down, etc. Which means you have to buy more bonds. Rinse, repeat.
Add in a falling Bank rate, increasing life expectancy and quantitative easing and bond yields fall even further.
All okay as long as inflation doesn't pick up ....
So this is what I don't quite get...why do the DB owners want to get it off their books at such a generous multiple if the market place can relatively easily support the pension commitment they have to their employee/ex employee?
Does that not suggest the long term forecast is that meeting that projected pension is going to get more expensive and the multiple may therefore not be as generous as it seems?
Too simplistic?
Not too simplistic just the wrong investments. DB schemes have to invest in Gilts for their pensionable members. If DB schemes had the option to invest in all the asset classes available then I'm pretty sure they would nit be offering large incentives for members to transfer out
With regard to @ralphmilne's friend. It really is a no brainer & you would have to be either risk adverse or stupid not to take the transfer. I usually use 4% as a rate for Drawdown plans & all my clients funds are comfortably ahead of their original starting point.
Assuming the tax free cash has already been taken from the £211k figure then 4%pa would pay just under £8500pa......almost 3x the DB payment. Even, as @ralphmilne says you start off with a lower figure than this (say £6k) you could then factor in inflation and increase the annual pension over the years.
Fwiw - I expect that the 25% tfc has not been taken out of the £211k & so the member would have over £50k tax free to work with too, before even thinking about Drawdown.
Thanks and very helpful - so just to validate my understanding of your reply:
1. DB scheme can only invest in Gilts for those members receiving a pension but it can invest in other asset classes for its other members? 2. Gilts paying closer to 1% (I guess) than your 4% forecast if across a range of asset classes? 3. The 4% you reference is what you'd expect a portfolio in partial drawdown to still be able to return i.e. presumably having switched to a relatively moderate risk type profile?
I'm not an actuary or an expert on DB funding and I think @WishIdStayedinthePub excellent post has answered your first 2 points.
For point 3 - I usually recommend a 4% drawdown figure as long term my clients portfolios have exceeded this over a 10+ year time span for a medium risk investor. For more cautious investors I usually suggest 3%. The other thing to remember is that your advisor should be reviewing the funds & the performance regularly (usually at least once a year) and so changes in funds / asset mix can be altered accordingly.
I am always really impressed with the
expertise on here so I am Just putting this sad pension tale out there so those in the
know can howl in derision at my ignorance or warn me off if it’s a completely insane
plan.
I have two very small Aviva private pension
funds which I acquired years ago (about 65K total). Having recently reached the big six zero I thought
I better do something about them. I have had a session with the Pension Wise
rep which I found to be very good and approached three IFAs so far and none
have yet offered anything useful at all. In all three cases I completed a form
to authorize Aviva to release details to them and then nothing happened. When I asked about their fees, they seemed
very high- up to 3% to deal with the funds and then another annual charge for
management. No offence to those who do this for a living but I felt very
uncomfortable about dealing with them. Maybe my pot is just too small for them to piss in.
I would be happy to pay a flat fee for
advice from an independent expert as I would with a solicitor or private doctor
but don’t really want recurring % charges for the rest of my life for one conversation.
Therefore, I decided to cut out the middle
man and deal with Aviva direct. They don’t offer advice (actually they refused
to give it even if I paid for it). I am looking at taking 25% of the fund as a
tax-free lump sum and bunging the remainder into a SIPP (Aviva Insured Funds
Investment Pathway 1) as a safe place it which allows me to take it as cash
when and if I need it. Aviva charge 0.4% to set this up so that seems a bargain
compared to going via the IFA and they seem big, safe and unlikely to go bust
when the shit hits the fan. I am not looking for mega growth or an income/annuity- just
a safe haven that offers something better than a bank deposit account.
£100 again for me this month from the PBs. A bit different to the beginning of the year when I was getting bugger all. Jnr got £150 including a £50 for the second month running! Nothing for Mrs Chaz though.
I am always really impressed with the
expertise on here so I am Just putting this sad pension tale out there so those in the
know can howl in derision at my ignorance or warn me off if it’s a completely insane
plan.
I have two very small Aviva private pension
funds which I acquired years ago (about 65K total). Having recently reached the big six zero I thought
I better do something about them. I have had a session with the Pension Wise
rep which I found to be very good and approached three IFAs so far and none
have yet offered anything useful at all. In all three cases I completed a form
to authorize Aviva to release details to them and then nothing happened. When I asked about their fees, they seemed
very high- up to 3% to deal with the funds and then another annual charge for
management. No offence to those who do this for a living but I felt very
uncomfortable about dealing with them. Maybe my pot is just too small for them to piss in.
I would be happy to pay a flat fee for
advice from an independent expert as I would with a solicitor or private doctor
but don’t really want recurring % charges for the rest of my life for one conversation.
Therefore, I decided to cut out the middle
man and deal with Aviva direct. They don’t offer advice (actually they refused
to give it even if I paid for it). I am looking at taking 25% of the fund as a
tax-free lump sum and bunging the remainder into a SIPP (Aviva Insured Funds
Investment Pathway 1) as a safe place it which allows me to take it as cash
when and if I need it. Aviva charge 0.4% to set this up so that seems a bargain
compared to going via the IFA and they seem big, safe and unlikely to go bust
when the shit hits the fan. I am not looking for mega growth or an income/annuity- just
a safe haven that offers something better than a bank deposit account.
Very grateful for any sensible feedback.
Thanks.
Age? And as well as the 0.4% is there a charge for the chosen fund?
EDIT: just looked and it appears to have a 0.15% fee, so assuming the 0.4% is annual, then the true charge is 0.55%, you can achieve better (someone like Vanguard, check but I think they are 0.15% account fee and depends on fund chosen but their 'standard' ones are low, some as low as 0.06%)
I am always really impressed with the
expertise on here so I am Just putting this sad pension tale out there so those in the
know can howl in derision at my ignorance or warn me off if it’s a completely insane
plan.
I have two very small Aviva private pension
funds which I acquired years ago (about 65K total). Having recently reached the big six zero I thought
I better do something about them. I have had a session with the Pension Wise
rep which I found to be very good and approached three IFAs so far and none
have yet offered anything useful at all. In all three cases I completed a form
to authorize Aviva to release details to them and then nothing happened. When I asked about their fees, they seemed
very high- up to 3% to deal with the funds and then another annual charge for
management. No offence to those who do this for a living but I felt very
uncomfortable about dealing with them. Maybe my pot is just too small for them to piss in.
I would be happy to pay a flat fee for
advice from an independent expert as I would with a solicitor or private doctor
but don’t really want recurring % charges for the rest of my life for one conversation.
Therefore, I decided to cut out the middle
man and deal with Aviva direct. They don’t offer advice (actually they refused
to give it even if I paid for it). I am looking at taking 25% of the fund as a
tax-free lump sum and bunging the remainder into a SIPP (Aviva Insured Funds
Investment Pathway 1) as a safe place it which allows me to take it as cash
when and if I need it. Aviva charge 0.4% to set this up so that seems a bargain
compared to going via the IFA and they seem big, safe and unlikely to go bust
when the shit hits the fan. I am not looking for mega growth or an income/annuity- just
a safe haven that offers something better than a bank deposit account.
Very grateful for any sensible feedback.
Thanks.
Hi. The first thing to say is that an IFA would want to understand a lot more about your financial situation and appetite for risk before being able to give you best advice. @golfaddick of this parish would be a good option to talk to.
In a lot of cases, though, taking the lump sum makes sense for tax reasons. You could recycle that into an ISA and pay no more tax on income or growth. Or blow it on hookers, champagne, coke and nice breads as George Best nearly said.
I personally also wouldn't pay on-going charges based on a percentage of assets under management as it pays regardless of the quality of advice. A fee based on out-performance, maybe, but then that can skew advice towards overly risky assets and, again, it's a one-sided deal, with only you losing if the advice is bad.
But I know plenty of very savvy financial people in the City who are happy to do this as it gives them peace of mind and they're not interested in investment as a hobby - they would rather spend their rapidly diminishing time on other things.
A flat fee up front and an on-going flat fee would seem to me to be more appropriate and, ultimately, why I didn't go into this business, despite having qualified to do so.
As for the choice of investment plan, I'm not sure Aviva are going to give you the best quality plan. There are plenty of better funds and mangers out there - again, Golfie is your friend here as others would testify on this thread.
Last, your money is safe if you are investing in any kind of SIPP from a main-stream provider. There's no real counter-party risk with these things - the money should be ring-fenced in client accounts and is protected (beyond the level you are talking about) should for some reason the broker breaks the law on that.
I am always really impressed with the
expertise on here so I am Just putting this sad pension tale out there so those in the
know can howl in derision at my ignorance or warn me off if it’s a completely insane
plan.
I have two very small Aviva private pension
funds which I acquired years ago (about 65K total). Having recently reached the big six zero I thought
I better do something about them. I have had a session with the Pension Wise
rep which I found to be very good and approached three IFAs so far and none
have yet offered anything useful at all. In all three cases I completed a form
to authorize Aviva to release details to them and then nothing happened. When I asked about their fees, they seemed
very high- up to 3% to deal with the funds and then another annual charge for
management. No offence to those who do this for a living but I felt very
uncomfortable about dealing with them. Maybe my pot is just too small for them to piss in.
I would be happy to pay a flat fee for
advice from an independent expert as I would with a solicitor or private doctor
but don’t really want recurring % charges for the rest of my life for one conversation.
Therefore, I decided to cut out the middle
man and deal with Aviva direct. They don’t offer advice (actually they refused
to give it even if I paid for it). I am looking at taking 25% of the fund as a
tax-free lump sum and bunging the remainder into a SIPP (Aviva Insured Funds
Investment Pathway 1) as a safe place it which allows me to take it as cash
when and if I need it. Aviva charge 0.4% to set this up so that seems a bargain
compared to going via the IFA and they seem big, safe and unlikely to go bust
when the shit hits the fan. I am not looking for mega growth or an income/annuity- just
a safe haven that offers something better than a bank deposit account.
Very grateful for any sensible feedback.
Thanks.
Out of interest how much would you expect or want to pay an IFA to do that for you?
I understand your frustration but IFA's have to earn a living & 3% is the norm in the industry to do a DC transfer - some firms charge up to 5%.
After that you don't have to pay any ongoing adviser charges if you dont want to (most firms charge 0.5% -1%), but as @Rob7lee says, there will always be the providers admin charge (or platform charge) as well as the fund charge. You should be able to get the admin/platform charge for less than 0.4% but then a decent fund could be up to 1% on top, although a basic tracker like Vanguard or Aviva should be less than 0.3%.
From what you have described it's probably not a bad idea to stick with what you are doing - stay with Aviva, take the TFC (if you need the money if not dont touch it) and transfer to a Sipp which will have the flexi-acess drawdown facility you are looking for.
Very many thanks for all that feedback. Really appreciate it. Sounds like it's isn't the most shrewd move to stick with Aviva but not totally stupid either.
They offer four different risk levels too.
I would be happy to pay say 300 quid for one hour decent detailed advice and help with the paperwork. But 1800 quid to fill some forms in seems a bit steep. If I had a big fund I wouldn't be at all happy with 3%
Interested you say don't take the dosh unless I need it. I am still working and have a small armed forces pension that just started at 60 so don't really need it at the moment.
My wife wanted to recently transfer a Aviva pension into one of their SIPP products. From what we could ascertain, and were told by them, was that if you do so you have to manage the funds yourself so beware of that or if you did want them to manage it then the product available was more restrictive and less flexible on withdrawals. As a result though I don't think there is an ongoing advisor charge as you are managing it yourself.
My wife wanted to recently transfer a Aviva pension into one of their SIPP products. From what we could ascertain, and were told by them, was that if you do so you have to manage the funds yourself so beware of that or if you did want them to manage it then the product available was more restrictive and less flexible on withdrawals. As a result though I don't think there is an ongoing advisor charge as you are managing it yourself.
Yes. That was my interpretation too. Quite happy to monitor it myself. Thanks.
Very many thanks for all that feedback. Really appreciate it. Sounds like it's isn't the most shrewd move to stick with Aviva but not totally stupid either.
They offer four different risk levels too.
I would be happy to pay say 300 quid for one hour decent detailed advice and help with the paperwork. But 1800 quid to fill some forms in seems a bit steep. If I had a big fund I wouldn't be at all happy with 3%
Interested you say don't take the dosh unless I need it. I am still working and have a small armed forces pension that just started at 60 so don't really need it at the moment.
Thanks again.
If you don't need it right now, then leaving hopefully allows it to continue to grow, tax free. For instance if it grew to £100k your tax free lump is now £25k rather than about 16k odd etc.
Golfie may be able to advise better (due to the forces pension) but you could do a bit of recycling/double dipping as you are still working.
Take your 16k odd tax free lump sum and put it in an ISA. Each year pay some back into your pension and get tax relief all over again! There are rules around it but generally it can be done.
I've advised (I'm not qualified by the way!) many people your age to get as much into pension these last few years as humanly possible. It's your last chance to get free money off the government by way of tax relief. For every 80p you pain in it immediately grows to £1.
Comments
Does that not suggest the long term forecast is that meeting that projected pension is going to get more expensive and the multiple may therefore not be as generous as it seems?
Too simplistic?
With regard to @ralphmilne's friend. It really is a no brainer & you would have to be either risk adverse or stupid not to take the transfer. I usually use 4% as a rate for Drawdown plans & all my clients funds are comfortably ahead of their original starting point.
Assuming the tax free cash has already been taken from the £211k figure then 4%pa would pay just under £8500pa......almost 3x the DB payment. Even, as @ralphmilne says you start off with a lower figure than this (say £6k) you could then factor in inflation and increase the annual pension over the years.
Fwiw - I expect that the 25% tfc has not been taken out of the £211k & so the member would have over £50k tax free to work with too, before even thinking about Drawdown.
1. DB scheme can only invest in Gilts for those members receiving a pension but it can invest in other asset classes for its other members?
2. Gilts paying closer to 1% (I guess) than your 4% forecast if across a range of asset classes?
3. The 4% you reference is what you'd expect a portfolio in partial drawdown to still be able to return i.e. presumably having switched to a relatively moderate risk type profile?
The result of all this is that some companies like to incentivise members of the scheme to transfer their benefits out. Sometimes significantly just so they have a certain liability rather than estimated.
Because all schemes act differently it makes it crucial an individual takes advice before taking action
Add in a falling Bank rate, increasing life expectancy and quantitative easing and bond yields fall even further.
All okay as long as inflation doesn't pick up ....
For point 3 - I usually recommend a 4% drawdown figure as long term my clients portfolios have exceeded this over a 10+ year time span for a medium risk investor. For more cautious investors I usually suggest 3%. The other thing to remember is that your advisor should be reviewing the funds & the performance regularly (usually at least once a year) and so changes in funds / asset mix can be altered accordingly.
I am always really impressed with the expertise on here so I am Just putting this sad pension tale out there so those in the know can howl in derision at my ignorance or warn me off if it’s a completely insane plan.
I have two very small Aviva private pension funds which I acquired years ago (about 65K total). Having recently reached the big six zero I thought I better do something about them. I have had a session with the Pension Wise rep which I found to be very good and approached three IFAs so far and none have yet offered anything useful at all. In all three cases I completed a form to authorize Aviva to release details to them and then nothing happened. When I asked about their fees, they seemed very high- up to 3% to deal with the funds and then another annual charge for management. No offence to those who do this for a living but I felt very uncomfortable about dealing with them. Maybe my pot is just too small for them to piss in.
I would be happy to pay a flat fee for advice from an independent expert as I would with a solicitor or private doctor but don’t really want recurring % charges for the rest of my life for one conversation.
Therefore, I decided to cut out the middle man and deal with Aviva direct. They don’t offer advice (actually they refused to give it even if I paid for it). I am looking at taking 25% of the fund as a tax-free lump sum and bunging the remainder into a SIPP (Aviva Insured Funds Investment Pathway 1) as a safe place it which allows me to take it as cash when and if I need it. Aviva charge 0.4% to set this up so that seems a bargain compared to going via the IFA and they seem big, safe and unlikely to go bust when the shit hits the fan. I am not looking for mega growth or an income/annuity- just a safe haven that offers something better than a bank deposit account.
Very grateful for any sensible feedback. Thanks.
EDIT: just looked and it appears to have a 0.15% fee, so assuming the 0.4% is annual, then the true charge is 0.55%, you can achieve better (someone like Vanguard, check but I think they are 0.15% account fee and depends on fund chosen but their 'standard' ones are low, some as low as 0.06%)
In a lot of cases, though, taking the lump sum makes sense for tax reasons. You could recycle that into an ISA and pay no more tax on income or growth. Or blow it on hookers, champagne, coke and nice breads as George Best nearly said.
I personally also wouldn't pay on-going charges based on a percentage of assets under management as it pays regardless of the quality of advice. A fee based on out-performance, maybe, but then that can skew advice towards overly risky assets and, again, it's a one-sided deal, with only you losing if the advice is bad.
But I know plenty of very savvy financial people in the City who are happy to do this as it gives them peace of mind and they're not interested in investment as a hobby - they would rather spend their rapidly diminishing time on other things.
A flat fee up front and an on-going flat fee would seem to me to be more appropriate and, ultimately, why I didn't go into this business, despite having qualified to do so.
As for the choice of investment plan, I'm not sure Aviva are going to give you the best quality plan. There are plenty of better funds and mangers out there - again, Golfie is your friend here as others would testify on this thread.
Last, your money is safe if you are investing in any kind of SIPP from a main-stream provider. There's no real counter-party risk with these things - the money should be ring-fenced in client accounts and is protected (beyond the level you are talking about) should for some reason the broker breaks the law on that.
Good luck with your decision!
I understand your frustration but IFA's have to earn a living & 3% is the norm in the industry to do a DC transfer - some firms charge up to 5%.
After that you don't have to pay any ongoing adviser charges if you dont want to (most firms charge 0.5% -1%), but as @Rob7lee says, there will always be the providers admin charge (or platform charge) as well as the fund charge. You should be able to get the admin/platform charge for less than 0.4% but then a decent fund could be up to 1% on top, although a basic tracker like Vanguard or Aviva should be less than 0.3%.
From what you have described it's probably not a bad idea to stick with what you are doing - stay with Aviva, take the TFC (if you need the money if not dont touch it) and transfer to a Sipp which will have the flexi-acess drawdown facility you are looking for.
They offer four different risk levels too.
I would be happy to pay say 300 quid for one hour decent detailed advice and help with the paperwork. But 1800 quid to fill some forms in seems a bit steep. If I had a big fund I wouldn't be at all happy with 3%
Interested you say don't take the dosh unless I need it. I am still working and have a small armed forces pension that just started at 60 so don't really need it at the moment.
Thanks again.
Golfie may be able to advise better (due to the forces pension) but you could do a bit of recycling/double dipping as you are still working.
Take your 16k odd tax free lump sum and put it in an ISA. Each year pay some back into your pension and get tax relief all over again! There are rules around it but generally it can be done.
I've advised (I'm not qualified by the way!) many people your age to get as much into pension these last few years as humanly possible. It's your last chance to get free money off the government by way of tax relief. For every 80p you pain in it immediately grows to £1.
Worth looking into.