Greedy financial advisers want a slice of my pension
I WOULD like to transfer my defined benefit local government pension to a self-invested personal pension (Sipp).
This is about flexibility, rather than whether I will make more or less money by doing so.
My pension either dies with me after being paid for a guaranteed five years, or, if I do not make it to retirement, three times my salary will be paid to my estate.
I understand the value of a defined benefit pension, but, if the payments stop when I die, there will be nothing for my only sibling after I have gone.
I am not married, nor do I have any children.
Because of the value of the pot, I believe that I must consult an independent financial adviser (IFA) before I can do anything.
I have spoken to several who want to charge for the report they do, which is fair enough, but they also want to arrange the transfer between the scheme and Sipp and control every aspect of it — and for a large fee.
If I pay for the advice that meets the Government criteria, do I have to accept it, or can I choose not to take the advice and then do my own transfer to a Sipp?
S. H., by email. iFAs can be greedy little devils — and you seem to have stumbled on some really grasping ones.
Yes, you do have to get the financial advice, but there is no reason why you have to use the same iFA — or even any iFA — to carry it out.
i checked this out with Hargreaves Lansdown’s Danny Cox, a chartered financial planner who has won the Money Management Financial Planner of the Year award and Financial Adviser Sipp Adviser of the Year. in other words, his qualifications and peer recognition knock spots off those who are after your money.
He tells me that most direct Sipp providers — including Hargreaves Lansdown — will accept a transfer from a defined benefit scheme, as long as the client has received the appropriate advice.
Hargreaves Lansdown will only accept the transfer if there is a positive recommendation to transfer; it can give financial advice, too.
Some providers will accept the transfer whether or not the recommendation is positive.
Mr Cox says: ‘ We turn away 95 pc of enquiries of this type as they are not in the pension holder’s best interests.
‘ However, in the reader’s case, transferring to a Sipp has the potential to provide greater death benefits to his sibling than staying with the defined benefit scheme.
‘ With this being his main objective, and the value of his pension being secondary, he is in the minority of situations where a transfer of this type is potentially a good idea.’
But he adds this cautionary note: ‘My challenge to him is to consider whether this pension is the best legacy for his sibling.
‘A defined benefit pension is guaranteed to be paid for the whole of Mr H’s lifetime, the income will increase annually to offset rising price inflation and he won’t have to worry about what’s happening in the stock market or to interest rates.’
Remember, most people underestimate their life expectancy and the long-term effects of inflation.
if you draw too much income from a Sipp drawdown arrangement in the early years, or your investments go against you, then your income could fall over time.
So, Mr Cox says, the key question is whether you would be better to keep your defined benefit scheme for the certainty of income — which would give you greater flexibility to use other assets as a legacy for your brother? I HAVE around £13,000 in Premium Bonds, which I now wish to cash in.
But I have been informed by National Savings & Investments (NS&I) that it can find no trace of them.
I am in my 90s and cannot locate the paperwork to prove I have them. However, I have had ten winning numbers in the past year.
Mrs P. M., Berkshire. i HAVE some excellent news. National Savings & investments confirms that you hold £13,700 in Premium Bonds.
it received a My Lost Account enquiry from you in January, but the trace did not show there were any holdings.
NS&i admits this must have been human error on its part. After a further search, it has found your bonds and has now sent you a valuation.