Monday Musings 14/02/2022 – Sometimes it is cheaper to pay for advice than bearing the cost of having no advice.
This week I read an article about some folks that had to pay for advice on whether they should transfer their Defined Benefit pensions scheme to a personal pension. The Financial Conduct Authorities rules say that if you want to transfer your Defined Benefit (DB) scheme and its worth more than £30K you must seek advice from a qualified adviser. The rules also say that they must charge a fee for the advice even if it is to leave your DB scheme where it is. The problem for the people in the article was that this is what they were told, they didn’t like the advice but didn’t want to pay another adviser in case the second adviser came to the same conclusion.
Although The FCA has made a few mistakes I think that these rules make a great deal of sense. I say this based on experience I have had trying to help clients whose DB schemes have been transferred to Self-Invested pensions, SIPP, and have become almost valueless. In one case a pension from the Ford Motor Companies DB pension with a value of £160K had a value of £30.00 thats right £30.00. It took me nearly three years to get this put right but eventually the client was out back in the position he would have been if the transfer has not taken place. Only this week one of my advisers has met with a now client who had his forces pension, a DB scheme, transferred to a SIPP by a firm based in Venezuela. We are going to try and resolve this for him but it going to be a long process.
I have another area of concern which applies to Personal Pensions which are the type of schemes that most of us have. There are a number of online firms that help you to consolidate your personal pensions but do not help you to avoid the pitfalls that you may fall into. Time and time again when we have a new client who wants to consolidate their pensions and we do the analysis we find that if they do consolidate, they will be losing a raft of valuable benefits they didn’t realise they had. These range from guaranteed pension or annuity rates to greater tax-free lump sum allowances.
So whatever type of pension you have it just makes sense to take proper advice from an Independent Financial Adviser who is properly qualified and regulated before taking what could be an expensive course of action.
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