Questions from our ‘life after a defined benefit pension transfer’ live stream

Equilibrium founder Colin Lawson recently presented a ‘life after a defined benefit pension transfer’ live stream. Whilst you can sign up to watch the full recording here, we have put together a summary of the questions asked by the viewers on the day.

Is it easy to change Advisers now I have already set up a SIPP with my current one?

Yes, very easy. We would require a letter authority to allow us to look at your existing SIPP provider and the investments within it. We would compare it against an alternative provider and assess the investment strategy in line with your attitude to risk.

We would conduct a full analysis taking into consideration charges, risk, flexibility, and investment performance. Whatever conclusions we arrive at will be, in our professional opinion, in your best interests.

Possible outcomes are that you could remain in your existing SIPP, but taking into account your objectives and how you feel about risk, we would advise you on appropriate investment funds and asset allocation. Alternatively, we could recommend that you switch to a different pension provider, and investment funds selected and managed by Equilibrium Investment Management.

And if I move to you will I get hit with big fees again?

Our planning stage typically takes three meetings, for some clients it can be more. This is a chance for us to understand about you and what you are looking to achieve, and for you to find out about Equilibrium and what we can do for you. Normally by the end of the second meeting both parties will have a pretty good idea of whether we can work together.

This first part of the planning stage is at no cost to you and is provided with no obligation, therefore you have had a good opportunity to decide whether you feel we are going to be of value before you become a client and pay fees.

The fees are completely transparent. We will explain to you in pound terms the cost. We are confident in our ability to provide an excellent service to the point that we offer a fee guarantee. At each annual review meeting we will ask you to confirm we have delivered what we promised and if we may retain our fees. If you are not satisfied with what we have done we will offer you a full advice fee refund.

My partner has a scheme we want to look at. What do you charge and what does the process look like?

DB transfer advice is complex. For some people their DB scheme could be the most valuable asset that they have, even more than their house. The decisions they make on what to do with the scheme could have a positive or a negative effect on them for the rest of their life. Therefore it is vital that the advice is right. To cover the costs associated with reviewing each defined benefit pension we charge £3,500 plus VAT. If there is more than one scheme we charge £500 plus VAT for each additional scheme.

The process starts with information gathering, covering the features, benefits, and value of your DB scheme, your attitude to risk and an assessment of how you are likely to behave when faced with different investment scenarios, and your income and expenditure.

Based on this our conclusions are arrived at in three separate modules, followed by a final recommendation . The first is an assessment of whether you are inherently suitable as an individual to switch from a defined benefit scheme to a defined contribution replacement. Based on our analysis the second module will examine the features of your defined benefit scheme and the pros and cons of a transfer. The third will look at the financial planning opportunities that may arise as a result of undertaking the transfer. It is here where we will look at lifetime cash flow modelling to judge whether your assets will be sufficient for you to achieve your objectives throughout your life. Finally our recommendation will be whether or not to transfer your defined benefit scheme to a new arrangement.

How does your review process differ from others?

It is unfair to comment on other company’s processes, however we ensure that we do not look at your DB scheme in isolation but as part of your overall circumstances and objectives. We will provide you with enough information so that you understand all the implications of a transfer and are able to make an informed decision. We will present it to you in a format that is digestible and not full of jargon.

Can you simply process a transfer, or do we have to keep an ongoing relationship afterwards?

Our DB pension review service will consider whether, given your circumstances, a transfer is suitable. If the recommendation to transfer is made, this will be based on a provider selected by Equilibrium, an appropriate investment strategy and the assumption that we will continue to review your circumstances, as it important to do so to ensure you remain on track to achieve your goals. However, you are of course under no obligation to proceed with that recommendation!

Could you look after my pension and my other Adviser look after the ISA?

The simple answer is yes we could, but that might not be the best solution for you. It is important to have a financial planning and investment strategy that takes account of your objectives, income and expenditure, the amount of risk you want to take within your investment portfolio against the amount of risk you need to take to achieve your goals, your tax position, and any investment preferences you might have.

It is difficult to have a coherent and co-ordinated strategy when there is more than one company involved. They may inadvertently work against each other as the right arm does not know what the left arm is doing.

I am not happy with my current Adviser but if I move to you am I locked in?

No, there are no exit fees. Our fees are transparent, and you pay as you go along. Incidentally although there are no exit fees as a barrier to leaving, the number of clients who actually leave us is exceptionally low.