Grove Pension Solutions
IFA Newsletter November 2023
Following the implementation of our new fee structure (detailed in the IFA Newsletter September 2023), we can confirm that we now have a maximum fee ‘cap’. In short, our maximum fee for DB transfer advice is now £13,000, applying to any client with a transfer value of greater than £857,000. The same cap amount also applies to introducing IFA’s fees.
We’ve also been asked by a number of IFA’s recently to clarify the circumstances where we would not be able to facilitate an IFA charge. These are:
- If you have asked us to facilitate a fee agreed with the client, but a transfer doesn’t subsequently proceed. You will be notified automatically where this is the case.
- If you have agreed an ‘administration’ charge with the client to submit the case to us in the first instance but have not asked for this to be included.
In both situations, you can of course arrange for the payment of your fees direct with the client.
Annuity Rates and Suitability of Transferring
Annuity rates have increased significantly in the last year, and we are finding an increased demand for both conventional annuities and hybrid retirement solutions.
In fact, as an example to match most DB scheme benefits, based on a 65-year-old, a standard (non-enhanced) annuity rate available is now 4.06%. This includes RPI increases for life, 5-year guarantee and 50% spouse’s pension*.
Based on recent research we’ve found that around a quarter of clients who have reached scheme retirement age (60 or 65) can actually get a bigger pension by transferring to purchase an annuity, compared to what their scheme would provide, even on a ‘like for like’ basis.
Of course, by transferring, clients also then have the advantage of ‘shaping’ the annuity to fit their circumstances and could also benefit from an enhanced rate based on health or lifestyle, where applicable.
Normally, only clients with larger pension funds wanting flexible retirement options would generally consider a transfer from a DB scheme at retirement. However, we would say that it is imperative that a DB scheme member consider the annuity alternative before defaulting to a scheme pension – particularly if the standard scheme benefits don’t fit their circumstances and/ or if they are potentially eligible for an enhanced rate pension.
*(spouse 5 years younger)
The Grove Pension Solutions ‘Real World’ CETV Index
The Grove Pensions Solutions (GPS) CETV Index provides an average CETV based on a £10,000 per year pension. This is calculated by analysing the actual CETV and benefit value of thousands of ‘real-world’ CETV’s calculated since July 2022. This is unlike other indexes that use a ‘typical’ CETV based on assumptions.
The Grove Pension Solutions CETV ‘Generosity’ Index
A Transfer Value Comparator (TVC) is the amount a transfer value would need to be at the date of calculation, to match the future benefits from the existing scheme, based on risk free investments. Comparing the TVC against the CETV gives an indication of the relative generosity of the CETV. For example, if the Transfer Value offered by the scheme matches the TVC (100%), this indicates a generous transfer value.
The following chart is based on analysis of thousands of real CETV’s calculated since July 2022.