‘Help! I can’t transfer my pension after two advisers threw in the towel’

Dear John,

Your frustration is shared. The maximum value set for transferring defined benefit or “hybrid” pension schemes, which incorporate a defined benefit feature such as an element of guaranteed retirement income, without the need for a financial adviser, is £30,000. 

This means that any pension worth more than £30,000 with any such guarantees requires a financial adviser to review the transfer and ideally approve it (although depending on the receiving provider it’s not always necessary for them to approve it, they just have to authorise that you have had financial advice on the move). 

This limit was set in 2015, around the time of the pension freedoms, when it was more feasible, though still not easy, to find an adviser who would get out of bed for the fee on this amount of money. 

Its purpose is to act as a layer of protection against people transferring their sole pension and then losing money or falling victim to a scam. The thinking is that amounts less than £30,000 are more likely to be someone’s secondary rather than main pension, so the risk to their retirement outcome of transferring the pot is lower. 

These days, the £30,000 limit acts more as a cap on how much you can have in a defined benefit or hybrid pension before it becomes impossible to move it. 

This is because a) it’s hard to find an adviser to advise on it – many have been dissuaded from this line of work given the huge complexity and risk involved, following incidents such as the British Steel pension transfer scandal and b) it might not make sense to pay a fee, which may be 1pc, let’s say, on a pot worth not much more than £30,000.

In your case, this fee could be around £1,200 – a costly move.

It’s a good idea to get advice on some types of pension transfer. However, in your case, in which you have other sources of retirement income, clear understanding of the consequences and good reasons to move it, I can completely see why you feel it’s an unnecessary extra cost.

There are industry rumours swirling that the Department for Work & Pensions may be set to change this advice requirement amount, possibly to £100,000. However, you may need this to go higher given the current value of your fund, depending on whether a new level is based on the full fund value or the value of the safeguarded benefits. 

There have been calls for a review, for all the reasons your case lays out, for some time. 

I expect it will happen soon enough, once the general election is out of the way, if you can sit tight a while longer.