Defined Benefit Pension Transfer Specialists

A DB pension scheme is classed as one of the best pension schemes on the marketplace because they guarantee a set income for life. They are now quite rare due to the complexity of running them.

In the past, you likely would have paid a fixed percentage of your income (usually 5-15% of your salary), alongside an employer contribution (that may vary from year to year). Being part of this scheme meant you’d get a pension for life. Your entitlement value is based on your number of years in employment and your final salary before leaving.

Even if your retirement age is a long way from the future, your entitlement must stay in line with inflation. So even if the market changes, they must still make good on your pension. This is different from taking on the risk yourself.

Making the decision to transfer a DB pension can be difficult. That’s why by law, you’re required to seek advice from an authorised financial adviser for transfers over £30,000. The regulation is in place because a traditional final salary pension was considered the ‘best’ pension available on the market. But with changes in lifestyle, many people continue to work after their planned retirement. As a result, a defined benefit pension may not offer the best value for money.

Calculating the value of a final salary pension against a different pension scheme can be complicated. As we all learn in life, situations can change and are often different from what we’ve planned. For some the security of a DB pension outweighs the benefits of flexibility and legacy planning, it’s all subjective.

Due to the level of complexity, your best option is speaking with a qualified professional with a reputation for impartial, financial advice. Some examples of suitability are highlighted below:

If you have other forms of income such as investments or other pensions and don’t need to rely on your defined benefit scheme, a pension transfer might be right for you. For those who are managing wealth or tax planning, a final salary transfer may also be suitable.

If you have limited life expectancy and are considering passing on the wealth from your pension, a transfer may also be appealing. There’s a balancing act to consider should you have dependents under 23 years old or a partner who may receive (reduced) benefits. It’s also worth noting if you die within two years of a transfer, taxes will need to be paid.

You can transfer your DB pension if you are over-55 and are not currently paying into or receiving your pension. It’s possible to release 100% of your pension fund, of which 25% is tax-free.

Before you start speaking to a financial advisor, begin with a clear understanding of your goals. If you’re unsure, that’s no problem. An experienced DB pension transfer specialist will be able to help you appraise your options.

We use FSA-approved processes to assess your situation, appraise your goals and needs, then consider if a pension transfer will work for you. The process is outlined below:

During the initial assessment stage, we’ll look at all key documentation including forecasts and valuations based on your state pension and any other held finances.

From there, we’ll gain more information from your defined benefit pension scheme, such as the retirement benefits you’re due to receive and transfer valuation. After this stage, a financial adviser will make an assessment to see if a DB transfer is a suitable option for you.

Before we go any further, we’ll have a second meeting. It’s at this point we’ll discuss options and you can make a decision to receive advice or stop the process.

If you choose to continue, a chargeable formal advice report will be published. It’s worth noting this stage is for advice only and the pension transfer will need to run through a series of robust checking mechanisms to progress from here. This report will then be presented to you before we meet again, where you’ll have a chance to ask further questions about the proposal.

Defined pensions, also known as final salary pensions, are usually provided by large organisations, non-profits, or government organisations such as the local government pension schemes (LGPS).

Many consider them as the best type of pension you can get, and mostly it’s best to leave them to run when you retire. But everyone’s circumstances are different and it can make financial sense to release the wealth from your pension.

Some of the largest pension schemes include:

• Universities Superannuation Scheme
• BT Pension Scheme
• Lloyds TSB Group
• Royal Bank of Scotland
• Barclays Bank
• Railways Pensions Trustee
• British Airways
• BAE Systems
• National Grid
• Tata Steel UK
• Mineworkers’ Pension Scheme
• British Broadcasting Corp.

In contrast, you cannot transfer a pension from statutory pension schemes, such as the ones paid for by taxpayers. These include pensions paid to people in occupations such as:

• Teachers
• Firefighters
• NHS employees
• Police Force employees
• Members of the Armed Forces

In addition, you can’t gain early access to old-age pensions provided by the Government.

Transferring your defined benefit pension certainly needs a lot of consideration. By transferring your pension to a defined contribution scheme (also known as a private pension) you should think carefully about the following facts.

Giving up your guaranteed for-life pension is considered the gold standard of all pensions.

By transferring away from your current scheme, you’ll be giving up a guaranteed increase that goes up in line with inflation.

All investments come with risk, and there’s no guarantee you’ll be better off.

You’ll have to pay for advice.

But there are also lots of benefits to making a pension transfer in the right circumstances. To find out if a DB pension transfer is suitable for you, contact our team here in Shrewsbury on 01743 382 002.