Defined Benefit Pension Transfer

If your cash equivalent transfer value is £30,000 or over, you are required to seek financial advice.
Transferring a pension means giving up guaranteed benefits which won’t suit most people.

UK expats – advice can only be given if you are currently within the UK.

Client circumstances generally necessary for advice

Due to the new non-contingent charging changes (see below) advice is generally only offered on defined benefit pension transfers if you are currently within the UK and fulfil one of the criteria listed here:

• You are within 12 months of retiring, have relevant investment experience, and need to draw income for retirement support.
• You have serious ill health or are in extreme financial difficulty with no other practical solution.
• You wish to purchase a commercial property within a SIPP, to support your own existing profitable business.
• Your defined benefit pension scheme is superfluous to your income needs and a transfer is for the purpose of succession planning.

New non-contingent charging for defined benefit pension transfers

Please be aware, rules around defined benefit pension transfer fees have changed!

The Financial Conduct Authority (FCA) have ruled that from the 01.10.2020 all defined benefit (final salary) pension transfer advice must be provided on a non-contingent basis, except in some very limited circumstances. This means;

• Irrespective of the outcome of the advice, the client will be paying the same fee.
• If the outcome is not to transfer, this fee will be liable for VAT, costing the client more than a recommendation to transfer.

Contingent charging will be banned in most circumstances, with only those consumers who do not have the money available to pay for advice AND are either in serious ill health OR serious financial difficulties.

Cash Equivalent Transfer Value (CETV) explained

Before we can provide you with advice it’s important to understand that the transfer value you receive from your defined benefit scheme could be different to the figure currently quoted.

Where all the requirements have not been met (for any reason) within the three-month period, the transfer value will need recalculating and could be higher or lower than originally stated. Without an in-date guaranteed CETV, the transfer from the defined benefit pension scheme is unlikely to proceed. Additionally, before an appropriate transfer recommendation can be made, the scheme also needs to provide all supporting documentation within the three-month window. Without the full scheme information alongside the CETV, we are unable to provide any advice before the CETV expires.

Our document below explains what the CETV is and why your transfer value might be different than the one originally quoted.

CASH EQUIVALENT TRANSFER VALUE (cETV) EXPLAINED

Defined Benefit Transfer Client Education Guide

Your decision on whether to receive pension transfer advice or not is an important first step

If you are looking to transfer your defined benefit (DB) pension, it is important you have a general understanding of your scheme, including the benefits and drawbacks it may have, before you decide whether you want to take advice or not.

Since the change in law around contingent charging for pension transfers, there are now advice fees applicable, regardless of the outcome. 

We offer a four page defined benefit client education guide, available on request, and designed to help you better understand the risks involved. This should help you to decide whether you wish to proceed with advice or not. You should read the guide carefully before making a decision.

The guide is for information only and is not intended to be, and should not be interpreted to be, personalised advice. 

Transferring out of a defined benefit pension scheme is unlikely to be in the best interests of most people.