Pension Transfers from one Defined Contribution scheme to another Defined Contribution or Personal Pension, are reasonably straightforward because you are moving a pot of money from one pension provider to another pension provider offering the same type of scheme. However, there are three key things to consider:
- The charges (costs) – are the charges higher or lower than the scheme you’re considering transferring away from and how much will it cost to make the transfer? There may also be exit penalties to consider.
- Investment risk – the level of risk of the pension fund you’re invested in and the fund or funds you’re considering investing in. Are they suitable for your appetite for risk?
- Guarantees or ‘safeguarded’ rights – does the existing scheme provide any guarantees like bonuses or a guaranteed annuity rate (income) at retirement? Losing these may be very costly.
Transferring benefits from a Defined Benefit pension scheme to a Defined Contribution or Personal Pension is a completely different exercise. By definition, you are giving up certain guaranteed benefits in favour of benefits that are not guaranteed. The benefits will rely on future investment returns, charges and inflation.
Before transferring a Defined Benefit pension scheme that is worth more than £30,000, you must receive professional advice from someone who is registered with the Financial Conduct Authority (FCA) as a ‘Pension Transfer Specialist’.
There are often significant reasons or circumstances that mean a DB transfer would make sense. For example, your health and the death benefits, whether you have any dependants, when you want to retire, how much the lump sum benefit might be and what other income or assets you have available for your retirement. However, you need to fully understand the options and risks as well as the potential benefits.
Pension Transfers In 3 Steps…
1. Investigation and Analysis
With your authorisation, we will trace and contact all UK pension schemes where you hold benefits. Pension schemes and the benefits they offer can differ significantly, therefore, our analysts will request detailed breakdowns of all the benefits you hold and their specifications.
2. Full Financial Review
Financial Planning provides a route from your current position to your future goals. In order to provide advice on your current financial plan or the suitability of your existing pension arrangements, we require a full understanding of your current circumstances. Only after a full financial review, can we assess the suitability of your current UK pension benefits.
3. Financial Planning Recommendation
Following our analysis of your existing pension benefits alongside a full financial review, we will be able to provide you with a financial planning recommendation. This comprehensive recommendation will not only focus on your retirement planning, but on all aspects of your financial planning requirements.
