With pension transfer values increasing it may be a good time to at least consider a transfer from a defined benefit pension as a potential option. However, before embarking on a review (and potentially a transfer) it is important to remember that the process is time consuming and, if you do transfer, there will be a cost. In this post, we cover the key steps involved in the pension transfer review process.
Find A Financial Adviser
You may wish to find an appropriate financial adviser at the very outset of your defined benefit pension transfer considerations or you may choose to take on the initial information gathering activities (see below) yourself before taking advice.
If, after due consideration, you do wish to action a transfer you must show that you have taken financial advice from a suitably qualified financial adviser before the pension scheme administrators will action the transfer. This is a legal requirement if the value of the pension fund is £30,000 or more.
When choosing an adviser you should ensure:
- They are authorised and regulated by the Financial Conduct Authority (check here https://register.fca.org.uk/).
- They have the relevant FCA permissions to discuss, advise and action defined benefit pension transfers.
- They have extensive experience of the pension transfer process.
The register will clearly state a firm is FCA authorised (or not). For those not familiar with the workings of the register it will be necessary to ask the Adviser about their specific permissions and experience.
Using an adviser who is not authorised by the FCA will put your pension fund at significant risk. While choosing an adviser without the relevant permissions can cause delays and increase fees. Selecting an adviser with appropriate experience (particularly experience of transfers from your scheme) simply reduces potential delays and/or mistakes.
Obtain A Defined Benefit Transfer Value & Early Retirement Quote
This an adviser will do for you if you have engaged with them at an early stage or you may request the information yourself from the pension scheme administrators. It can take up to twelve weeks for the pension administrators to provide this information. You have twelve weeks from issue of the transfer value quotation to initiate the transfer process, if, after due consideration, this is the route you wish to take.
The transfer value and early retirement quote (if applicable) are key pieces of information should you wish to perform an initial review to determine if transfer from a defined benefit pension is the best way forward for you.
The adviser will use the transfer value and retirement quote (if applicable), a review of your personal circumstances and objectives and other inputs and calculations to advise on your best way forward.
It is important to note that the demand for defined benefit pension transfers has increased dramatically during 2016 and into 2017. As a result, those financial advisers holding the relevant permissions to advise on pension transfers are extremely busy. There may, therefore, be a wait before you can arrange a review meeting.
Some advisers will charge for transfer review meetings then charge again should you wish to transfer (if you do not transfer you pay for the review). Others, do not charge for reviews but charge should you wish to action a transfer. It is therefore important to compare and contrast charging models between advisers. It is also important to check fees for any ongoing services and establish exactly what those services will be.
Expect to pay more if you wish to self invest (rather than take advice) the pension fund after transfer. The adviser has a responsibility to ensure your investment strategy is sound. If they have no control of the investment they will typically charge a higher fee to cover their risk.
Pension Transfer – Due Consideration
After a review meeting, it is important to take some time to carefully consider all that was discussed and the advice you received. It is important to fully evaluate both the benefits and the risks of a transfer.
Defined Benefit Pension Transfer
Should you decide to action a defined benefit pension transfer it can take up to six months for the funds to be released to your new pension provider.
Your adviser will discuss with you the issues surrounding investment management and risk during the pension transfer process and it is vitally important you consider how those issues will be addressed going forward.
Any potential defined benefit pension transfer should be given serious consideration. The process is time consuming but that is generally a good thing as it leaves plenty of time to carefully consider the benefits and risks of a transfer from a defined benefit pension and its potential impact on personal circumstances.
Should you have any questions simply complete the contact box below and we will Email you an answer (no cost or obligation) or visit our pension transfer frequently asked questions section.
The information in this article does not constitute financial or other professional advice. You should not take action on the basis of this article without seeking regulated independent financial advice that addresses your specific circumstances. Past performance is no guarantee of future returns. The value of your investment is not guaranteed and you may not get back the full amount invested.