Defined Benefit Pension Transfer Advice

No, some defined benefit pensions such as public sector pension schemes cannot be transferred.

This depends on your circumstances and plans for retirement. Defined benefit pensions give many benefits, such as a secure income for life. This means that not everyone has the right circumstances to be able to take advantage of a transfer, which is why it is vital to get advice from a pensions transfer specialist before you make a decision.

Yes, but this is unlikely to be in your best interests.

The transfer process can take up to six months due to an advisor’s legal requirement to ensure you fully understand the consequences of transferring a defined benefit pension. This advice can often involve a thorough analysis of your situation, and discussions to ensure you consider the consequences before a transfer takes place.

Yes, if you are over 55 and not an active member of the scheme. You can contact your existing scheme for early retirement options. You will normally be offered a reduced annual pension with a tax-free lump sum. The earlier you access the pension from your DB scheme, the larger the reduction.

Defined benefit pensions, and other types of pensions with safeguarded benefits, give you extra guarantees and advantages, so transferring them is not a decision to be made quickly. There are several types of safeguarded benefits, including: 

• Defined Benefit or Final Salary pension schemes
• Guaranteed Annuity Rates (GAR) pension policies: these convert the accumulated pension fund into a guaranteed lifetime income, also called an ‘annuity, at retirement. The rate on this annuity is often higher than the ones available on the ‘open market’. The fund can still change in value, which can affect the income gained from it, and you can’t surrender the guaranteed minimum pension for a cash sum. 
• Guaranteed Minimum Pensions (GMP): these give you a guaranteed amount of income when you retire. There are often restrictions on whether you can transfer these pensions, and if there is a shortfall then the pension scheme or company will have to make up the difference. If there is more in the fund than it costs to provide the GMP, then you may get a tax-free lump sum or income. 
• Guaranteed level of income or minimum level of income: These older pension policies calculate a promised, or guaranteed, minimum level of income based on the contributions and premiums that were paid into it.

These schemes are run by large employers, often PLC companies, or government organisations. For more information about your specific circumstances, you should seek advice from a specialist pensions advisor.

You cannot access pensions that don’t have funds because they are paid for by taxes as you take your pension. Schemes like this include the Teachers’ Pension Scheme, NHS Pension Scheme, as well as pension schemes for firefighters, the police and the armed forces.

If your defined benefit pension is worth over £30,000, you are legally required to get advice before transferring it. However, to help you make a decision about whether this might be the right choice, we’re giving you a brief overview of the advantages and disadvantages:

Advantages of transferring a DB pension

• You can access your pension fund from the age of 55
• You can access a maximum of 25% as tax-free cash, which is often greater than from a defined benefit scheme.
• You have control over how and when your benefits are taken, which can mean greater flexibility and choice.
• When taking benefits there are no restrictions on the amount of money you can withdraw at any one time.
• On your death, your nominated beneficiaries will receive the full balance of your pension fund. There are no restrictions on who you can choose to receive these benefits.

Disadvantages of transferring a DB pension

• You will lose a guaranteed income for life that is also guaranteed to increase every year
• You will take the investment risk upon yourself as the fund you invest in will be subject to market fluctuations.
• You will have to pay for the advice to take it out. 
• You will need to demonstrate an understanding of the risks of swapping safeguarded benefits for flexible ones
• Your pension pot’s value might go down if the investments you choose perform poorly

We begin by discussing your goals and situation. What you want to achieve and what your current circumstances are can have a huge impact on the suitability of transferring your defined benefit pension. Once we have done this, we will investigate the possibilities and return to you with detailed information about your options. 

We will talk you through this and ensure you understand the advantages and disadvantages of every option we offer to you. We will answer any questions you have and help you make the best decision for the future, for you and your family.