A Final Salary (or Defined Benefit) Transfer involves exchanging your pension entitlement for a cash lump sum which must be put into a registered, or HMRC recognised, pension scheme. The FCA and The Pensions Regulator (TPR) believe that it will be in most people’s best interests to keep their final salary (DB) pension.
You choose investment funds that match your objectives, attitude to risk and set the income you want. The income you receive may be adjusted periodically depending on the performance of your investments.
Once you’ve taken your tax-free lump sum you can start taking income right away or wait until a later date.
There are number of advantages to transferring your final salary pension into drawdown, but there are also some disadvantages, for example you are giving up a guarantee but gaining the ability to pass money onto your loved ones on death.
Working with a suitably qualified Adviser to understand both the advantages and disadvantages of final salary transfers and whether they are right for you is extremely important.
If you take advice with us, we will give you one of two outcomes:
In order to provide advice on Financial Salary Transfers, advisers must hold The CII Certificate in Pension Transfers (Formerly Advanced Financial Planning Certificate "AF3 Qualification" and before that "G60"). At The Pension Drawdown Company we offer the professional services of four Financial Planners holding this prestigious qualification (meet the team).
Both options are provided for comparison, each have their benefits and which one is appropriate in meeting your long term needs depends on your personal circumstances.
Comparisons based on typical Final Salary Schemes we have advised on going into Pension Drawdown
Upon transferring out your final salary scheme, for most people, we believe that ongoing advice is vital to support your plans and evolving circumstances.
This may not be the case if you are merely in a workplace pension scheme.
Your relationship with your advisor is a key part of feeling confident about your pension and making sure you continue to be correctly invested. It is important to remember that markets go down as well as up and that the value of your fund may go down and up as a result. Your advisor is there to make certain you understand the risks of investing and ensure you are invested at a level that is commensurate with your attitude to risk.
Triage
Following your initial enquiry, we will provide you with guidance to give you enough information about safeguarded benefits and flexible benefits to enable you to make a decision on whether to take advice to transfer your final salary pension. At this stage, it is factual information only and is not advice itself. There is no charge for providing this information.
Abridged advice
This is a shortened form of advice and will be provided by a pension transfer specialist. It will involve gathering information from you by way of a fact find document. The good news is, we will be allowed to tell you if transferring your Defined Benefit pension is a bad idea and that we do not recommend it. And we can still do this for free.
There will one of two outcomes from abridged advice:
Provide you with a personal recommendation not to transfer or convert
your pension.
or
Advise you that it is unclear whether you would benefit from a pension
transfer or conversion based on the information collected through the abridged
advice process.
Currently, we do not charge for providing abridged advice
Full Advice
In the event of the latter ‘unclear’ outcome, to find out if a transfer is then likely to be in your best interests we need to proceed to the full advice process, where we can carry out a full analysis, but whatever the outcome, you will have to pay our full fee. Obviously, you can choose not to proceed to full advice, in which case no fee is paid.
Here we would establish full personal information, scheme information and objectives. Check ceding scheme details for any transfer penalties and/or special enhancements that could be lost on transfer. Advise on an appropriate solution based on this. We will do cashflows and take into account tax and investment considerations; include Transfer Value Comparator (TVC) and Appropriate Pension Transfer Analysis (APTA) comparisons.
At the end of this process we may still recommend that you DO NOT TRANSFER out of your DB scheme. Our initial fees for providing full advice are set out below, please note that these will apply in full regardless of the full advice outcome – whether it’s to transfer or not to transfer.
With our full advice service, we will provide you with a written suitability report detailing the reasons for our advice. It will specify your demands/objectives and needs and highlight what is important to you. It will also set out possible disadvantages of any course of action. Our aim is to produce a report that stands the test of time and tells a story in ‘plain English’ about how the recommendation endorses your retirement plans.
Fees and transfer criteria:
Triage and abridged advice – no fees
Full advice – 2% initial, minimum £2,500 applicable in full regardless of the full advice outcome – whether it’s to transfer or not to transfer.
Minimum pension transfer value, £200,000.
We can only advise you if you are a deferred member of your DB scheme. So, if you are already an active member of your scheme, we are unable to advise you to ‘opt out’. Minimum age: please discuss your individual circumstances with us.
This guide should not be construed as individual advice to transfer out of a final salary pension scheme. Pension transfers are relatively complex and irreversible transactions and it is both imperative and a legal requirement to seek advice from a suitably qualified adviser before accepting a transfer.
Always remember the value of investments and the income they produce can fall as well as rise and you might not get back all your initial capital. This document has been produced based on our understanding of current pension rules and pension tax treatment. These do change from time to time.
The FCA think that keeping safeguarded benefits will be in the best interests of most consumers. Their current stance is that a transfer, conversion or opt-out will be unsuitable. When giving full advice, advisers should only consider a transfer, conversion or opt-out to be suitable if it can be clearly demonstrated, on contemporary evidence, that the transfer, conversion or opt-out is in the client’s best interest.
This guide should not be construed as individual advice to transfer out of a final salary pension scheme. Pension transfers are relatively complex and irreversible transactions and it is both imperative and a legal requirement to seek advice from a suitably qualified adviser before accepting a transfer.
Always remember the value of investments and the income they produce can fall as well as rise and you might not get back all your initial capital. This document has been produced based on our understanding of current pension rules and pension tax treatment. These do change from time to time.
The FCA think that keeping safeguarded benefits will be in the best interests of most consumers. Their current stance is that a transfer, conversion or opt-out will be unsuitable. When giving full advice, advisers should only consider a transfer, conversion or opt-out to be suitable if it can be clearly demonstrated, on contemporary evidence, that the transfer, conversion or opt-out is in the client’s best interest.