Defined Benefit (DB) pension transfer advice

A Defined Benefit (DB) or Final Salary (FS) pension scheme provides a source of secure, indexed-linked, lifetime income in retirement.

If your Cash Equivalent Transfer Value (CETV) is over £30,000, you are required under UK law to obtain UK regulated advice; indeed, the Trustees of the DB scheme can’t transfer any value of over £30,000 unless this has been signed off by a UK regulated financial adviser with the required specialisms.

Square Mile Asset Management has all the necessary specialisms and regulatory requirements to provide full transfer advice in this complex area. We can provide advice to UK and non-UK residents and have solutions for US tax resident members.

It is widely accepted that in most cases, it will remain in the best interests of the member to retain their DB pension scheme for the secure benefits it will provide them in retirement; indeed, this will always be our starting point.

Many financial advisors will rightly advise the member not to transfer should it be clear on contemporary evidence, that the transfer is not in their best interests. In many of these cases they will then decline to proceed with the transfer even if you wish to disregard this advice and transfer.

Should we recommend that you don’t transfer out of the DB pension scheme, we will allow you to proceed with the transfer as an ‘Insistent Client’ if this is done within the FCA’s guidelines.

An ‘insistent client’ is a client who:

  • receives a personal recommendation from a FCA-regulated firm
  • decides to enter into a transaction which is different from that recommended by the firm in the personal recommendation, and
  • wishes the firm to facilitate that transaction

Therefore, we will not stop you from transferring your DB schemes if this is your preferred course of action, once you have been through our full advice process.

Several factors will influence a transfer decision, including personal circumstances, attitude to transfer and investment risk and the generosity of the cash transfer value offered by the Scheme.

We have outlined below some common reasons why members of DB pension schemes may choose to either remain or transfer out of the scheme.

Reasons for remaining in the DB scheme

  • DB scheme pension forms a large proportion of retirement provision
  • Secure income available from the scheme meets income needs in retirement
  • Uncomfortable with investment risk arising from a transfer
  • Comfortable with the existing secure income structure (pension increases and dependant pension)
  • No experience of making investment decisions
  • No desire to retire early
  • Income available post-transfer is likely to be unsustainable
  • No need for immediate tax-free cash or income
  • Uncomfortable with change
  • Low transfer value relative to secure income offered
  • Younger spouse and dependants
  • Additional scheme membership benefits
  • Initial and ongoing charge and fees

Reasons for transferring out

  • Ill health and low life expectancy issues
  • Can benefit from enhanced annuity rates upon transfer
  • Member is independently wealthy and has alternative income streams to call on
  • Increased flexibility on how to structure retirement benefits
  • Member is a professional investor and requires flexibility on how to invest retirement funds
  • Enables early retirement
  • Potential for a higher tax-free cash amount
  • Potential for a higher pension/retirement income, especially in the early years of retirement
  • More suitable death benefits
  • High transfer value relative to secure income offered
  • Inheritance Tax planning
  • No dependants

The above are merely examples and whilst we have suggested something could be a reason to transfer it may be the opposite based on your own individual circumstances and could be a reason to remain.

A DB pension transfer is irreversible once implemented, and it is imperative that you seek professional, independent advice in this complex area. Please contact us for further information on our full DB pension transfer advice service.

Pension Transfer Gold Standard

Square Mile Asset Management has met the criteria to achieve the Pension Transfer Gold Standard set out by the Personal Finance Society (PFS). The Pension Transfer Gold Standard is a voluntary code of good practice for safeguarded and Defined Benefit (DB) pension transfer advice based around a set of principles. Firms are required to adopt and promote the principles, so consumers can better understand and find good advice and be confident they are dealing with a firm going beyond minimum requirements.

gold standard

The Pension Transfer Gold Standard seeks to give Defined Benefit (DB) pension holders confidence when considering transferring out of a scheme. The nine core principles of the Pension Transfer Gold Standard are:

1. Helping clients understand when advice is appropriate
2. Ensuring advice given supports the clients’ overall wellbeing in the context of their stated objectives
3. Confirming client understanding and acceptance of all charges
4. Providing the most suitable and updated technical skills are applied
5. Transparent management of Conflicts of Interest
6. Helping clients understand the cost of transferring benefits
7. Avoiding unregulated investments and introducers
8. Transparency in advice processes and outcomes
9. Promoting the Consumer Guide to the Pension Transfer Gold Standard

Firms that adopt the Pension Transfer Gold Standard must:

  • Have regulatory permissions for provisions or pension transfer advice. Therefore, we have demonstrated high levels of the financial and technical knowledge required to advise on pension transfers appropriately.
  • Not currently be under any form of ongoing regulatory sanction by the regulator or accredited body in this field of advice. You can, therefore, rest assured that we operate to the highest standards.
  • Have adopted all the principles of the Pension Transfer Gold Standard without exception. Accordingly, you can have confidence that we will uphold the above principles.

By working with a firm that has voluntarily committed to the Pension Transfer Gold Advice, you can be confident that you will receive the best possible advice, service and support when considering transferring out of a Defined Benefit (DB) pension scheme.

You can learn more about the Pension Transfer Gold Standard by reading their consumer guide here.

How can we help?