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.

If the pension transfer advice is to remain in the DB scheme, our policy is that we will accept an ‘Insistent Client’ pension transfer request on the assumption that the Financial Conduct Authority’s (FCA) guidance is followed in full.

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

Under the insistent client scenario, we must ensure that you fully understand the risks and consequences of taking this course of action. If this isn’t evidenced, then the insistent client pension transfer request will not be permitted.’

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.

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?

To find out more about how we can help you, please contact Square Mile Asset Management on +44 (0) 20 3603 3888 or email hello@sm-asset.com

Past performance is not a reliable indicator of future performance.
Investors should remember that the value of an investment and the income received from an investment can go down as well as up, and they may not get back the amount they invested.
Investment returns may be constrained by charges levied and inflation may reduce the value of investments.
Changes in exchange rates or taxation may have an adverse effect on the price, value or income of the investments.
All statements concerning the tax treatment of products and their benefits are based on our understanding of current UK tax law and HMRC's practice.
Levels and bases of UK tax relief are subject to change.
Any non-UK residents should take the appropriate legal and/or taxation advice locally if required.

Square Mile Asset Management
30 Moorgate, City of London, EC2R 6DA.
Telephone: 020 3603 3888 Fax: 020 7112 5127 Email: hello@sm-asset.com

Square Mile Asset Management Limited is authorised and regulated by the Financial Conduct Authority (FCA). Reference Number 585160.
Square Mile Asset Management Ltd is registered as a private limited company in England & Wales No. 05279520.
Registered office: 1 Parkshot, Richmond, Surrey, TW9 2RD.