If you are 50+ and have a defined benefit pension which you are not currently paying into or receiving income from, you could possibly transfer it into a new flexible personal pension;
The question is…should you do so?
The starting point, is that transferring a defined benefit pension is not usually in your interest because of the guarantees attached which are usually very valuable and lost if transferred away. However there may be personal circumstances which mean that it might be beneficial to consider transferring your defined benefit pension.
Whilst we do not give advice in this area ourselves, we have relationships with Pension Transfer Specialists (PTS) and some of the most competitive and sensible offerings available.
We act as your local contact and will help you to gather the information that the Pension Transfer Specialists’ process requires in order that the PTS is able to best advise you.
Defined benefit pension transfer advice is sensibly regulated by the Financial Conduct Authority (FCA) who have set out thorough and detailed regulations surrounding it. The regulations are there to protect you and your pension, in order to ensure you are aware of all the pros and cons before you decide to transfer.
1/ Up to £29,999 CETV (Cash Equivalent Value) – Non Advice Solution – No fee.
– Ongoing annual personal pension advice fee of 0.5% of fund value. (Veracity FP fee; from the fund).
2/ £30,000 to £100,000 CETV (Cash Equivalent Value)
– £500 Admin Fee (Veracity FP Fee payable at submission of documentation to PTS, not from fund).
– No further fee from the PTS for Triage or Abridged advice (see below).
– If a transfer then progresses after the abridged advice to a full transfer the Initial fee on transfer of funds depends on the fund value as follows:-
First £250,000 – 3%
Next £750,000 – 2%
Any amount over £1M – 1%
There is a minimum fee of £2,950 (payable to the PTS from the fund) so any transfer value under £100,000 will have an actual initial cost of more that 3% depending on the value.
(Any fee over the minimum fee of £2,950 is then split between the PTS (60%) and Veracity FP (40%) which can also be paid from the fund).
– Ongoing annual personal pension advice fee of 0.5% of fund value. (Veracity FP fee, from the fund).
3/ £100,000+ CETV (Cash Equivalent Value)
– Admin Fee – £500 admin Fee (Veracity FP Fee payable at submission of documentation to PTS; not from the fund).
– Initial Advice Fee – 1% of funds transferred (Capped at £3,000) (PTS fee payable from the fund if transferred).
If the advice is likely to produce a decline; no advice will be offered and the PTS will ‘decline to advise’ with no further fee due.
If the advice is likely to produce a positive decision; advice will be offered, at which point the advice fee will be created.
If the PTS declines to advise no initial advice fee is payable.
If the PTS advises to transfer after agreement to full advice but you decline to transfer the funds the initial advice fee is still due.
– Ongoing annual personal pension advice fee of 0.5% of fund value. (Veracity FP fee from fund).
There are generally three stages to advice; the first ‘Triage’ is free, the second ‘Abridged Advice’ requires an admin fee to Veracity who ensures that the details required by the PTS are packaged and submitted within the PTS’s timescale and the correct process is managed, the final ‘Full Advice’ stage is subject to an initial advice fee to the PTS.
1. Triage – Free
On completion of an enquiry form, you will receive some generic information from the PTS about the risks of transferring a defined benefit pension scheme which will provide you with some basic information about your pension, helping you to understand the benefits of a defined benefit (final salary) pension scheme before deciding to proceed to the next stage.
2. Abridged Advice – Veracity FP Admin Fee Due
On submission of your personal circumstances and pension details, the PTS will provide more detailed advice specific to you and your specific pension. The PTS will analyse your personal circumstances along with the details of your pension and what you have said you want to achieve. The PTS will send you a detailed report.
The report will conclude that either transferring your pension is ‘not advisable’ or, that the PTS is ‘unable to ascertain suitability’ and can only do so by proceeding to Full Advice. You can then decide whether you wish to proceed to the next stage or not.
Once you have received the report the PTS will arrange to discuss the contents with you including the fees and charges and you will need to decide whether to proceed to full advice or not.
3. Full Advice – Paid
For this stage there is a charge as described above, whether you decide to go ahead and transfer your defined benefit pension or not. Full advice will provide you with a definitive answer as to whether a transfer is suitable for you, and will include, where applicable, detailed additional information and analysis about investment risk and scheme charges.
If a defined benefit pension transfer goes ahead then you can usually pay the transfer fee from the pension fund. This has the advantage of it being deducted from a tax-free fund, rather than being paid out of taxed income or savings.
If you prefer, you are able to pay by cheque or bank transfer.
Transferring a defined benefit pension is a slow process as it can take your pension scheme three months to provide all the information required, although the average time is roughly two months.
If you decide to proceed with a defined benefit pension transfer, it can take another 2 to 3 months for the money to move across from your old scheme to the new arrangement.
If you want a review of your Pension(s) or would like to understand more about how pensions work; get in touch with our advisers to arrange an initial consultation.