How Is a Final Salary Pension Transfer Process Done
at Cameron James?
A Final Salary Pension is unlike a Defined Contribution pension transfer. It requires thorough research of your current financial situation and future goals and objectives.
These pension schemes are referred to as being ‘gold-plated' for the safeguarded benefits and guaranteed income for life that you will receive from your scheme from your Normal Retirement Age (NRA).
As such, when it comes to a Defined Benefit Pension Transfer or Final Salary Pension Transfer, you and your independent financial adviser (IFA) must legally ensure that the transfer is indeed in your best interests.
Many of our existing clients who had Defined Benefit Pension pots asked the same questions around the DB Pension transfer process. In this article, we will present some typical clients' concerns and our answers to them.
Can I Transfer My Final Salary Pension to a SIPP?
Final Salary Pension is a safeguarded pension scheme with multiple advantages such as annuity (scheme pension), death benefits, inflation-linked, etc. Due to these benefits, Final Salary Pensions are dubbed as being “gold-plated”.
As a result, the FCA wishes to protect investors from potentially making poor decisions and giving up these benefits without having taken professional financial advice. The FCA requires every individual who possesses a Final Salary Pension with a value above £30,000 to take advice from a regulated and authorised independent financial adviser such as Cameron James.
Furthermore, your IFA must also be a qualified Pension Transfer Specialist, commonly referred to as a PTS in the industry. As such, a Final Salary Pension transfer to SIPP is possible, but requires advice from FCA-regulated Independent Financial Advisor to ensure that the transfer is in your best interest.
Should I Transfer My Final Salary Pension?
This question is also one of the most asked questions by our clients. It will depend on your own individual situation, and as mentioned above, it can be a time-consuming process if not done correctly, and it requires a great deal of due diligence.
A Final Salary Pension transfer to SIPP requires a thorough analysis of your financial situation and your future objectives after transferring. It is important to know that the FCA requires all regulated independent financial advisers to start from the position that a transfer is not in your best interests. This is because a Final Salary Pension has safeguarded benefits, and it may be in your best interests and to retain your Final Salary Pension asset and not transfer out or convert.
Watch an explanation by our CEO and Independent Financial Advisor, Dominic James Murray about all considerations you should take before deciding your Final Salary Pension transfer.
How Is a Final Salary Pension Transfer Done at Cameron James?
Another typical question. Clients want to understand exactly what the process and steps will look like before they commit to working with us.
Moreover, we assume many clients generally ask this question to understand and determine the Financial Adviser's credibility and experience in DB transfers. Since there are a lot of pension scams (in our opinion any advice that is too expensive or places an Adviser's interests over or above the clients) so it is important to understand how the process works.
At Cameron James, there are a number of steps involved in transferring a final salary pension to a SIPP or International SIPP. The following process answers one of our US residents client questions on the process:
- The initial DB Report needs to be done by an FCA Regulated Pension Transfer Specialist. We typically use a Company named Pension Advice Specialists (PAS);
- Kindly note, we have numerous in-house Pension Transfer Specialist (PTS) within the team at Cameron James, and I in fact am also a qualified PTS. However, we believe that a conflict of interest can arise if the PTS advising on the case is also the IFA who will benefit from the ongoing Asset Under Management (AUM) as such we create a Chinese walls system and ensure all FCA DB reports are prepared independently;
- The transfer itself has to be conducted by an SEC Regulated IAR (Investment Advisory Representative) working for an RIA (Registered Investment Adviser). They are the ones who take on the liability for the transfer etc;
- The UK SIPP has to be an “International” SIPP, which is a UK SIPP open to non-UK Residents. The amount of International SIPPs which allow US Residents is limited due to FATCA and additional insurance costs etc. For our US Clients, we typically use Novia Global or iPensions;
- SIPP Provider requires an adviser attached to the account for regulatory/insurance purposes;
- Pension remains in the UK but is registered to yourself in the US and should be declared on your Tax Return etc;
- Once you draw down on the pension, the marginal state and federal income taxes will apply.
The above process summarises how a client’s Final Salary Pension will be transferred into an International SIPP for them to manage on an ongoing basis from the US. Several steps and verifications are involved, with extended communication between several stakeholders (client, IFA, existing DB scheme, new SIPP scheme, underlying platform and funds houses).
Now that you have understood the overview of how a Final Salary Pension transfer to SIPP is completed, we will break down the physical advice process in greater detail in a step-by-step guide.
Kind note, UK DB pension regulation changes frequently, and we must follow UK pension rules, so the below process changes from time to time.
Client Physical Advice Process & Steps:
- Initial Consultation to fill out Fact Find and Letter of Authority (LOA), held over Zoom;
- Fact Find and LOA sent to the client on DocuSign;
- Once returned, LOA was sent to the Pension Scheme. Ten-day turn around for them to accept the LOA on your account;
- Once LOA is Processed, we shall request all the required actuarial calculations required to complete your DB Transfer Report, if not already received in your transfer out and valuation pack;
- We will draft for you your DB RWL 1, which is effectively your LOA for the DB Report. We shall also draft for you a Pre-Advice Confirmation Report, highlighting your possible generic options, SIPP providers, Investment Platforms, costs, regulations etc, if a transfer were deemed suitable for you by the PTS. Kindly note, this step is generic and not authorised DB advice;
- Once you sign the DB RWL 1 on DocuSign, we shall send you your Pre-completed Application Pack to start your DB Pension Transfer Report with PAS or another partner on DocuSign;
- Once signed, the Report Takes C.18 days to complete;
- Once completed and a transfer is advised, we will send over to you all the pre-completed Novia International SIPP or iPensions Platform SIPP forms and the Ceding Pension Scheme Transfer forms; and
- Once signed, we shall submit these to the Ceding Scheme, and Novia or iPensions and the transfer process will begin.
Apart from those processes above, one of the most important things that you should do yourself before initiating your Final Salary Pension transfer is to research the financial adviser's eligibility.
We always advise our clients to check on our SEC disclosures (click here to see an example of our IFA SEC disclosures) and our RIA. This is to ensure that we are a regulated and well-regarded firm in the industry, which means that your pension transfer is in the safe hands of UK pension transfer specialist.
Trust Cameron James to Handle Your Final Salary Pension Transfer to SIPP
We are transparent with all of our clients and answer their questions to reassure them and guide them through the process of Final Salary Pension Transfer.
In particular, we let clients understand that we are an FCA-regulated and well-regarded pension transfer specialist in the industry. We believe you have questions about defined benefit pension, especially if you are looking to transfer your Final Salary Pension overseas
Choose your convenience date below and start speaking with our regulated independent financial advisers to answer all of your questions regarding UK pension transfers. Initial consultation at Cameron James is always free of charge.
You can also head over to our YouTube Channel to learn more about Final Salary Pension Transfers and further educate yourself.
