Pension funds are a vital aspect of planning for your future, and defined benefit pension transfers can be a complex and confusing process. As an independent financial advisor, it's our job to guide clients through this process and ensure that they understand all of the benefits and drawbacks of transferring their defined benefit pension scheme.
When you’ve spent decades building up your pension pot with your Final Salary scheme, the thought of transferring it to a new scheme – such as a Self Invested Personal Pension (SIPP) – can be a daunting one. There are a lot of things to consider, and it’s a decision that shouldn’t be taken lightly.
However, there is a lot of information out there about transferring your Final Salary pension, and some of it is wrong. In this blog, we’re going to look at what you know and don’t know about transferring your Final Salary pension, and why you should work with the right Independent Financial Advisor (IFA) to ensure the process goes smoothly. Before reading further, watch our video on transferring Final Salary pensions to understand the process better.
What You Know About Transferring Your Final Salary Pension
One of the most common things you may know about transferring your Final Salary pension is that you may be giving up safeguarded benefits. Safeguarded benefits are the benefits that are guaranteed by your employer or the government and are usually non-transferable. This can include things like death benefits, early retirement benefits, and index-linked benefits.
Another thing that you may know is that you can’t transfer back to your DB scheme. Once you transfer your pension, you can’t change your mind and transfer it back to your DB scheme. This means that you need to be certain that transferring your pension is the right decision for you before you go through with it.
You may also know that you will be giving up your CETV (Cash Equivalent Transfer Value) when you transfer your pension. Your CETV is the value of your pension that can be used to buy an annuity or transfer to a new pension scheme. When you transfer your pension, you will be giving up this value, which can be a significant amount of money.
Another thing that you may know is that you will be giving up the index-linked asset when you transfer your pension. The index-linked asset is the part of your pension that is linked to inflation, which means that it increases with inflation. This can be a valuable asset as it helps your pension to keep up with the cost of living.
What You Don’t Know About Transferring Your Final Salary Pension
Now that you have understand common things mentioned online when researching about Final Salary pension transfer, there are things you don’t know about transferring your Final Salary pension that you should be aware of.
Final Salary Pension Transfer Is a Long and Hard Work
First, it's important to understand that your defined benefit pension transfer is a lot of hard work. The process can take anywhere from six to nine months, and requires a significant amount of paperwork and follow-up.
The scheme must produce a cash equivalent transfer value (CETV), and there may be additional information that needs to be gathered before the transfer can take place. Some schemes are very efficient and allow clients to download their CETVs electronically, while others may take months to produce the CETV. It's important to work with an IFA that can get the information to you quickly and efficiently, so that the process can move forward as soon as possible.
Once the report is submitted, it must be reviewed and due diligence must be completed by your DB scheme. Finally, there's a Money Helper telephone call, which is a call to ensure that the client fully understands the implications of the transfer.
This is why, working with a financial advisor who is efficient and fast is a crucial factor. Because the process takes so long, it's vital to have someone who can keep things moving and ensure that everything is completed in a timely manner. Furthermore, it's vital to work with an advisor who is experienced in this process and can help you navigate the nuances of transferring your defined benefit pension scheme.
Requires Your Involvement
Final salary pension transfers require involvement on your end for documents review. This means that you need to be actively involved in the process of transferring your pension, including reviewing and signing important documents.
This process has become more convenient in recent years with the use of digital signature platforms that we use, such as DocuSign, which allows you to review and sign documents electronically. This is a stark contrast to 5–10 years ago, when the process required more time as it involved handwriting signatures, mailing or delivering the documents in person. With digital signature, the process is more efficient and secure.
The Money Is Yours
Final salary pension transfers allow you to have ownership over your pension funds. When you transfer your pension to a Self Invested Personal Pension (SIPP), the money is yours, and you are in control of your investments.
This means that you have the ability to have an active involvement with your Independent Financial Advisor (IFA) during the investment choice process. It is important to remember that the money is yours, and you should never let your IFA tell you what to do with your investments.
It is important to have an open and transparent conversation with your IFA to ensure that the investment choices align with your goals and risk tolerance. With a SIPP, you have more flexibility and control over your pension funds, which can provide a sense of empowerment and security for your retirement.
Working With the Right IFA
In conclusion, transferring your Final Salary pension can be a complex and confusing process, but working with the right Independent Financial Advisor (IFA) can make all the difference.
At Cameron James, we understand the importance of this decision and are dedicated to guiding our clients through the process, ensuring that they understand all of the benefits and drawbacks of transferring their defined benefit pension scheme. Our team of experts is committed to providing personalized and comprehensive advice, tailored to meet your specific needs and goals.
If you are considering transferring your Final Salary pension, we highly recommend booking a free consultation with Cameron James. Our team will provide you with all the information you need to make an informed decision and help you navigate the process smoothly. Don't hesitate, book your consultation today and take the first step towards securing your financial future.