Client story - When not to transfer a defined benefit pension

Monday, 20 March 2017

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Final salary pension advice across the UK

What did the client want?

He asked us to transfer his two defined benefit pensions into a SIPP. He had been to other IFAs but found their fees too high. His reasons to transfer were as follows:

  1. The transfer was around 30 times the value of the pensions being surrendered and this seemed a high multiple.
  2. While he was near retirement his wife was in her early 40s, with a low income, so he was concerned that his death could leave her in financial difficulties.

What did we do, and what was our advice?

We ran his pension transfer packs through our Transfer Value Analysis system, and asked further questions about his circumstances. We strongly recommended that he did not transfer his pension, for the following reasons:

  1. His pensions included a guaranteed spouse income of 66% of his entitlement. This meant that if he died his wife would get a good level of pension income - enough to live when combined with her salary - for the rest of her life, which could be 60+ years.
  2. We showed the client that to buy this level of income via a lifetime annuity would cost around double the amount that his final salary pension schemes were offering as transfer values, because his wife was so much younger than him.
  3. As such, our advice was that to meet his aim of ensuring financial security for his family, the best route was to do nothing, and leave the defined benefit pensions intact.

What did we charge for this

We made no charge - our initial assesment of a final salary pension transfer is always free.


It can make sense to transfer out of a final salary pension and we arrange such transfers 2 or 3 times per month. However, perhaps surprisingly, in situations where the pension scheme member has a much younger spouse this makes a final salary pension much more valuable, and the transfer a much less attractive idea.

Sadly, pension scheme administrators don't take your spouse's age into account when calculating a transfer value. So if you have a much younger spouse they may not offer you nearly enough. Conversly, where you have a much older spouse their transfer offer may be really generous.

There are no hard and fast rules for when a defined benefit transfer makes sense - each situation is different - so if you are considering it then get in touch and we will carry out a free assesment of your situation.

Chartered Financial Planners. Regulated by the Financial Conduct Authority (FCA no. 603653).