Defined benefit pension transfers

As IFAs and Chartered Financial Planners based in Wetherby, near Leeds, York and Harrogate, we are specialists in offering advice on the transfer of a defined benefit (e.g. "final salary") pension to a personal pension or SIPP.

We can help clients with DB transfers wherever they are in the UK. No face-to-face meeting is required. No fee is charged if a transfer does not occur.

Please note that we are currently only advising on defined benefit pension transfer values worth more than £150,000.

Our initial advice charge

If a transfer occurs then our full transfer advice fee, deducted from the transfer value as it moves to the new personal pension, is as follows:

  • £3,450 for transfer values between £150,000 and £250,000
  • Between £3,450 and £4,950 (sliding scale) for transfer values between £250,000 and £500,000
  • £4,950 for transfer values above £500,000

This covers the work involved in the transfer as well as the very significant compliance, regulatory and liability costs involved in advising on defined benefit transfers.

Ongoing charges

We will provide expert advice on how to invest your transfer value, in order to meet your financial goals while taking an appropriate level of risk. If you choose our ongoing advice service then the total annual cost of your new pension, including the provider charge, fund management charges, and our ongoing advice charge, will typically be between 0.5% and 1% of assets per year, which is highly competitive by industry standards (the total cost of a SIPP with Hargreaves Lansdown, including their provider charge and the cost of a typical "active" investment fund, can be as much as 2% per year, or even more).

We can usually only provide advice on a DB transfer if we are also going to be providing you with ongoing investment advice for at least the first year after the transfer. This is because we want to be sure that the investments you choose will be suitable for your circumstances and appetite for investment risk. We would therefore usually set up a new SIPP, with a provider such as Aviva or AJ Bell, to receive the transfer proceeds.

However, for clients who have existing investment experience and wish to self-manage their investment strategy then we can, in certain circumstances, help transfer a defined benefit pension into your existing SIPP, whether that be with a company such as Hargreaves Lansdown or an employer pension.

Should you consider a transfer?

Final salary pensions used to be the norm, but are becoming increasingly rare. They are offered by employers to their employees, and guarantee a certain level of pension income for life once you retire, regardless of how long you live. Even better, this income is usually inflation-linked so it will rise each year, and also guarantees a (usually lower) level of guaranteed income for your spouse if you die before him or her.

A guaranteed income for life is a very attractive thing, and for 90% of people will be the best option. However, if you have a final salary pension then you have the option of giving up your right to this income in exchange for a one-off payment into a new personal pension in your name.

Why would you do this? Well, most people shouldn't, but here are some reasons why it makes sense for some people:

  1. A final salary pension dies with you (or with your spouse) - you cannot leave anything to your children. In contrast, money in a personal pension can be left to whoever you wish - your spouse could inherit it, use some of it, then pass the remainder to your children when they die - all completely free of inheritance tax. As such, if you are worried about how long you might live, or if your main focus is passing assets to your children rather then using them to provide a retirement income, transferring into a personal pension could work for you.
  2. A final salary pension pays you the same amount each year (increasing with inflation). You have no control over it. However, a personal pension allows you to take whatever income you like from it, and for some people this flexibility is very important. For example, you might want to be able to release large chunks of money in some years, but take nothing in other years. You can do that with a personal pension, but not a defined benefit pension.
  3. If the employer who promised you the final salary pension goes bust then the pension scheme will be taken over by the Pension Protection Fund. If this happens then you will still get a guaranteed pension, but you might get a lot less than you were promised, and the annual increases with inflation might be lower. As such, if you are seriously worried about the financial health of your previous employer you might want to consider a transfer, especially if you are expecting a large annual pension income (more than £37,000 per year).
  4. Part of the appeal of a final salary pension is that it promises an income for your spouse if you die (usually 50% of the income you were promised). However, if you are unmarried this isn't of much value to you. Your priority might be to ensure that your children, or someone else, benefits on your death. In this situation transferring benefits to a personal pension could make sense.
  5. If you are an experienced investor and are willing to take a degree of risk with your pension fund then moving it to a personal pension and investing it could deliver strong investment growth between now and when you reach retirement age.
  6. Final salary pension schemes will start to pay you an income on your "normal retirement age" (usually 60 or 65). Moving your pension money into a personal pension gives you the flexibility to start taking it when you wish, whether that is 65, 70, or never.

If you think that any of the above might apply to you then you might consider asking your pension scheme for a "transfer pack" to see what final salary transfer value they would offer you.

Our process

Stage 1: Free initial sense-check
This involves a look over your circumstances, and the pension offered by the scheme, and your appetite for investment risk, to see if it is likely that we will recommend a transfer. If not, we will explain why and you will of course be free to get a second opinion elsewhere. This stage takes no more than a day or two usually.

Stage 2: Free analysis summary presented to you, with discussion of the pros and cons of a transfer (no fee)
This is only offered if we believe that we are very likely to recommend a transfer, and includes a report covering the following aspects:

  • What income the scheme is promising at your intended retirement age.
  • What investment growth in a personal pension would be needed to provide an equivalent guaranteed income via the purchase of an annuity (the so called "critical yield")
  • How long the pot would last in retirement if you used "income drawdown" and achieved various levels of investment growth
  • A full Transfer Value Analysis report generated using one of the industry standard software tools.
  • Cashflow forecasting to show how a transfer out could affect your household finances in various scenarios, over the rest of your life.
  • Discussion of how a transfer could meet your objectives, and what other approaches might meet those objectives in a cheaper and less risky way.
  • A full list of the pros and cons of a transfer in your particular case.

If having read all that you still want to proceed, and we are happy that you understand the risks involved, and that a transfer is suitable for your situation, then we proceed to the transfer itself.

Stage 3: Transfer (fee applicable, deducted from transfer)
We will supply a full recommendation report, explaining why we are recommending a transfer for you to check, along with an illustration from our recommended pension provider, showing all costs involved. We will complete the documents required by the defined benefit scheme, and the personal pension provider receiving the transfer value. We will then troubleshoot the transfer as required, until it is complete. Our transfer advice fee is deducted from the transfer value as it moves to the new SIPP.

Stage 4: Ongoing advice on the investments within the new pension
A transfer will be most likely to work for you if the transfer value is invested in an appropriate mix of investment funds, combining growth potential and risk control, and reviewed on a regular basis. As such, once the transfer is completed we provide ongoing advice on the investments held, including when to make changes to the funds you hold as market conditions and your circumstances and risk appetite change, as well as advice on how to withdraw money in the most tax efficient way when you reach retirement age. We will write to you regularly with performance reports, market updates, and investment advice, and will provide you with as much ad-hoc advice as you want.

To discuss our service please get in touch.

For our main pension advice page please click here, or to read customer testimonials click here.

"Matthew advised me on transferring my DB pension to a SIPP. I was very pleased with his personal service - it was very efficient and thorough. Like many people I thought I knew what I wanted before the review started, but Matthew was very professional and raised all the issues that needed to be considered - making my decision much more informed and considered. This level of professional capability combined with administrative efficiency made the whole transfer smooth and painless"

Crispin Finn, London

"I asked Wendy Cochran to review the benefits of moving a final salary pension scheme. They provided a very quick response to my initial request, asking me to provide comprehensive details about the scheme and once I had done this they provided a detailed report on my circumstances within 2 days. The report was comprehensive, insightful and completely free. They recommended I take no action. Given this denied them an opportunity to earn a fee I genuinely believe they acted in my best interests."

Andrew Pattinson, Leeds

Final salary pension transfer advice, Wetherby, near Leeds, York and Harrogate, IFA

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