If you leave your pension scheme, you do not lose the benefits you have built up. They continue to belong to you and you have several options for what to do with them and your scheme administrator or pension provider should tell you which options apply to you.
The decision therefore to transfer a defined benefit pension – to all extents a “guaranteed” benefit – is not one that should be taken lightly. Quite rightly, it needs to be demonstrably in the client’s best interest to do so and for this reason the starting point is often that it is better not to transfer.
However, there are a number of reasons why an individual may wish to transfer their defined benefits / safeguarded pension.
The most common are:
- Death benefits / IHT planning
- Ill health considerations
- Poor spouse’s or dependent’s benefits
- Scheme in deficit / PPF concerns
- Full Encashment or early retirement
- Control of retirement income for tax planning
The process is complex and, with transfer values only normally guaranteed for three months, it often takes much of this time to complete the required analysis. If you’re thinking of transferring from a defined benefit scheme, you should ask your scheme administrator or pension provider for a cash equivalent transfer value (CETV), also known as a transfer value.
At Beckford James, our senior advisers have been advising on the pluses and minuses of transferring your pension for over 20 years.