Considering transferring a defined benefit pension is a significant step that can affect your financial future. In this guide, we discuss the importance of defined benefit pension transfer specialists in the process and explain how to find a reliable and qualified specialist to guide you through every step.
What You Will Learn
- Who are defined benefit pension transfer specialists?
- Which UK expats need a defined benefit transfer specialist?
- What are the risks associated with not working with a specialist firm?
- How can UK expats find a reliable defined benefit transfer specialist?
Who Are Defined Benefit Pension Transfer Specialists?
Defined benefit pension transfer specialists are professionals who are qualified, knowledgeable individuals regarding pension transfer rules, regulations and legislation.
They are advisers who can help explain what your pension is and how it works, as well as the ramifications of a transfer.
Pension Transfer advice is the most regulated area of UK financial advice, if your Cash Equivalent Transfer Value (CETV) is worth more than £30,000 you will need to have advice from a qualified Pension Transfer Specialist (PTS) if you are considering a transfer.
A DB pension, also known as a final salary pension, was historically known as the standard retirement scheme in the UK, especially in the public sector. The pension scheme provides you with an income based on:
- Your final or average salary
- Length of employment at a company
- The scheme’s accrual rate
While the scheme offers several benefits, like a guaranteed income and protection from inflation, it isn’t without its drawbacks:
- The employer determines the pension plan—not you.
- Investment decisions are managed solely by the employer, leaving you with no investment control.
- Access to the pension is restricted to a fixed monthly income, with no option for lump-sum withdrawals.
- Inheritance options are limited. Beneficiaries are predetermined and typically receive only a portion of the pension.
If you’d like to transfer your final salary pension for these or other reasons, a defined benefit pension transfer specialist can help. They offer expert guidance and can:
- Examine your current pension plan, assess the pension transfer value, and determine if a transfer is a good idea based on your circumstances
- Outline risks associated with transferring a defined benefit pension
- Create a report that accounts for your situation and requirements
- Discuss the pros and cons of available options and suggest the best transfer plan
- Help with choosing the right investment strategy that aligns with your goals and willingness to risk
- Help you understand tax implications and fees you could expect if you decide to transfer
- Assist you with collecting and completing relevant paperwork
Keep in mind, according to the Financial Conduct Authority (FCA) for the vast majority of clients, retaining your scheme benefits will be in your best interests.
This is what is known as the ‘underlying assumption’ and it is from this assumption that transferring your pension will not be in your best interests that pension transfer specialists start from.
What Qualifications Do Defined Benefit Pension Transfer Specialists Need To Have?
Pension transfers involve complex financial decisions impacting your retirement plans and long-term financial security. Therefore, to offer advice based on your goals and circumstances, defined pension transfer specialists in the UK must have qualifications that comply with the Retail Distribution Review (RDR) requirements—set by the Financial Conduct Authority (FCA)—for Activities 4 (advising on retail investment products) and 6 (friendly society tax-exempt policies).
A pension transfer specialist will need to have one of the following qualifications:
- AF7 Pension Transfer (including a Level 4 Diploma in Financial Planning or a Level 4 in Regulated financial planning from the Chartered Insurance Institute (CII)
- A PTS may have withdrawn qualifications from the CII such as AF3 or G60
- The Level 6 qualification with the London Institute of Banking and Finance (LIBF) – referred to as Pension Transfers Qualification (PETR) or the
- Level 6 Certificate in Pension Transfers and Planning Advice from the Chartered Institute for Securities and Investments (CISI)
Why Are the Qualifications of Defined Benefit Pension Transfer Specialists Important?
The qualifications are more than a regulatory requirement. They reassure you that you’re working with someone who understands the full scope of pension transfers, including the nuances of how different pensions work and the impact of their decisions. In practice, this translates to:
- Peace of Mind: The specialist is not only knowledgeable of pension, they are an individual who you can use as a sound board to state what you are looking to achieve. PTSs are very good at discussing what are called ‘suitable alternative options’ with you as opposed to a transfer. It may even be that there is another way of achieving your objective without considering a transfer, or that you may already be on track to achieve your objectives.
- Personalised Advice: Reputable specialists observe your specific situation and suggest solutions that fit your retirement goals and readiness to invest.
- Tax Efficiency: Defined benefit pension transfer specialists are familiar with tax implications that apply to your specific case and can help you minimise tax liabilities and avoid high charges.
- Long-Term Support: DB pension specialists can help you prepare for retirement by discussing investment opportunities or ways to optimise investment management as you approach your retirement. Specialists can adapt your portfolio as your needs change, ensuring financial security and wealth preservation.
Do You Need To Work With Defined Benefit Pension Transfer Specialists?
Working with a DB pension transfer specialist helps you:
- Minimise the risk of unexpected charges and losing money or benefits
- Understand the pros and cons of different pension schemes
- Choose a plan that aligns with international UK rules and regulations and your needs and retirement goals
The law dictates that you must work with a transfer specialist if your defined benefit pension has a transfer value of £30,000 or more. In some cases, pension providers may require you to get pension transfer advice regardless of the transfer value.
In addition to guiding you through the transfer, pension transfer advisers add a layer of security and protection to the process. They take on risks and liability for every recommendation.
At Titan Wealth International, you’ll find reliable and professional specialists you can trust with your defined benefit pension transfer. Our firm is accredited as a CISI Chartered Firm and a CII International Professional Partner, guaranteeing the highest level of expertise to all clients, no matter how complex their situation may seem.
Working With Defined Benefit Pension Transfer Specialists—What UK Expats Can Expect
Working with a specialist to transfer your defined benefit pension typically involves the following stages, and their length can vary:
| Stage | Description |
|---|---|
| Initial Engagement | You reach out to a chosen specialist and explain your needs. You’ll be required to complete the letter of authority to allow your specialist to collect relevant info on your current pension scheme on your behalf. |
| Gathering Information | A reliable specialist will ask you a series of questions regarding your spending habits, additional sources of income, and retirement plans to obtain information on your situation and preferences. |
| Receiving a Report | A specialist will create a personalised report to explain whether you’re a suitable candidate for the transfer. If you are, the report will include a suggestion on the best pension scheme, along with the rationale behind the recommendation. The report will also discuss tax implications, applicable fees, and potential risks to ensure you have complete information before deciding to transfer. |
| Transferring the Pension | Specialists can help you fill out relevant paperwork to begin the transfer. They monitor every part of the process to ensure it goes as planned and minimise the risk of penalties or losing valuable benefits. Please note, if the advice is for you to remain in the scheme, the PTS firm will not assist you with a transfer, as you would be going against their advice. Clients who choose to go against the advice of a PTS are called ‘Insistent clients. |
Risks of Not Working With a Specialist Firm When Transferring Your DB Pension
Transferring your defined benefit pension opens the door to more investment freedom, financial flexibility, and better inheritance options. However, the transfer also entails giving up a guaranteed income, exposing your pension to fluctuating inflation, and taking on a higher investment risk.
A pension transfer adviser is supposed to work in your best interest and offer relevant and detailed defined benefit pension transfer advice. Still, even an experienced adviser might not have the necessary knowledge to untangle the complexities of transferring DB pensions for UK expats, exposing you to potential risks, including:
| Risk | Explanation |
|---|---|
| Wrong Financial Decisions | A DB adviser may talk you into transferring to a pension scheme even when you are better off on your current plan. They could also advise a transfer to a scheme that doesn’t align with your goals or suggest high-risk actions that can cause significant losses. |
| Tax Charges | Inexperienced and non-qualified DB pension advisors may not be familiar with the relevant local and international tax regulations, potentially exposing you to significant tax liabilities for unauthorised payments, which could result in a reduction of your pension fund by as much as 55%. |
| Lack of Resources | Firms without access to global resources could miss opportunities to help you grow your wealth and minimise costs. |
Specialist firms also hire pension transfer specialists, lawyers, accountants, and trust experts. These professionals work together to develop a comprehensive plan for pension transfers, efficient asset structuring, estate planning, and global property management. This holistic approach typically doesn’t exist in smaller or less-equipped companies.
Choosing a Reputable Defined Benefit Pension Transfer Specialist
Not working with an experienced pension transfer specialist can jeopardise your financial stability in the future. It could expose you to tax penalties, fees, and significant financial loss.
To prevent that, consider the following when choosing a specialist to handle your pension transfer:
- Qualifications and Experience: A qualified specialist should have accreditation that confirms they can help you with your pension transfer. Find a professional specialising in DB pension transfers for UK expats to ensure they have experience in the specific service you need.
- References: Every DB specialist should be able to provide references of past or current clients that can verify their professionalism and expertise.
- Independence: Look for a specialist who doesn’t work for pension companies. This ensures they won’t try to push services that may not be in your best interest.
- Approach: The right specialist should have a unique approach to every client and offer tailored solutions for every situation. If a specialist isn’t particularly interested in your current pension scheme or your preferences for the future, they can’t offer personalised advice.
- Transparency: Reputable specialists are transparent about their fees and expected costs from the start.
Defined Benefit Pension Transfer Specialist Fees
Defined benefit pension transfer specialists can choose how they charge for their services. Triage and abridged advice are often free of charge, while fees for full advice are highly individualised.
Due to what is called a ‘contingent charge ban’ pension transfer specialist firms must charge you the same irrespective of whether the advice is to remain in your scheme or to transfer.
Furthermore, pension transfer specialist firms must disclose their charges up front to you. If you agree to pay these charges, they must be paid up front, the pension transfer specialist firm will then undertake the appropriate analysis and produce a suitability report recommending either a transfer or remain.
Every pension transfer specialist firm will have a different charging structure, so make sure you know what the charges are before you agree to being given regulated independent financial advice from a pension transfer specialist.
Whatever their fee structure, respected specialists should always inform you about their pricing in advance and clearly explain what services the stated price encompasses.
Key Takeaway
Defined benefit pension transfer specialists help provide you with all of the information on your pension and the pros and cons of a transfer. A pension transfer specialist will give you advice based on the FCA rules and what they believe is in your best interests based on those rules.
Once you have paid for and been provided your suitability report from the pension transfer specialist, you should have all of the available information for you to make an informed decision on what to do next, which is either to retain your pension benefits and why, or to transfer your pension benefits and why.
We’ve also explained what working with a defined benefit pension transfer specialist entails, and we’ve provided a short overview of the key stages of the process.
To help you protect your pension and prevent financial losses, we’ve outlined the principal risks of hiring an inexperienced specialist and ways to ensure your specialist is qualified.
You’ll find such specialists at Titan Wealth International. At our company, every UK expat gets a dedicated defined benefit pension transfer specialist who can objectively evaluate the situation. Based on the evaluation’s results and your wishes, you’ll get a complimentary pension transfer assessment to help you make the best decisions for your retirement.
