Moving pension savings?
Transferring pensions from one scheme to another can be fraught with risk. Carl Lamb looks at why it’s important to get good advice
It is possible to move pension savings from one scheme to another. However, there are pitfalls to avoid: the pension saver who doesn’t understand what a transfer entails is in danger of losing valuable guaranteed benefits (known as ‘safeguarded’ benefits) or incurring future unwanted responsibilities and costs.
That’s why advice is critical for anyone considering a transfer. Indeed, getting financial advice for pension transfers is compulsory for anyone with safeguarded benefits worth over £30,000.
In recent years we have seen members of Defined Benefit (DB) Pension Schemes – also known as Final Salary Schemes – choose to move their DB benefits, based on length of service and salary, into a Defined Contribution (DC) Scheme where growth is dependent on investment performance. They do this in the pursuit of better returns. The same prospect can motivate them to transfer benefits from one DC scheme to another.
In a move to signpost pension savers to suitable advisers, the Personal Finance Society – the professional body for financial advisers – has set up a new standard for firms offering pension transfer advice to those with safeguarded benefits: the Pension Transfer Gold Standard.
This sets out nine core principles for firms that determine the structure of their processes as well as the quality of advice and transparency of the information provided. It’s also about making sure you understand if and why you might need advice and what that advice might cost.
Firms holding the Gold Standard will have the people with the right qualifications and experience to deliver pension transfer advice that protects your best interests and who will recommend suitable investment solutions in which to invest your newly transferred funds to achieve your desired outcomes. Smith & Pinching and Almary Green are among the early adopters of this standard.
A decision to transfer safeguarded pension benefits is usually an irrevocable one, with long-term consequences and is often not in the best interests of the pension saver. However, there are circumstances when it is worth considering – where you have sufficient other guaranteed sources of retirement income, for example, or where your focus is on providing benefits for beneficiaries on your death. Do make sure that you take advice from an independent financial adviser holding the new Pension Transfer Gold Standard if you are considering doing it.
Any opinions expressed in this article are subject to change and not advice. Any solution described may not be suitable for everyone. The value of an investment and the income from it could go down as well as up. The return at the end of the investment period is not guaranteed and you may get back less than you originally invested. The tax treatment of investments depends on individual circumstances and is subject to change.
Smith & Pinching and Almary Green are Chartered Financial Planners and adhere to the Pension Transfer Gold Standard. If you would like a no-cost exploratory review to discuss your retirement planning with an adviser from either Smith & Pinching or Almary Green call 01603 789966 or email en[email protected]ing. co.uk.
This content is supplied by Smith & Pinching and Almary Green.
ABOVE: Your nest egg is important and good advice is essential Photo: Getty/Brian A Jackson