Understanding a defined benefit pension transfer

Personal finances can be confusing, no matter what stage of life you are in. However, when it comes to your pension, it can be even harder to understand - with different types of pensions and different options for when you can access them.

Here, we take a look at defined benefit pension transfers to leave you with a better understanding.

Defined Benefits (DB) vs Personal Pensions (PP)

Broadly speaking, a pension scheme is either Defined Benefits (DB) or Defined Contribution (DC):

  • Defined Benefits (DB) - The characteristics and income benefits of a DB scheme are based on years of service and level of salary.
  • Personal Pension (PP) - is a defined contribution (DC) scheme, where the level of retirement income is decided by the level of contributions, investment growth over the investment term, and by the term over which the income is needed or expected to be paid.

    The Financial Conduct Authority (FCA) and The Pension Regulator (TPR) believe that it will be in most people’s interest to keep their DB pension.

Can I transfer a defined benefit pension?

Not everyone is able to transfer their defined benefit pension. You should be able to do this to any other type of scheme if you're currently in a defined benefit scheme provided by your private sector employment. This also applies if you are in a funded public sector pension scheme. On the other hand, this option is not open to you if you are in an ‘unfunded’ public sector pension scheme. In this case, you can only transfer your pension into a different defined benefit scheme, giving you less flexibility with your choices.

Should I transfer my defined benefit pension?

Whether or not you should transfer your defined benefit pension comes down to what you want to get out of it. A pension transfer from this style of scheme means that you will, as standard, be sacrificing your income for life. In return, you receive a cash value. After this, the cash is moved and invested into another pension scheme.

How Integritas Financial Planners can help

If you are considering a defined benefit pension transfer, then you need the best and most comprehensive support - which is where Integritas Financial Planners come in. We provide three stages of advice for you, depending on your position and needs. Initially, our Triage stage gives you all the information you need about your benefits, allowing you to decide whether or not to take advice on this transfer. We also provide Abridged Advice, where we can identify, at an early stage, those who definitely shouldn’t transfer. Finally, we offer a Full Advice service analysing your circumstances and the defined benefit pension before making a recommendation as to whether you should ‘do nothing’, make a ‘partial transfer’ or make a ‘full transfer’.

Get in touch to see how we can help you.

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