If you are trying to get defined benefit pension advice you might struggle.
I’ve written before about why it’s nearly impossible to transfer a defined benefit pension.
The rules and regulations are now so tough for Financial Planners, leading to very high professional indemnity insurance costs, that many have just given up advising in this area.
Even if you do find a Financial Planner willing to advise in this area you must do your due diligence on them. Including making sure they have the right permissions for what you are trying to do.
Helping a couple trying to get defined benefit pension advice
We recently met with a couple, David and Sue (names changed to ensure privacy).
Sue had two defined benefit pensions from previous employments and was keen to transfer them to a defined contribution pension.
They wanted to pay off the mortgage, clear their other debts and help their daughter.
Sue is 55 and David is 67 so David was very keen to retire however because of the monthly re-payments on their mortgage and debts he felt like he had to keep working.
They really wanted:
- The flexibility to take out a lump sum from their pensions and clear the debts.
- David to then retire.
- Sue to take early retirement in the next few years or at least go part-time.
- Both to spend more time together enjoying themselves.
Unfortunately, David and Sue had already been working with a very large financial advice firm who do a lot of work on defined benefit pensions. They had received a cash equivalent transfer value from the two defined benefit pensions and were weeks down the line when this financial advice firm turned around and said they could no longer act for them.
The reasons were very unclear but we suspect they did not have the correct permissions as the rules on advising in this area had recently changed.
Communication had not been great during this period and this had resulted in David and Sue having to do a lot of the chasing themselves which caused their health to suffer.
We got to work really trying to understand David and Sue’s situation to make their case.
It turned out David was already receiving enough secure pension income that they could afford to cover all their essential spending in retirement if the debts were clear. So, they didn’t need lots of extra secure income that wasn’t flexible.
We built the file and passed the case on to our specialist defined benefit pension team.
It took a few more months due to long delays from the defined benefit pension administrators but eventually we got the result David and Sue wanted. It was recommended that both defined benefit pensions were transferred.
I met with David and Sue the other day and to see the smiles on their faces was amazing.
They have paid off their mortgage, cleared their debts and David is now retired. David receives his list of jobs to do around the house each day from Sue!
This shows the power of working with the right team and understanding what can and can’t be done before you commit to the process.
Some tips for trying to get defined benefit pension advice
Once you commit to regulated defined benefit pension advice you are usually committed to paying the advice fee which can be a percentage of your overall transfer value.
If the advice is not what you were hoping for then you could find you have paid out a lot of money and are still stuck where you started.
When trying to get defined benefit pension advice here are some tips for giving you the best chance of getting the right outcome you desire and that is appropriate:
- It’s likely that most financial advice firms will only look at your case once you are aged 55 or over.
- It’s usually easier to get advice if you have already left the employer or scheme so there is no further contributions going into the defined benefit scheme.
- Speak to a range of Financial Planners and ask about their defined benefit pension advice process.
- Are they independent?
- Can they recommend alternative pensions from the whole of the market?
- Don’t request a cash equivalent transfer value until you have found the Financial Planner you wish to work with.
- Ensure you are able to get abridged advice first which will give you an indication of the likely outcome with little or no cost to you.
A defined benefit pension is likely to be either your biggest or second biggest asset in life so it is vital that you consider all your options and understand what you are getting into.
This is definitely an area where a specialist is needed.
You wouldn’t want a knee surgeon operating on your heart!
If you would like to discuss your case then please schedule a 15-minute call with me where I can go through your case and guide you in the right direction.
Risk warning:
Stock market linked investments and any income from them, can fall as well as rise and is not guaranteed. Any figures quoted are for illustrative purposes and should not be taken as a forecast or guarantee. Past performance should not be seen as an indication of future returns and clients may get back less than they have invested.
