In April 2015, the UK pensions landscape was given a complete overhaul. The pension freedom rules introduced have given investors considerably more flexibility over what they can do with their defined benefit pension retirement savings.
Investors aged 55 or over now have the option of transferring their defined benefit pension pots to personal or stakeholder pensions, a pension scheme with another employer or a self-invested personal pension (SIPP).
With ‘transfer values’ surging higher as a result of low interest rates and gilt yields, an increasing number of investors have been considering this option.
Should you transfer out of your defined benefit pension?
The question that many investors are asking, is whether transferring out of a defined benefit pension is a good idea. Unfortunately, there’s no simple answer to that question. Whether to transfer out of a defined benefit pension or not, is a complicated decision that cannot be answered without a thorough review of your personal circumstances. Indeed, to ensure that investors fully understand the pros and cons of transferring out, it’s actually a legal requirement that any defined benefit transfer over £30,000 must be signed off by a regulated financial adviser.
Advantages and disadvantages
In reality, there’s likely to be both advantages and disadvantages of transferring out of a defined benefit pension. It’s important to understand that the decision could have major consequences for your quality of life in retirement.
For example, while transferring out of a defined benefit plan could provide a more flexible retirement income, and the possibility of passing your wealth on to future generations, it will also mean sacrificing risk-free income and inflation protection. While high transfer values may seem attractive now, switching to a defined contribution pension plan could potentially leave you with a financial shortfall in the future.
Allow Clarity IFA to help
Given the complicated nature of the pensions landscape, it makes sense to speak to financial experts that have a thorough understanding of UK pensions transfers. This is where Clarity IFA can help you.
As independent financial advisers, we can provide you with detailed, impartial advice in relation to pension transfers, specific to your situation. We can help you compare the transfer value you’re likely to receive with the guaranteed benefits that you will be giving up, and discuss the range of transfer options available. With our help, you can make your defined benefit pension transfer decision with confidence.