Defined Benefit Pension Transfer – should you?
Pension Freedom for the over 55’s now gives you more flexibility than you ever thought.
From April 2015, the most wide ranging reforms to pension rules came into force. These new rules brought in an era of pension freedom never known before, which provided far greater flexibility and choice in the way you accessed your money from the age of 55. The problem was that these benefits didn’t apply to old company Defined Benefit pension schemes.
You could transfer your old pension into a new arrangement that would then give you these new freedoms, the question is, should you?
The benefits of transferring are that you can be as flexible as you like about how you take your money, giving you the freedom to change with your changing circumstances; maybe to stagger your retirement or possibly to clear or reduce unmanageable debts, whilst leaving the rest of your pension for a later date:
- Release all your cash in one lump sum (taxes will apply)
- Take a smaller, tax-free lump sum (up to 25%), leaving the rest in your pension to access another day
- Take a regular income
- Take a cash lump sum and a regular income
- Take lump sums as and when you need the money, to fit your changing circumstances
Usually up to 25% is paid tax free and the balance is taxed at your marginal rate when released, these rates could change in the future.
Of course, there are also disadvantages to transferring your old Defined Benefit pension, the most important being the loss of a guaranteed and increasing lifetime income. That is why transferring is only suitable for a limited number of people and circumstances and will almost certainly reduce your pension income in retirement.
So the question to ask yourself – is the opportunity of far greater flexibility and control with my pension, better than a guaranteed increasing pension paid for life?
To find out about these, and all the other very important questions, you will need to speak with a qualified, experienced adviser who specialises in Defined Benefit pension transfers, a firm such as Grove Pension Solutions Ltd.
Why use Grove?
We have been authorised and regulated by the Financial Conduct Authority (FCA) since 2007 and have always specialised in pension transfers. As one of the longest established and largest Defined Benefit pension transfer specialists, we only ever recommend FCA regulated pensions and investments.
Our initial consultation is free of charge, so why not find out what your options are. Complete the form below to find out more.