There is much to consider regarding the real value of Final Salary or Defined Benefit (DB) pension schemes. In recent years, pension transfer values for these types of plan have largely risen and some individuals have decided, with or without advice, to transfer their protected pension benefits to personal pension / SIPP arrangements from deferred or current employer schemes.

Policy Statement PS18/20 (October 2018 / Improving the quality of pension transfer advice) from the UK regulator, the Financial Conduct Authority (FCA), notes the following:

'While most consumers will be best advised to keep their DB pensions and other safeguarded benefits, we recognise that the pensions environment has changed. This is particularly the case since the pension freedoms gave consumers with Defined Contribution (DC) pensions more options to access their pension savings. As a result, there has been an increased demand for pension transfer advice, as advice is mandatory under government legislation for potential transfers valued at more than £30,000.'

Signposting to TPAS, The Pensions Advisory Service

We hope that the text in the pensions section on our website is helpful. For initial impartial guidance on occupational pension schemes, we can signpost you to TPAS, The Pensions Advisory Service, an independent organisation supported by the Department for Work & Pensions (DWP), and details can be found here:

Questions for your own circumstances

Some individuals are attracted by what are perceived to be greater flexibilities in moving away from Final Salary type pension arrangements. However, this is usually at the expense of losing valuable guarantees, and each individual needs to consider many aspects of their personal circumstances before coming to a decision on the most appropriate course of action.

The table below may highlight some of the possible questions that you might want to consider in these circumstances:

Example Question

Reasoning and Understanding?

Noting the Financial Conduct Authority's position at the start of this document that 'most consumers will be best advised to keep their Defined Benefit/Final Salary pensions and other safeguarded benefits, why do you believe that that this doesn't apply to you?

Why and how are you different?

What are your reasons for wanting to consider a transfer of your pension benefits and how would you prioritise these reasons?

Are there other ways that your objectives might be met, for example is the provision of death benefits more or less important than your income needs in retirement. If death benefits are important, is life cover an alternative option for you?

What are your retirement income needs and how would they be affected if you no longer had the existing safeguarded pension benefits?

Do you have other sources of guaranteed income available for your retirement?

Do you understand the risks of transferring away from safeguarded benefits and are there any tax implications, such as the HMRC Lifetime Allowance?

What is your understanding of investment risk and how future pension benefits could be affected by your decisions?

What is your experience of managing investments and your views on paying for investment advice for as long as the funds last?

For how long do you expect the funds might last and do you have any views on how you would access them?

This is not an exhaustive list and these are just examples of some of the points that would need to be considered by you before seeking suitable financial / pension advice. As you may see, some of the points would need to be assessed, along with your individual circumstances, to provide advice on your scheme benefits and their future.

We believe it is important that you refer to and understand the FCA's written view at the beginning of this document before you seek financial advice and certainly before making any decisions, noting that: '…most consumers will be best advised to keep their DB pensions and other safeguarded benefits...'

Costs & Charges

It is vital that individuals understand the underlying pension guarantees, in their various forms, before starting any process, advised or otherwise, of making changes to their employer sponsored pension plans.

There is a cost to pension advice / transfer advice, irrespective of the decisions made as to how future pension benefits will be treated, and this document is designed to help individuals understand some of the implications before they seek advice and before they incur advice costs.

Seeking advice

We are qualified to provide advice in this area and will charge to provide advice if we engage. A link to our Terms of Business and indicative charges can be found here: .

Defined Benefit (DB) pension assessment times vary dependent on scheme responses and can take up to 8-10 weeks to achieve. This is not guaranteed and the timescale may be longer, depending on the scheme.

No individual advice is given in this generic document and this document is for information only. Please read this carefully before seeking advice.

We will only provide full advice on pension transfers, which may include externally sourced reports, to allow us to reach suitable recommendations on whether to transfer or not. This process is likely to exceed 10 hours work (and any external report costs) and we will charge our fees irrespective of our recommendation outcome. We will not implement a pension transfer if we do not believe it is in a client's best interest but will still charge for our work.

We reserve the right to decline pension transfer enquiries without explanation.

Chapters Financial Limited is authorised and regulated by The Financial Conduct Authority, Number 402899.