Calculating your Defined Benefit pension value
To understand what your DB pension is worth, you will need to find out your CETV. This will vary but the main factors that will affect your CETV are:
- Your salary
- Length of service with the company
- Any rules about how your pension will increase, and any other benefits from the scheme
- Assumptions on future annuity/interest rates
- The value of gilt yields (these are bonds issued by the government, and many DB schemes are heavily invested in these assets)
Every scheme is different, so you will need to contact your Scheme Actuary to get your CETV/DB pension transfer value.
Benefits of a Defined Benefit pension
There are pros and cons to DB and DC pensions, but neither is good or bad. They simply meet different needs.
If you’re considering transferring out of a DB Scheme, remember that once you’ve done so, you can’t reverse the decision. Valuable benefits from the scheme could be lost. Speaking to a Pension Transfer Specialist can help you learn whether you could be better off in the long run by remaining or transferring away.
Drawbacks of a Defined Benefit pension
DB pension plans do have some downsides – chiefly the lack of flexibility in how scheme members are able to draw on their funds.
Can I transfer my Defined Benefit pension plan?
Anyone (with funds) under £30,000 can transfer away without needing financial advice. Self-administering can have its own challenges as few people will be used to filling in pensions paperwork. The process is the same whether your pension is worth £30,000, £300,000 or £30,000,000.
The transfer process begins when you receive your cash equivalent transfer value. The majority of providers will now want to see evidence of financial advice before accepting a transfer into a Defined Contribution or Self-Invested Personal Pension (SIPP), even your DB pension is valued at less than £30,000.
Transferring to a DC pension may give you more flexibility, but it won’t necessarily leave you better off. Your adviser will need to know more about your financial situation, and can make a recommendation about whether or not to transfer. If your Wren Sterling adviser does not believe you will be better off transferring away, we will not be able to assist you further.
We understand that it can be difficult to pay for advice, only to be told that its in your best interest to remain in the scheme.
What to consider when transferring your Defined Benefit pension
Transferring your DB pension plan is an irreversible decision. If you choose to transfer away from the scheme, you will not be able to reverse this choice or re-enter the scheme. It is also important to consider:
- Declining choice for advice. In the course of three years, suppliers of DB advice in the market have halved, to around 1,500 firms.
- Impartial advice. You may take advice, only to be told it’s best to stay in the scheme. This is a difficult message to hear but advisers have to remain impartial.
- The cost of advice. The cost of advice in this market has become more expensive because of the cost of providing the service, including the public liability insurance (PI) premiums required to operate
- Pension scams. An increasing prevalence and sophistication of pension scams means individuals can receive many unwanted approaches, challenging trust in the industry