PAUL


Defined Benefit Pension Transfer

A client contacted Wealth of Advice in order to seek advice in respect of the accumulated pension benefits that he had built up within two different pension schemes.

He had recently been made redundant and wanted to consider his retirement plans.

The Challenges

The client came to us with two pension funds, one was a personal pension and the other a defined benefit pension. He was seeking advice regarding both pensions and his retirement options.

As he had recently been made redundant, he wanted to ensure that he was in control of his pensions and that he could bridge the gap financially until he retired.

What We Did

During our initial meetings, the client explained that he had already received a forecast for his defined benefit pension, for his annual income. We requested a Cash Equivalent Transfer Value and discussed with the client, the advantages and disadvantages of transferring his fund as well as the implications of breaching his lifetime allowance.

The client decided to leave his defined benefit pension benefits within the scheme, as he was happy with the forecasted annual income that it would guarantee him. He also felt that the scheme was the most safe and secure option for him. His attitude to risk and capacity for loss were both factors which we agreed meant that he would not be comfortable with such a transfer.

We discussed his options in respect of accessing his personal pension fund. The client explained that he had no need for a fixed income from an annuity as he would be receiving an income from his defined benefit pension. He planned to deplete his entire personal pension fund before he reached retirement age as he would then be in receipt of his defined benefit fund and would become a higher rate tax-payer.

He therefore planned to use his personal pension to supplement his income until he retired, we recommended that he transfer his personal pension to a Flexi-access Drawdown pension plan.

The Results

We transferred the clients defined benefit pension to a Flexi-Access Drawdown pension plan. This meant that he could take 25% of the fund value as tax-free cash and could use this to clear any outstanding debts and become more financially secure.

The remainder of his fund can now be used to supplement his income, we reviewed how much income he could receive in order to be within the basic rate tax threshold and to ensure that the fund is depleted before he reaches retirement age.

This has allowed the client to bridge the gap financially between now and his normal age of retirement. The death benefits of this scheme mean that his wife and family will be provided for in the event of his death.

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