Client seeking a defined pension transfer

DEFINED PENSION BENEFIT 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 was seeking advice on the implications of transferring the benefits away from his Defined Benefit pension scheme as he was concerned by the poor death benefits available within the scheme. He was motivated by the high transfer value offered if he were to transfer away from the Defined Benefit scheme.

During our meeting, the client clearly stated that he did not believe that he has a long life expectancy given his current state of health and lifestyle. The client did not think that he will live long into his retirement and was therefore concerned by how his pension fund will be passed to beneficiaries. He was unhappy with the death benefits of the scheme.

What We Did

In an initial meeting, we explained to the client that we would normally recommend that individuals with accumulated Defined Benefit benefits retain their benefits. However, given his circumstances, we were confident that transferring away is the best course of action for the client, the main driver being the potential death benefits offered by the new scheme and the fact that he would be able to flexibly draw the benefits from age 55 onwards.

The client had explained to us that he was unmarried and wished to pass most of his accumulated pension funds to his son, as his main beneficiary. We concluded that transferring his Defined Benefit pension to a Personal Pension would allow him to fulfil this aim, as well as allowing him to access the funds from the age of 55.

The new arrangement allowed the client to receive 25% of the fund as a tax free lump sum, with the remaining funds becoming accessible as a taxable income, under the Drawdown functionality included with the new plan.

The Results

Given his current state of health, the ability to access the funds from the age of 55 rather than the age of 62 was extremely beneficial to him. His pension fund is still invested and therefore can still benefit from investment growth. This growth can potentially support his income level, maintaining the capital value of his fund which will support him through his retirement.

His son will have the ability to choose how and when how could receive benefits from the pension in the event of the client’s death, and is no longer confined to the Scheme rules.

Wealth of Advice

We urge anyone, in these circumstances or otherwise, with a Defined Benefit pension to contact us to review your options.

Wealth of Advice provide independent regulated financial advice which will enable you to make an informed decision to suit your personal aims and circumstances.

Get in touch with us today on 0191 384 1008, or via email at cbreward@wealthofadvice.co.uk.

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