Ultimately you have control of your own pension fund and the option to transfer to a different administrator/trustee. This is all good and well, but it is very important that you protect any defined benefits you have built up over the years.
This is even more important when you are transferring from a defined benefit scheme to a defined contribution scheme.
The UK authorities have extended regulations/protection for pension fund holders, and also enshrined transfer rights. There are some stop-gaps within the regulations to protect, for example, defined benefit schemes, which we will cover in a moment.
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The first thing you need to do, whether or not you actually decide to transfer your pension fund, is to request a cash equivalent transfer value. This is often referred to as the “transfer value” and is the monetary value of your pension fund benefits.
As we touched on above, the cash equivalent transfer value is the first request you should make to your pension fund administrators/trustees. Using actuarial calculations, the administrators/trustees will be able to calculate a monetary value for your defined benefit pension assets.
This is not a straightforward calculation as the benefits will likely be greater than you paid in contributions.
Legally, if your defined benefit pension assets are worth more than £30,000, you will need to take advice from a regulated financial adviser. This is a means of protecting you and your defined benefits to see whether:-
The key here is that transferring from a defined benefit scheme to a defined contribution scheme takes away the safety net of the final salary pension fund connection. In simple terms, the value of a defined contribution scheme, such as a SIPP, will vary in line with the investments held within the fund.
With regards to defined benefit schemes, it matters not how much you have contributed because the pension payment calculation is already set in stone.
In theory, because a defined contribution pension scheme has no defined benefits, you are able to transfer to another party without advice. Quite why you would look to transfer your pension assets without taking any advice is a little worrying.
This is an area which the fraudsters have targeted, those with the statutory right to instruct the transfer of their pension fund assets to any party they wish.
In theory, you have 30 days to cancel an instruction to transfer your pension fund to another party. In reality, it probably takes 30 days of administration to complete the transfer, so it is perfectly feasible.
This is a very useful safety net for those targeted by fraudsters and put under pressure to transfer their assets to them. However, the best course of action is to take your time, take advice, and never rush into the transfer of pension fund assets.
As good practice, you will notice that many pension administrators/trustees will ask you to fill out a pension fund transfer form. This is a means of confirming that everything is in place, and also a double check that there is no fraudulent activity.
If the administrators/trustees were to spot some issues, they would likely make you aware, but they cannot influence your decision. It is also a useful way in which pension administrators/trustees can place their findings on the record.
If you are transferring defined benefit pension assets to a new employer, you may be offered additional years of membership in recognition of the cash transfer value. It is worth noting that your new employer is not legally obliged to accept your existing pension fund assets.
In reality, unless there were major problems, it seems sensible to authorize a transfer. Rejecting your pension transfer would not be a good start to your new employment!
Aside from the scenario where you are legally obliged to take advice from a regulated adviser, it makes perfect sense to take advice on all pension fund transfers. After all, your pension fund assets need to grow in order to fund your cost of living in later life.
These are not one-off investments; these are long-term funding tools. It may be that your financial adviser has spotted something you could do differently to enhance your long-term pension fund value. After all, that is what you pay them for!
If you believe the advice given by your adviser was incorrect or inappropriate for your situation, you may be able to take action for pension fund mis-selling. It is extremely important that you keep a record of all conversations and recommendations during your advisory meetings.
Many people seek the services of a claims management company to pursue such action. There is nothing stopping you from taking action in your own right. However, history suggests that claims management companies understand the market much better and are expert negotiators.
There are two timetables to consider, one which deems that you need to lodge a claim within six years of receiving the advice in question. The second timetable is much simpler, a three-year window of opportunity from the time you found out that the advice was inappropriate.
On occasion, you will be able to lodge a claim, even if the six-year time period has expired. This is yet another reason why more and more people are now looking towards claims management companies.
As we touched on above, there is only one real scenario where you are legally obliged to obtain financial advice from a regulated adviser. In reality, why would you look to undertake a pension fund transfer if you have no experience in this field.
We are not discussing one-off speculative investments; we are discussing your long-term income stream in later life. What could be more important?
Here at Money Savings Advice, we have partnered with some of the UK’s leading Financial Claims management companies. They have already helped thousands of people claim compensation for a mis-sold pension and they can do the same for you.
Choosing an independent claims management company means they won’t proceed with a claim unless they are sure it is in your best interests. They are also regulated by the FCA, which gives you an additional layer of protection.
If you would like to speak to one of these claim management companies who can help you make a compensation claim, then click on the below and answer the very simple questions.
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