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Defined Benefit to Defined Contribution pension transfers

Anyone remember Pension Liberation schemes? Back before the last government’s pension freedoms released us from the regulatory chains, all sorts of bottom-feeders tried to entice savers to move their pensions into byzantine schemes run from famously safe places like Panama.

This trickle of people cashing in their Defined Benefit (‘DB’, or ‘final salary’) pensions turned into a flood when George Osborne introduced his pension freedoms in 2015.

Yet considering how momentous a personal decision it is, there’s not much discussion about the actual process of transferring out of a defined benefit scheme.

You only get one shot at preparing for retirement, so this is not something you want to screw up.

So today I’m going to cut through the convoluted world of DB pension transfers and try to explain how they work.

Buckle up! We’ll start with baby steps but we’re going to go deep.

Defined Benefit pensions

A Defined Benefit or DB pension is a pension in which an employer promises a set of benefits based on a predetermined formula.

Thus – hold on to your hats folks – the ‘benefit’ is ‘defined’.

The benefit – that is, the pension income you get when you retire – is usually based on a combination of factors including salary, length of employment, and retirement age.

Benefits are typically expressed in pounds per annum. Most people, when they retire, can also take some of their benefits as a tax-free lump sum (aka the Pension Commencement Lump sum ‘PCLS’ in fancy terms).

If you leave an employer before you retire, your benefits in that employer’s scheme are referred to as ‘deferred’ benefits. This benefit is revalued each year before you retire, and, once in payment, the benefit increases according to the scheme rules.

Most schemes also provide a death benefit, usually 50% of the benefit, paid out to the widow(er) and dependants. The benefits payable vary according to the rules of the scheme (which you can and should request to see).

The big benefits of a defined benefit scheme

With a DB pension, the investment risk lies with the trustees of the scheme – and with your employer who sponsors the scheme.

It’s up to the trustees to invest the scheme’s assets to make enough investment return to meet their promises. And if there is a deficit between the money in the scheme and the amount needed to meet the promises made, then the employer has to top-up the scheme.

This means that for a saver with a DB pension, there are fewer sleepless nights when, say, the stock market loses its marbles because Trump decides to start a trade war.

Similarly, there’s no admin or management required by member of DB schemes. Your scheme is responsible for all the paperwork. You just receive money in your account each month and a P60 at the end of the year.

Easy as pie, and like annuities, this simplicity can provide for great peace of mind.

What is Defined Contribution?

In contrast, the income you receive in retirement from a Defined Contribution pension (‘DC’, not to be confused with David Coulthard) is based on the amount you’ve and your employer has put into it over the years and the investment return you’ve made.

Unlike with a DB pension, the investment risk and responsibility now lies with the saver. It’s your responsibility to manage your pot. Great news for Monevator if it means more eyeballs on the site!

While some people get their thrills from investment – The Accumulator, I’m looking at you – for most people a DC pension means more work to do, more risk, and potentially more sleepless nights.

Why would you transfer from DB to DC?

You might be thinking why on earth would anyone transfer from the safety of a DB pensions scheme – with its guaranteed, rising income for life with no investment or management risk – to take on the uncertainty of a DC scheme?

I mean, there’s always bungee jumping and cave diving with sharks if you want a little more excitement in your life?

However there are some valid reasons why you might consider transferring from DB to DC:

  • Flexibility – A DB pension pays a set income for life with no ability to access capital except in particular circumstances (such as if you’re seriously ill or your benefits are very small). In reality many people find that their expenses are lumpy. You’ve got to fund those round the world cruises somehow! Most DC arrangements can offer greater flexibility (such as cash, drawdown, and annuities).
  • Ill health – You or a family member might have a life-limiting illness that means the flexibility of DC is preferable. DB schemes can cash out your pension where (broadly) you’re expected to live for less than one year or can pay your pension early if you meet certain ill-health requirements, but if you don’t meet that standard you’ll have to plan ahead.
  • Relative importance of capital over income – If you have many other significant pension pots, you may end up with more income than you need but less capital than you’d like. Transferring out of one of your DB schemes may help balance your income and capital more appropriately for you.
  • Little need for death benefits – Your spouse may have their own substantial pension, meaning that you’d rather your pension goes towards other family members or dependents.

Who can transfer out of a defined benefit scheme?

Most private sector DB pensions are transferrable – with some strings attached.

Unless you are within 12 months of retirement age you usually now have an automatic right to transfer. If you don’t have an automatic right to transfer, you can ask the trustees or administrators of the scheme to let you transfer anyway (called a ‘discretionary’ transfer).

Unfortunately, if you’re got a public sector pension it’s unlikely that you can transfer out. In 2015 the Government changed the rules such that unfunded pension schemes – such as the NHS Pension Scheme – can’t be transferred out.

There’s also the potential option of a partial transfer. This where part of your pension can be transferred out at retirement. Not all schemes allow members to undertake partial transfers, and in some schemes they are prohibited. Indeed there appears to be only one scheme actively exploring this.1

How do you transfer?

What follows applies if you have an automatic right to transfer.

To start with you need to get a statement of your Cash Equivalent Transfer Value (CETV) or ‘Transfer Value’. You’ve got a statutory right to request one statement per 12-month period.

The scheme trustees don’t have to provide any more in the twelve-months. But, generally speaking, unless you’re taking the mick and asking for several every year, they’ll likely issue you a second one if you ask nicely (though they might charge a fee).

The trustees usually have three months to fulfil a request for a Transfer Value statement.

Based on some fancy number crunching, the Transfer Value sets out the pounds and pence value of your benefits as at a certain ‘guarantee date’.

With your Transfer Value in hand, you’ve got three months in which to accept. If you do accept, the trustees must generally pay out within six months of the ‘guarantee date’.

If your Transfer Value is above £30,000 you must get regulated advice before you transfer. Your advisor will consider the value of the pension pot as well as your retirement needs and priorities (more on this in a bit). They’ll also look at your attitudes to investment risk and your capacity for loss, taking into account your other pensions and assets.

The advisor must then make a recommendation – either stay in the scheme or transfer out. (Nobody say Remain or Leave!) They must explain why their advice applies.

The scheme usually then pays the agreed lump sum into a DC plan (usually a SIPP) or uses it to buy an annuity, as recommended by the advisor.

You do not have to follow the adviser’s recommendation but may ask for a transfer to go ahead in any case. However, the advisor and the pension provider that was proposing to facilitate the transfer may decline to do so.

In that event, you’ll need to find an alternative pension provider to transfer to.

Before you transfer your pension

It’s important to know before you transfer that it is very, very unlikely that you can reverse a transfer.

A transfer means a substantial change in risk – especially investment risk. And you become responsible for managing your pension. This something you might welcome as a sprightly 50-something but perhaps less so as a nonagenarian. Unfortunately we won’t all age as gracefully as Queen Liz.

Similarly, after transferring and unless you opt for an annuity, the benefits you’ll receive will change from a set regular income for life into some type of drawdown plan. More flexibility means more options, but also more ways for things to go wrong.

Another downside: Pension transfer advice does not come cheap. You are usually looking at a total cost of around £3,000 to £4,000, though it could be substantially higher.2

Before you even think about transferring it’s worth asking whether the cost of advice is worth it. This is where something called ‘Triaging’ comes in.

Triaging: good and bad

Triaging – in this less bloody context – is where an advisor, planner, or accountant provides information about DB and DC pensions to help a saver decide whether to take advice.

In effect, it’s a bit like a weeding-out service, to help prevent members from taking unnecessary, expensive advice.

The purpose is to educate and inform. Not advise. A member receiving a triage service may have the pros and cons of a DB transfer explained to them, an overview of how DB benefits work, and the differences between DB and DC pensions laid-out.

But, importantly, they won’t be told whether it’s worth them transferring.

Because of the chill hand of the FCA, there is a limit to what someone offering Triaging can do.3 It must ultimately be the customer’s choice whether they to proceed to get advice. Some therefore consider triaging to be a bit of a waste of time.

Regardless, in the first instance it’s worth seeking out free guidance from Pensions Wise and information from the Pensions Advisory Service4.

However, bear in mind that again they only provide guidance.

Regulatory landscape

STOP PRESS! Rather annoyingly, between writing the bulk of this post and it being published the FCA released new survey data on DB to DC transfers. (The inconsiderate fiends!) Anyway, the FCA’s data found that nearly 70% of clients were advised to transfer – a level the FCA has publicly stated it finds to be too high. It does seem a shocking figure, but it’s open to debate how representative the FCA’s survey is. The survey data doesn’t appear to take into account customers triaged out (see my comments above) and according to the Personal Finance Society it wasn’t a truly representative sample of advisers. Similarly, the survey data relates to the period up to October 2018. This is an important date as we’ll see below.

Accepting then that the situation seems to be developing quickly, I still think it’s helpful to provide some of the regulatory background to give an idea of the environment potential transferees are walking into.

Following some harrowing findings on investigating how the system outlined was working, the FCA brought in a few changes in late 2018 on transfers that involve regulated advisers. (For instance, the FCA found less than half of the advice given out was suitable.)

In short, the starting assumption is now that a DB transfer is unsuitable. For a transfer to be suitable it has to pass what’s called an Appropriate Pension Transfer Analysis ‘APTA’. This is a series of factors that advisors must consider and then base their recommended action on.

The FCA also brought in something called the Transfer Value Comparator ‘TVC’. This is a graphical comparison of your Transfer Value compared to how much it would cost to replace the DB benefits with an equivalent annuity.

Below is an example of a TVC:

Pretty clear, no?

One final regulatory matter. On 1 April, the FCA increased the Financial Ombudsman’s award limit from £150,000 to £350,000. The Personal Finance Society thinks that this will lead to many advisers leaving the DB transfer market due to the rising cost of professional indemnity insurance.

Factors to consider with transfers

We mentioned above about the Appropriate Pension Transfer Analysis, so let’s end by looking at what the factors it takes into account and what they mean in practice:

Returns – What potential returns could an investor receive from the proposed investment arrangements? This should be commensurate with the assets being invested in. (So for example you shouldn’t forecast equity-like returns for a gilt-dominated portfolio).

Charges – All charges – both upfront and ongoing – should be included. For drawdown portfolios these can be significant.

Pattern of income/capital/cashflows – The proposed transfer should set out a cashflow analysis or explain how the saver can meet their income and capital retirements. This should be comparative – in other words contrasting what’s being given up with what’s being gained.

Plan beyond life expectancy – What happens if the saver lives beyond their forecast life expectancy? What is the plan given they may run out of money in retirement?

Death benefit – The analysis should take into account any death benefits given up, and to the extent income/capital is required on death, how those requirements can be met.

Trade-offs and priorities – It’s unlikely that all of a saver’s objectives can be met, so it should be clear what trade-offs may be needed and how those fit into a saver’s priorities.

Pension Protection Fund (‘PPF’) – Advisors should also be clear and balanced about the pros and cons of a scheme entering the PPF (or a PPF-plus arrangement). Have a look at my earlier post for more information on the PPF.

Wrapping up

Defined Benefit pensions are incredibly valuable, but there are circumstances where a DB transfer might be suitable. However the starting point from the FCA’s perspective is that all DB transfers are unsuitable.

If you’ve got a pension pot of over £30,000 you must get advice. This advice must set out a value comparison between what you’re giving up and what you’re getting. It must also consider the factors mentioned above, and explain how they apply in any particular case.

Transfers are expensive – at least several thousand pounds – so it’s worth considering getting some more information or going through Triage to work out whether getting advice is worth it.

Obviously all our thoughts above are just for additional information, as opposed to advice, so don’t think they’re the last word for you!

Further reading

Have a look at these previous posts on DB transfers where transferees share their experience (but bear in mind both were written prior to those 2018 changes):

Read all The Detail Man’s previous posts on Monevator.

  1. Ford: http://www.pensions-expert.com/DB-Derisking/Ford-set-to-offer-partial-transfers?ct=true. []
  2. At time of writing, for example, see: https://www.moneymarketing.co.uk/pension-transfer-charges/) ((This is leaving aside the controversial practice of ‘contingent charging’. See: https://www.ftadvisor.com/pensions/2019/05/16/mps-urge-fca-to-ban-contingent-charging/ []
  3. Advisors have been strongly warned not to cross the ‘advice boundary’ []
  4. Collectively being rebranded, along with the Money Advice Service, into the Money and Pensions Service []
{ 26 comments… add one }
  • 1 Neverland July 4, 2019, 9:32 am

    Its pretty funny that the starting point for advice on transfers from DB to DC schemes are unsuitable…

    …but DC schemes are the only thing that anybody under 45 working in the private sector has

    Ever feel you’ve been sold a dog?

  • 2 PaulH July 4, 2019, 12:21 pm

    @Neverland – I see the two scenarios as different. For example, a Skoda Kodiak is a great car. An F-type Jag is also a great car. But depending on your uses, transferring from the former to the latter is going to cost you money and leave you with less utility.

    Having said that I am pretty envious of family members with DB pensions!

  • 3 Rob S July 4, 2019, 12:40 pm

    @Neverland
    Well it certainly seems that way just now. But it will be interesting (especially so if you’re <45 🙂 ) to see in 20 years time whether there is a significant problem. If you're in a reasonably paid job and you "take control" 0f your pension and max out employer contributions etc, you *may* end up better off. Received wisdom at the moment is that the resulting pensions will be worse. But (assuming no WW3) maybe not…

  • 4 Factor July 4, 2019, 1:02 pm

    @TDM Who can transfer out …..

    Typo “….. allow members undertake partial transfers,”

  • 5 Marco July 4, 2019, 2:32 pm

    Problem with the NHS scheme is it has lots of very dangerous “gotcha” traps for high earners, with the introduction of pension taper tax.

    I pay 35% of my total remuneration package into my DB pension but if o want to opt out the employer keeps 20% so I’m stuck now and forever. Also, I need to work part time to keep my earnings low enough to avoid the tax traps.

  • 6 Marco July 4, 2019, 2:35 pm

    Sorry, main point was that if high earners in DB schemes could opt out and take the employer contribution they could be free to do much needed public work. If you are in a DC pension you can just pay bank the amount from your pension pot if you breach the annual allowance.

  • 7 Benjamin July 4, 2019, 3:52 pm

    “In short, the starting assumption is now that a DB transfer is unsuitable.”

    This has in fact been the starting assumption for over a decade.

    Good piece.

  • 8 FIREhunter July 4, 2019, 5:07 pm

    There are a couple of further issues that could be worth exploring. First, the access age. Many DB schemes are linked to the state pension age which is rising inexorably, and a pension which is locked (unless one pays a large penalty) until 68-70 is far less attractive than one where the access age is as much as 10 years sooner. Is there not a case to move between one scheme and another depending on which is most favourable in terms of how soon it can be accessed?

    Similarly, are employer DC schemes distinguished from personal pensions such as SIPPs? The latter offer significant flexibility, tax advantages after death, and early access, which could be attractive in some circumstances. Employers are gradually becoming more willing to make pension contributions outside their company scheme.

  • 9 PC July 4, 2019, 5:28 pm

    One more valid reason to transfer out may be inheritance – the full amount of a SIPP can be inherited as I understand it. This was an important factor for me as my children have a long term illness.

  • 10 MrOptimistic July 4, 2019, 5:54 pm

    I transferred one DB scheme last year. If all my pension was substantially in a single DB scheme I wouldn’t have contemplated it. The validity period of the CETV is limited so you need to have your advisor ready and a clear idea of the destination before you request the CETV. Biggest issue I found was finding an advisor who didn’t insist on taking control of the investments post- release. I wasn’t unduely convinced by their investment approach, or the fees. Found one, restricted advisor, famous company, £2500 fee. Subsequently transferred out of their sipp into a flat fee provider.

    The ratio between pension and CETV needs to be not less than 28, prefer 30, in my opinion. I got 31, some have got much more but perhaps they had full inflation protection ( I wouldn’t easily have given that up if I had it).

    Main reasons for transferring? Spouse keeps 100% of the (remaining) benefit on my death, distant though that undoubtedly is ( other pensions I have give 50% to survivor). Also the 5% cap on inflation proofing in the surrendered dB scheme. If one of us survives for 30+ years, that’s a long time to avoid an inflationary accident. Those of us who lived through the 70s and 80s have scars! Oh, and we are both lifelong smokers, so may be there will be some left.

    Incidentally, I paid no mind to the inheritance tax benefits currently on offer. A future government could reverse this.

  • 11 Gentleman's Family Finances July 5, 2019, 8:49 am

    I got a transfer value for an old DB pension – around x35 the final salary value.
    You can see why it’s very tempting to take it – especially if you are in/near retirement. Many new retirees are still paying off their mortgages for heavens sake – so the promise of big bucks and 25% tax-free is like manna from heaven.
    I don’t think I’d cash mine in – I have to wait over 20 years to get it anyway and if I’m honest, I don’t think the extra risk is worth it – it’s a nice income floor to have for the future.

    Everything I’ve heard is anecdotal except for one person who quit work at 65 about 18 months back. He had old-style DB & DC pensions and cashed them all out and invested them instead. He thought that the rates of annuities were rubbish and the transfer value was just too good to be true.
    Put ALL his money in the safe hands of some clever chap called Woodford – I kid you not.
    Last time I saw him he was looking ashen!

  • 12 Vanguardfan July 5, 2019, 11:41 am

    I’m kind of glad I can’t cash my NHS pension in. One less decision.
    Spouse has a private sector DB and we’ve had occasional transfer values – they have massively increased recently. Still not tempted though. I really like the idea of not having to worry about basic income needs. (Unless they go bust or public sector schemes take a haircut in the next economic crisis – which I know is possible as it happened in some European countries in the GFC).
    Btw, Pensionwise won’t help with DB pension transfers – they only cover what you can do with a DC pot – if you don’t have any type of DC pot you can’t have an appointment. They will tell you less about DB transfer than is in the article!

  • 13 JediMaf July 6, 2019, 1:13 am

    Another excellent and knowledgeable DB pension piece from TDM/YFG.

    I think another reason for transferring is that people think they can do better in terms of investment return. A lot of transfer value calculations will have a baked in assumption for future investment returns, particularly for someone near to retirement age, based on an a largely fixed interest portfolio (although it does vary scheme to scheme). This assumption may be something less than 3% p.a., say, at the mo. Annuity pricing (as used for the TVC comparison) may be based on ever lower return assumptions.

    However, most of the population are not Monevator readers. Managing investments, living to budgets, life expectancy and contingency planning are not majority skills. I am not sure that general society is really in the mind set that “normal” (as opposed to rich) people have IFAs. I am not sure there are enough good and value for money IFAs to go round if it were. Something will need to change on this in the future as the mainly DC generation reaches retirement. In the current circumstances I am inclined to agree with the FCA and TPR that the starting position, for many people at least, is that transferring out of a DB pension scheme is probably not a great idea. Of course there are many potential exceptions to this as pointed out in the article and other comments.

  • 14 MyNameIsSteve July 6, 2019, 10:40 am

    At my work there is still an open DB scheme for those that have been there a long time, although the annual increments are now restricted to a fraction of pensionable salary from a few years ago. My last CETV was 38x the current annual amount acrued to date. I would say about 90% of colleagues have jumped ship in the last few years, mostly to allow them to drawdown earlier than 60, and with an eye on IHT.

  • 15 david r July 6, 2019, 2:34 pm

    I think the valuation offered is always a consideration.

    I have built up a mix of DB and DC rights, with all the DB rights starting at 60. which is only a few years off.

    Last year I was offered a CETV. it was worth 43x annual pension ( if you ignore/capitalise a small toppup the DB scheme pays at ages 60-67) for the largest of my DB pensions.

    even though i am not an expert investor, and even though it took me into LTA territory, it was just about worth it for me. after quite a bit of analysis and discussion with peers.

    But if I had had to pay an IFA and a bunch of fund manager fees and costs, I would have stayed put.

    On my somewhat cautious assumptions, 35x is approx my break even point. factor in an IFA and funds costs and I would need about 50x. if i were completely below or completely above the LTA limit, my break even point would be more like 28x (40x if using an IFA and fund managers).

    very glad i didnt take the TV offered ten years ago, at a multiple of 9x.

  • 16 weenie July 7, 2019, 5:48 pm

    I don’t intend to transfer my DB pension – by the time I come to take it (65), I will welcome the guaranteed income and not having to worry about sequence of returns risk etc. I don’t think I’ll even bother getting a valuation (although one ex-colleague I know who transferred got 30x) – I’d rather not have the temptation!

  • 17 britinkiwi July 8, 2019, 9:42 am

    Kia ora!

    From the depths of a New Zealand winter having migrated a decade ago and worked for teh NHS for nigh on 30 years and wondering what to do about NHS DB pensions in place for both myself and wife. We went for cashing out when moving to NZ for several reasons – that it would be accessible at age 55 and not 61, that it would be in NZ $ (currency risk being a live issue for us and the pound being very fickle vs $NZ this last decade or so), that it makes life insurance redundant, we may win from market (out)performance and that any inflation adjustments in the UK may not be applicable to NZ.

    So have we gained, lost or stayed the same? Well, yes from currency movement and market performance, flexibility and feeling financially independent but not sure from end result yet (NHS Pension Authority made some predictions) as its too early to tell (I’m still in FT work and <61).

    Our costs were significantly lower than those quoted here being around 0.03% of total resulting portfolio albeit this was some years ago.

    PS @ david r – in the words of Monty Python – you were lucky! We got to x22 – although cashing in your NHS pension is no longer permitted.

  • 18 MrOptimistic July 8, 2019, 7:03 pm

    @weenie. Probably wise but keep inflation risk in mind if the inflation protection is capped. There is ( nearly) always something to worry about 🙂

  • 19 Armitage July 11, 2019, 11:38 pm

    I’ve recently discovered your website, it’s a great read and an education.

    I am 35 and currently have a defined benefit pension with my current employer (Civil service) and a deferred defined benefit pension from a previous job. I recently requested a CETV which I’m considering transferring to a SIPP to manage the investments myself with a low cost index tracker.
    I’ve calculated that a modest annualized return would beat what would have been “guaranteed” on my deferred pension.
    I (hopefully) have time on my side to ride out a few ups and downs in the market and in a worst case scenario I’d still have my current defined pension to fall back on.
    I would also have the option of drawing my SIPP sooner, should I choose, than I otherwise would on my deferred pension.
    I hesitate only because I read online that it is not recommended if the pension and CETV ratio is less than 28-30 and my ratio is 14….
    I’d be interested in any thoughts your readers may have.

    Armitage

  • 20 oz July 13, 2019, 2:23 pm

    Start by admitting i’ve (lazily) not read the article.
    My Mum has a BT pension. She stopped contributing many years ago but it has reached a decent sum. Lately she has decided to swap it out of the BT scheme as apparently if she were to pass her husband would only get half the value.
    Where is the best place for me to swat up just so I can gather a bit of understanding and ‘keep an eye’ on proceedings if you like?
    She is in touch with an adviser who has come recommended but I just want to make sure everything is kosher and she’s not unknowingly putting the capital at risk or making any school boy errors.
    I was thinking MSE forums or somewhere like that?

  • 21 david r July 13, 2019, 3:00 pm

    hi Armitage

    unless you have a pressing need for the cash… at 14x i would advise (small-a advise, def not ‘Advise’ in a professional sense) against cashing out.

    the offer is likely to improve over time. mine went from 9x to 43x (plus increases due to indexation on top) in about 12 years. a bit extreme, but you could certainly expect your multiple to double over 15-20 years.
    factor in the fund mgr fees, platform fees, possibly IFA fees, LTA rules, risks (market risk, crap or self interested advisor risk, poor personal choices risk, etc ) etc, and you probably need you investments to grow at RPI+7 or so, to make it worthwhile.

    obviously DYOR and if you’ve genuinely found a compelling reason then you might prefer to do differently with some (or all) of your DB rights…

  • 22 Y32K_Class October 10, 2019, 9:46 am

    What if the sponsor has been up to no good and when closing the Scheme LINKED its early access features from age 55 , to loss of Employment.

    A game changer for any IFA decision surely ?
    As once Transfered the link to loss of Employment from age 55 is broken forever.

    Lies in the Closure about Members becoming Deferred and then being allowed to get away with it by the Entire UK Pension System.
    Keeping All Active Members restrictions in place and creating a new Member Classification. All watched by the Regulator with no action.

    That surely should guarantee simple AUTOMATIC Positive Transfer Out Assessment from any IFA. In the Biggest UK DB Pension Scheme , so far , they have been allowed to get away with this.
    Many members with families and mortgages are invited to drop to sub £15k Income PA from age 55. They become reliant on State Benefit Income , a tax swing of £20k PA. From paying £10k tax and Ni to BEING ABLE to claim £10k tax credits and UC in many cases under age 60.

    The Govt. sit by and watch this…. why wouldnt they or more importantly why would they? – Completely incoherent Government Policy in play to help Corporations at the tax payers expense.
    They have the HMRC attack dog also circumventing age 50 -54 access to the Closed Pension (SEE PTM) , with the same loss of Employment linking copied by the Scheme from age 55 – 75.

    Both Organisations deserve a MASS Member Transfer Event for betrayal of the Pension Member.
    What the heck are the DWP doing encouraging mass transfer out and losing Tax revenues from dual Employment and DB Pension early Access (early access to DB is already massively reduced)?

    This all needs explaing by the DWP and needs fixing urgently before the Justified Mass Transfer Events commence. A complete betrayal of the Pension Member and the Tax Payer.

  • 23 Carpenter1 June 13, 2020, 7:30 am

    Dear Mr optimistic
    I am currently searching for an I.F.A.
    Who can transfer an old DB pension to my consolidated DC pension..would you please let me know who you reccomend..I previously spoken to several I.F.A.s they are charging extortionate amounts and wanting to place my funds into their expensive to run schemes…

  • 24 Y32K_Class June 13, 2020, 12:12 pm

    The Regulator and FCA are working to make it impossible for the IFA to function. In effect they are circumventing the 2015 Pension Freedom Laws , on the basis they (TPR) have failed to introduce a scam free framework (with HMRC) to access Pension Freedoms. Having left so many risks to be scammed in place , they now proceed to make it near impossible for the IFA to function. Yet the Law states an IFA must be used. So instead of circumventing the Law , WHY not create a low FIXED cost scam risk free framework (that Schemes have to run) to get out of Rogue, altererd or Decimated DB Schemes?
    The BTPS – largest private scheme in Europe was allowed to close by the Regulator with None Consulted Accrual change from State Pension Age (the Scheme Offset to Single Tier State Pension, created and misused from April 2016 with older Age itself used so age 65 Members (now) have a 20% higher Offset reduction from SPA) , with age 55 – 75 Pension Access ties to loss of Employment for C Members and age 55 -65 ties to loss of Employment for B Members. If the DWP or TPR or FCA had stopped these malign Closure features then the UK and the HMRC could have gained income tax from continued employment and from any early access of the DB Pension (age 50 in this scheme). Instead Employees wanting to access Pension have to turn to (2015 Freedoms) and transfer out if they want to detach Pension Access from loss of Employment from age 55. This is the failure of Govt. and all its offices and Regulators to control Corporations. The BTPS Offset reduction (in closure) grew by 4% in April 2020, the pension grew by 1.7% CPI. The Scheme was closed 15 years early for many so if that is repeated ,you see more of the Engineered loss of Pension continue to increase during Deferred / closed period viA S148 , the already butchered DB Pension (CARE and Offset misuse) reduces by Design and the Regulator just watched this. So all hopes are now with the Ombudsman and Individuals dealing with these abuses that the Regulator and DWP should have. Rogue Employers need to be dealth with. The Pension protection in BTPS was part of the Privatisation Legal deal BT signed up to when it gained monopoly ownership of the UK Telecoms market in 1984. Yet all it does now is give 12 months notice and renege on promise after promise (Contracts / Agreements) whilst breaking the 2010 Equalities Act from April 2016 – June 2018.
    The Members got zero protection from the above from the Trustees , yet the Scheme is 3 times bigger than the sponsor market Capitalisation (part of the monotonous Executive failure brings this Sponsor weakness about and as such Pension attacks become a self fulfilling necessity). This again also suggests the Trustee is not carrying out its obligations and clearly favours the Sponsor over its Members. As these issues would already have been in Court if the Trustees had shown true Fiduciary to its Members.

  • 25 Y32K_Class June 13, 2020, 12:27 pm

    correction .. The Scheme is at least 5.5 times bigger than the Sponsor …
    yet it does not exert that Gravity for its Members .. New Incomer Executives (CFO) simply allowed or encouraged to set about attacking the DB BTPS Pension (it was already dire from 2009 CARE point) whilst running progressive Deidend Policies the Sponsor could not afford. A quality Board of Executives would have realised Network is Core Business and that fibre to the premises Asset would have been in place 5 years ago , not 5 years into the future. All the new breed know is 5 yr plans and everything is near term return on Investment and only ever seen in their own inept Executive short term lifespan horizon. And what did these Executives place at risk ? The very productivity of the UK and its ability to compete Gloabally. Attacking the Pension only allowed Executive incompetence to go on for a further 2 years from Closure until running out of road / check mate in May and the cancellation of unaffordable Dividends. The era of the Progressive Dividend Policy at the expense of the Employee finally over ? That exploitation was not the promise made in 1984. Promises made , promises not kept.

  • 26 NotaBene March 29, 2021, 6:24 pm

    Thanks for this excellent post. I’m a bit late with my query but hope that, nonetheless, someone may respond.

    I have a DB pension with a former employer. I asked for a CETV 2 years ago and was given a pension estimate of 1800 GBP annually and a CETV of almost 19K.

    This was from 3 years of employment resulting in 10K paid into the scheme so probably it’s not too bad. I’m 47 and have also other DC and SIPP schemes.

    Reading the comments suggesting that the factor CETV/pension should be +30 to make the transfer worthwhile made me pause a bit. In my case the factor is just above 10. Is it guaranteed that it will ever get to 30?

    The other point is that even this CETV looks like a good deal to me. I’ve been earning well above 10% return on my SIPP investments so it looks like I might be better off managing the CETV myself.

    I am fully aware that this return was due to me investing in a largely tech shares ETF (eQQQ) which had an outsized growth over the last few years (the valued tripled in 5 years) which may not hold for the future. I am, however, still optimistic that a broad tech ETF is likely to out-perform the market so hope for a return that is close to or above 10%.

    Under these (rosy) assumptions it looks like even such a relatively modest CETV is likely to yield better results than the DB pension.

    Please, let me know if there is some error in my reasoning other than the assumptions mentioned.

    To simplify the matter I’d ignore potential edge cases like a scheme failure or me dying at an age different than the average.

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