Getting the right

Getting the right financial advice when it comes to DB pension transfers

While it is a legal requirement to take specialist financial advice if you have DB benefits with a transfer value of over £30,000, it does not always mean that transferring will be the right outcome for you. 

When thinking about transferring your DB pension scheme, we believe it’s important to work alongside the right financial adviser – somebody who listens, understands and gets to the heart of what matters to you.

The search for the right financial adviser is not just about looking for someone with the correct qualifications, although of course that is important. It is also about making sure you choose someone who has a high level of practical experience in this area. You need to find someone who will ask you questions about your aims, circumstances and ambitions, to help get the right outcome for you. Giving advice on DB transfers is extremely complicated. It takes many hours, and sometimes days of work, to analyse and make a qualified recommendation, and decisions are not reversable – so you need to make sure you’re working with the right person.

Firstly, make sure the financial adviser starts from the assumption that a DB transfer would be ‘unsuitable’ for you. Giving up the guarantee of an income for life is not a decision to be taken lightly and not one which can be reversed. Additionally, you need to be comfortable with taking on the subsequent responsibility for managing everything from investment decisions, to how you take your benefits.

Make sure your financial adviser takes time to understand you and your circumstances. They should have an overview of all of your financial planning, including estate planning. This will look at what you would like to happen to your estate on death and who you would like to benefit (for example, children and grandchildren). It’s important to work with an adviser who considers your wider circumstances and other assets you may have rather than focusing on pension plans in isolation.

They should also look at how you will be able to fund your retirement in detail, including all of your possible sources of income. Depending on your requirements there are a number of ways to do this, including cash flow modelling which can help bring your money to life. Cash flow forecasting can help show you where you are now financially, and where you could be in the future.

It’s also important to consider whether the financial adviser’s advice is ‘signed off’ within their firm. This could be done by a DB transfer committee, whose role would be to challenge the advice at the early stages to make sure the adviser has considered every option. Or, does a technical specialist within their firm review their advice to make sure it’s right for you? Remember once you transfer your DB pension you can’t go back.

Also make sure you ask to see details of the percentage of transfers they have completed, in comparison with those that have not gone ahead. It would be unusual to find an adviser who is transferring the majority of cases they review.

You may also want to consider looking for a financial adviser who has additional qualifications beyond the basic requirements, such as a DB pension transfer qualification.

Most importantly, you need to find an adviser who will take the time to fully listen and understand what is important to you, so that they can advise you best on what steps you can take to help achieve your goals.