DB transfers – three things to think about
Advisers are receiving an increasing number of requests from clients looking to transfer their pension from defined benefit schemes to personal pensions.
Defined benefit transfers are a complicated area of advice. There are three themes in the queries we receive on the subject. We look at each of them in turn:
- Defined Benefit pensions are normally valued for the lifetime allowance by multiplying the expected annual pension by 20.
- If the tax-free cash is provided by giving up pension it is added to the pension value.
- Since 17 May 1990 (Barber v GRE) the scheme retirement ages for men and women should be the same.
- The value of the contracted-out funds being transferred must be greater than the cost of providing the GMP, otherwise the transfer can’t go ahead.
- A defined benefit to defined contribution transfer can result in a higher valuation for lifetime allowance purposes
The information provided is based on our current understanding of the relevant legislation and regulations and may be subject to alteration as a result of changes in legislation or practice. Also it may not reflect the options available under a specific product which may not be as wide as legislations and regulations allow.
All references to taxation are based on our understanding of current taxation law and practice and may be affected by future changes in legislation and the individual circumstances of the investor.