What is the procedure to transfer a pension account?

The deVere Group assists many clients with their workplace pension accounts that have been accumulated in the United Kingdom. Within this blog, we explore the procedure of transferring a pension account step by step.

This blog will give readers an idea of how a pension transfer works;. It should not be considered as advice. deVere offer a complimentary pension review service that provides clients/prospective clients with a clear understanding of their pension benefits and whether or not a pension transfer is in their interests.

The procedure to transfer a pension account

Information gathering

The deVere Group pension tracing team is in place to help clients and prospective clients track down all of the information relating to their pension(s). This process is undertaken by sending a ‘letter of authority’ to your pension scheme. This letter of authority allows deVere Group to request a full pension statement on your behalf. The scheme will then send deVere Group a full pension statement. Once the letter of authority is sent to the scheme/former employer, it can take a period of time to receive the report back, usually 2-6 weeks. Please note new reports are required. If you are unsure if you have built up entitlement and want to check, please get in touch.

In order to complete a letter of authority, the following information is required:

  • The pension scheme/provider’s name
  • Your policy number with the pension scheme/provider
  • National insurance number
  • Current and former address
  • Pension scheme/provider’s contact details

If you are unable to provide all of these details, our team will offer guidance on how to find it.

Understanding the pension report

What information is gathered in the pension statement?

The statement will contain the member’s entitlement, information on the type of pension (defined benefit or defined contribution), the value of the pension pot and the transfer value, the scheme’s retirement age and the death benefits.

Many clients/prospective clients hold multiple pensions in the UK. Therefore multiple letters will need to be sent to the various schemes/employers.

A deVere Group UK pension advisor will go through the report with you to ensure you have a full understanding of your entitlement.

The advisor will cover all the key facts with you. It will explore what funds your pension holdings are currently invested in, what levels you can expect from your scheme, what charges you are currently paying, what level of risk you are exposed to, what level of income you can expect, what currency your pension is available in, and any tax/taxes you should be aware of.

Defined Benefit vs Defined Contribution

Defined benefit/final salary pensions produce a cash equivalent transfer value (CETV). This is the amount that can be transferred as a one-off lump sum. This amount is dependent on years of service with an employer, the final salary amount and the scheme’s accrual rate. Other factors, including interest rates, will impact CETVs. The pension scheme/employer is responsible for all underlying investment risk.

Defined contribution (DC) schemes are accounts that hold underlying investments. DC pensions are paid into by both the employee and employer. The underlying investments can go up and down in value.; this is based on investment performance.

Understanding you

Once an advisor has explained your pension entitlement to you, the next step is understanding more about you. Our goal is to help you understand whether or not your current pension arrangements are suitable for you. To build an understanding, an advisor will conduct a fact find with you. This is a financial health check/questionnaire which explores your assets, liabilities, dependents, aspirations, short term targets, long term goals and retirement plans.

This session is worthwhile for all clients, especially new ones. It allows them to gain a greater understanding of how to achieve their long-term financial goals.

Advice

When the deVere UK pension advisor has built a solid understanding from your financial profile questionnaire, they will cross-analyse it with your pension statement(s). The advisor will then be able to create a suitability report. This will highlight whether or not the advisor believes it is in your interest to stick with your current pension arrangements, or whether you should transfer your pension into another arrangement.

Finding the most appropriate pension arrangement for a client involves:

  • Understanding where they intend to retire
  • What currency they are likely to be spending in retirement
  • What levels of investment risk is appropriate
  • Whether or not the client would prefer a guaranteed income annuity arrangement
  • What levels of service the client requires
  • What level of income the client would prefer

Certain pension arrangements may also have certain tax benefits involved.

If the advisor believes your current arrangement is the most suitable option for you, this will be the end of the complementary pension review service. However, if the advisor believes you should transfer your pension, an advice report will be produced highlighting the main reasons.

When the advisor has selected the most appropriate pension arrangement, they will present it to the client/prospective client. The client is then encouraged to weigh up the suggestion. Should they wish to proceed with transferring, the advisor will prepare the final advice paperwork and transfer documents which are sent to the pension scheme.

Please note:

If the client/prospective client holds a defined benefit pension with a CETV in excess of £30,000, a suitability report from a UK advisor is required to proceed.

Timeline to transfer a pension account

  • DC/defined contribution transfers usually take 1-2 months
  • DB/defined benefit transfers usually between 2-4 months
  • deVere will ensure that the process is done in a timely manner if the client has decided to proceed with the transfer process.

Get in touch

If you would like to learn about your current pension entitlement and the options available to you, please do not hesitate to get in contact today. Our team can help you plan for whatever the future holds.

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