Independent Financial Advisor Pension Transfer
LEARNING OBJECTIVES
We’re passionate about providing high quality, relevant and up-to-date financial information to Expats around the world.
IN THIS ARTICLE, YOU WILL LEARN THE FOLLOWING:
Considerations when taking financial advice as an Expat
Pension transfer options
The benefits and disadvantages of a UK pension transfer
Best practise when taking advice
As an independent financial advisor (IFA), helping clients with pension transfers involves a comprehensive process to ensure their financial well-being.
If you hold one or more UK pensions and want to explore your options, choosing an independent financial advice firm is an important part of the process.
Whilst transferring your pension can offer significant benefits, there are many pitfalls to be aware of. Pension scams continue to rise along with misinformation and bad practices.
As a regulated fiduciary, we look at some key areas and outline the pros and cons of a pension transfer.
Types of UK Pension
There are various types of UK pension schemes, these include:
State Pension: Provided by the government and based on National Insurance contributions.
Occupational Pension Schemes: Provided by employers for their employees, also known as a workplace pension. There are two main types:
Defined Benefit (DB) Pension Schemes: A DB scheme will guarantee a specific level of income upon retirement, based on factors such as salary and length of service.
Defined Contribution (DC) Pension Schemes: A DC scheme involves contributions from both the employer and the employee, with the final pension amount depending on the performance of the investments made with these contributions.
Personal Pension Schemes: Also known as a Self Invested Personal Pension SIPP. This is a pension plan that members can set up themselves or consolidate existing pensions into. This is a type of DC scheme where individuals have more control over how their pension funds are invested.
Pension Transfer Options
Your pension transfer options will depend on your specific situation and requirements, factoring in the pension scheme and benefits it can provide.
Personal factors may include:
What are your key objectives i.e. capital growth, income generation, and capital protection?
Does it fall into overall Estate Planning?
Do you have poor health?
Can you ensure your assets are passed onto loved ones in a simple and tax efficient manner?
Do you want peace of mind knowing your pension pot is being invested and managed in line with your other financial assets?
Pension Scheme factors may include:
Can you access and if so, in what capacity?
Is it a defined benefit or a defined contribution?
How is it currently being managed?
How is the performance?
Can you invest in the areas you want?
Do you have several pension schemes and want to consolidate?
Once you understand the above, we can discuss suitable options.
Depending on your location, this can include onshoring the pension to a recognised solution or transferring to another pension arrangement better suited to your needs.
Pension Transfer Rules
The UK government has introduced various reforms and regulations over the years which need to be adhered to. You can become liable for significant tax liabilities if the transfer falls outside of these.
These include the Overseas Transfer Charge of 25% and up to 55% penalty tax for making an unauthorised payment.
Defined benefit pension schemes come under even stricter requirements due to the guaranteed income you would be forfeiting.
Compliance with pension transfer regulations, in addition to ensuring a safe and secure transfer, should be a top priority in any pension transfer consideration.
Pension Transfer Advice
Receiving the appropriate advice is fundamental in ensuring you get the desired outcome for your pension pot. Transferring your pension scheme can offer many pros and cons such as;
Potential Benefits
Consolidation: Transferring multiple pensions into one scheme can simplify management and reduce administration. Making it easier to keep track of investments, fees, and performance.
Investment Choice: Some pension schemes offer a wider range of investment options compared to others. Switching to a new plan can help you invest in funds that align with your risk tolerance and financial goals. This can ultimately lead to higher returns on your investments.
Reduced Fees: Pension provider and fund management fees vary. Moving to a plan with lower fees and more fund options can help you save money and improve your investment returns.
Improved Service: Transferring to a different pension provider may offer better customer service, online tools, and communication channels.
Flexibility: Certain schemes provide greater flexibility in terms of retirement options, such as lump sum, regular or both drawdown options. The same applies when exiting a DB scheme as you swap a guaranteed income for the ability to access in any way you choose.
Death Benefits: For DB schemes, you can pass on 100% of the pension value in the event of death rather than 50% of the guaranteed income. QROPS Qualifying Recognised Overseas Pension Schemes can also remove your pension pot from UK inheritance tax.
Potential Disadvantages
Loss of Benefits: Transferring from a defined benefit (DB) pension scheme to a defined contribution (DC) scheme will mean giving up valuable benefits, such as guaranteed income with inflation protection.
Fees and Charges: Transferring a pension may come with fees like transfer, exit, or setup fees. These costs can reduce your retirement savings, so it's important to review them carefully.
Tax Implications: Transferring a pension can have tax consequences, particularly for overseas schemes.
Investment Risk: Moving pension funds to a different scheme means exposing them to different investment risks. While this can lead to better returns, you also risk losses, particularly if the new investments underperform or misselling of commission-based products is involved.
Expat Financial Advice
The Wealth Genesis provides expert pension transfer advice for clients globally. Our advisers hold extensive knowledge in cross-border financial advice. We help expats with all types of pensions implement a financial plan for the long term.
We can assist with all your retirement planning needs, ensuring you make an informed decision for your pension benefits.
We hold the required multijurisdictional licenses to provide independent financial advice throughout North America, Europe, and the rest of the world.
As we are not affiliated with any investment provider or fund manager, our sole focus is to achieve positive client outcomes and work together over the long term.
Before moving your UK pension, it's important to consider the advantages and disadvantages, based on your personal situation, retirement goals, and finances.
Contact us today to speak to an independent financial adviser about transferring your UK pension.
FAQs
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The Wealth Genesis charges an initial fee of £3000 and an ongoing management charge of 0.85%.
For more information on our fees visit our fee calculator page here.
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For a defined contribution scheme, you can encash your pension and have the money paid to your bank account. You can only transfer your pension to another pension scheme.
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Only in special circumstances such as death, or under a pension sharing order.
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Yes, however, if the value is over £30,000 you will need to take advice from a UK FCA-authorised pension transfer specialist.
More information on how to transfer a final salary pension scheme can be found here.
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For a defined contribution pension, around 6 - 8 weeks although it can be longer depending on your provider.
A defined benefit pension transfer will take 8 - 10 weeks for the advice process and another 2 - 4 months for the money to be transferred.
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This will depend on your country of residence. Certain locations with a tax treaty with the UK may consider the withdrawal tax-exempt. We recommend taking tax advice from a qualified tax expert.
