Understanding the Pension Transfer Gold Standard
As a member of a defined benefit pension scheme (or pension scheme with safeguarded benefits) we hope the Gold Standard enables you to better understand what good advice on what to do with your pension looks like.
Please be aware that the Financial Conduct Authority (FCA), the regulator of financial advice firms, maintains the view that the value of guaranteed benefits available to members of a defined benefit or final salary pension scheme are such that for most scheme members a transfer to a money purchase arrangement, where you take on the investment risk of your pension fund, is unlikely to be in your best long-term interests.
Financial advice firms which adopt the Gold Standard have committed to an advice process that is underpinned by adherence to nine principles. These are designed to empower you to:
- Make an informed decision on whether a transfer of your pension benefits is appropriate for you
- Help in understanding what good advice in this area should look like
- Find an advice firm which has already adopted the Gold Standard
How to find out more?
To find out more about the Gold Standard, we recommend you read the documents in the right hand column that will help you understand how adopting firms will go the extra mile to ensure you get the best advice.
If you don’t already have a financial adviser and you want to find out more about the advantages and disadvantages of transferring your pension, you could consider a free guidance session via the Money and Pensions Service. To speak to one of their impartial pension experts call 0800 138 7777 and select option 2 or for webchat visit: https://www.pensionsadvisoryservice.org.uk/TPASChat
To find a financial advice firm you can visit the Money Advice service advisor directory. A firm that has adopted the Gold Standard will have the Pension Transfer Gold Standard shield beside its name.
Should I move my safeguarded pension benefit?
Pension Transfer Advice is complex and can be viewed as expensive. It’s important you have enough understandable information about the generic advantages and disadvantages to enable you to decide whether to go on to take advice on the transfer or conversion of your pension benefits. Firms adhering to the standard will ensure provision of this information ‘at arms-length’ so you are not under any undue influence in deciding whether to incur the subsequent cost of advice. You may sometimes hear this referred to as a ‘triage’ service.
Money Alive video
An independent company called Money Alive have produced a short video that gives you some basic details about the different types of pension schemes. This will help you understand some of the issues around different pension arrangements. We would like to thank Money Alive for making this video available:
- Video: Money Alive - Stay or transfer? (external link)
Below are a few statements which will explain some of the more common circumstances that cause people with safeguarded pension benefits to either leave those benefits where they are or to transfer them into a flexible pension.
Reasons some people give to leave their benefits where they are:
- This pension will be my sole or primary source of income in retirement and the fact that it is guaranteed and has built in indexation is reassuring to me
- I believe that I have a normal life expectancy so the fact that the pension will pay out until I die, whenever that might be, is important to me
- As this is my sole or primary source of income in retirement I am reassured that it will not be reduced if stock markets fall
- I have a partner who will also be dependent on this pension income, and I am pleased that it will continue to support them if I die before they do
- I am happy that, although this pension is a reduction in income from the level I earn in employment it is enough to meet my financial needs in retirement
Reasons some people give to transfer their benefits into a flexible pension:
- My retirement is likely to be a gradual affair and I expect to have varying income needs from year to year, so it is important for me to be able to vary the income I receive from my pension accordingly
- Unfortunately, I am not in good health and as a result my life expectancy is likely to be below average; I understand that a flexible pension gives greater options for my heirs and dependants
- I am planning to take early retirement – at least partially – and value the flexibility that a flexible pension can give me in this regard
- I have a range of financial assets at my disposal to support my retirement, so this particular pension will not be my sole source of income. The guarantees within this particular pension are therefore not important to me and flexible pensions give me more options.
- I fully expect to manage my various pension and non-pension assets myself and together with my adviser decide where to take income from as appropriate