Leading specialists in defined benefit pensions advice & pension transfers.

  • Specialist defined benefit pension advice
  • Final salary pensions
  • Pension transfers
  • Goal-based wealth management
  • Retirement plans

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Achieve a higher pension income potential
Greater flexibility on
your pension
Get more out of your pension, tax free
Leave more of your pension for your loved ones

Find out if transferring your DB pension is right for you.
Speak to one of our advisers on 0207 736 2434 or see the potential benefits of transferring your pension with our pension calculator.

Pension Transfer Calculator

Defined Benefit Pensions

These are a form of occupational pension scheme which, as the name implies, provide a promised level of benefit. Benefits are normally based upon the employee’s length of service and salary (either at the date of leaving or averaged over a specified period of time). The attraction of these schemes is that employees are insulated from investment risk. This is borne by the employer. It is up to the employer to ensure the scheme is sufficiently funded to enable the trustees to meet liabilities as they fall due.

Once in payment, defined benefit pension normally increase, either in line with an inflation index or by a fixed amount each year. On the death of the pension scheme member a surviving spouse or civil partner is normally entitled to a reduced pension.

By contrast Defined Contribution (DC) plans such as personal pensions, offer no promised level of income. The capital value of the plan and the income stream it can provide are dependent on the contributions made, the investment return achieved, the charges that apply and, if an annuity is purchased, the prevailing annuity rates.

Members of DC pension schemes have choices as to how the capital accumulated is used to meet their retirement expenditure. Members of DB schemes have no choices other than whether or not to take a reduced pension in exchange for a one off lump sum payment.

Rather than remaining a member of a defined benefit pension those with more than a year until they reach the scheme normal retirement age have the right to transfer out. The first stage in this process is to request a Cash Equivalent Transfer Value (CETV). This is the amount of money that the trustees will give you to move to a new pension scheme. The CETV must be invested into a new approved pension plan.

"Rather than remaining a member of a defined benefit pension those with more than a year until they reach the scheme normal retirement age have the right to transfer out."

Why Transfer Your Pension?

Can I achieve higher spending by transferring?
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Can I leave my pension for the next generation?
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Can I get more out tax free if I transfer?
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Can I take benefits before my scheme allows?
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I want more flexibility from my pension
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If I die will my spouse receive less?
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I am in poor health
 
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I am comfortable with investing
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Find out if transferring your DB pension is right for you.
Speak to one of our advisers on 0207 736 2434 or see the potential benefits of transferring your pension with our pension calculator.

Pension Transfer Calculator

Why Fowler Drew

Established in 2004 our primary area of expertise has always been helping people live off their capital in retirement. To do this we developed proprietary stochastic modelling to show at every stage how the range of sustainable draw amounts changes based on the level of investment risk adopted and what happens to markets and inflation. This allows clients to make informed decisions about risk by comparing potential spending upside against downside. Using a robust investment model provides clients with far greater composure and peace of mind than simply working to crude rules of thumb.

We have long recognised that planning for retirement is about much more than managing a pension plan. Clients tend to have multiple sources of capital that can be put to work to meet their retirement expenditure. These might include ISAs, investment portfolios, cash and property; including the main residence. A comprehensive understanding of a client’s total financial position is vital when advising on a potential defined benefit transfer. Without understanding the relative importance of the defined benefit pension and the wider risks a client is exposed to, high quality advice cannot be given.

The number of advisers working in the industry able to advise on defined benefit transfers is small but the number who can then offer a robust ongoing investment management service specifically tailored to those needing to live off their capital is smaller still. Transferring from a defined benefit pension scheme provides far greater freedom and flexibility but freedom introduces a myriad of options which makes ongoing management of financial capital a huge challenge. Whilst a transfer value may look attractive, the challenges of managing the transfer value as part of a wider plan should not be under-estimated. Some of the key things clients need to know are:

  • How much they can safely withdraw from capital each year
  • From where these withdrawals should be taken (pension, ISA, cash accounts etc)
  • How a future downsize or equity realise can be incorporated into their planning
  • How draw from capital can best be arranged to minimise taxation
  • Having undertaken a full analysis and modelled potential outcomes we can then establish whether withdrawals from capital should act as a top up to a defined benefit pension (do not transfer) or whether retirement spending should be met in full from capital withdrawals (transfer).

How It Works

Getting started in 5 easy steps...

Step 1 - A no obligation phone conversation to determine whether a transfer is likely in principle to be in your best interests and to answer any questions you may have.

Step 2 - We help ensure you have an up-to-date Cash Equivalent Transfer Value and then tell you all of the key facts including all of the costs and risks associated with a transfer so that you can decide, based on that information, whether a full review and recommendation are in your interests.

Step 3 - We work with you to understand your retirement expenditure requirements and your capacity for and willingness to tolerate investment risk. We then produce a comprehensive Transfer Value Analysis Report which illustrates the extent of the shortfall risk and the potential for higher sustainable withdrawal amounts compared to the defined benefit pension. We do this using our own stochastic investment modelling software.

Step 4 - If you proceed with a transfer we will instruct the ceding scheme and implement all the new investment vehicles required. Investments will be structured in line with the plan developed and agreed with you in Step 3.

Step 5 - Having implemented the new plan we take on the ongoing discretionary management of the money assigned to the plan to ensure that the financial outcomes are within the range that you specified. Your plan will be adapted as necessary to reflect changes in your circumstances and legislation as well as the progress of the plan.

Contact Fowler Drew

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Where we are

Office Address

12 Tinworth Street
London
SE11 5AL

Contact Information

Local: +44 (0)20 7736 2434
info@fowlerdrew.co.uk

Can I leave my pension for the next generation?
In a defined contribution arrangement any capital remaining undrawn at death can be passed on to nominated beneficiaries. If you die before age 75 these payments are normally entirely tax free. If you die after age 75 then your nominated beneficiaries can draw on the inherited pension fund and be taxed at their marginal rate of income tax. Contrast this with a defined benefit scheme which typically only offers a reduced and fully taxable pension to a qualifying spouse or civil partner.
Can I get more out tax free if I transfer?
The different basis for calculating the capital value of a defined benefit scheme will normally, but not always, mean that less Pension Commencement Lump Sum (PCLS) is available when compared to taking a CETV and investing it into a Defined Contribution pension. Under current legislation the PCLS is paid tax free.
Can I take benefits before my scheme allows?
The earliest that you can take pension benefits from any pension scheme is currently age 55. Most defined benefit schemes have a normal retirement date of 60 or 65. It may be possible to take benefits sooner but these will be reduced to reflect their earlier payment. A defined contribution plan offers complete flexibility – benefits can be taken at anytime after age 55 and you need not take all benefits at once.
I want more flexibility from my pension
For many the attraction of a defined benefit pension is the relative certainty it provides. A known income is produced each year and on death a percentage of this income will normally be paid to any surviving spouse or civil partner. These schemes also tend to provide a reasonable degree of inflation protection. For others, the very prescriptive nature of defined benefit pensions may not be appealing. Many people seek the flexibility to be able to vary the amount of pension income they take each year; perhaps because it acts as a top up to other income or simply because their spending requirements vary from year to year. Others will have no need for a spouse’s pension. Others may have no requirement to spend the pension at all and would prefer simply to leave it to the next generation. If flexibility is valued then a defined contribution pension may be more suitable.
If I die will my spouse receive less?
Defined benefit pensions normally offer a continuing pension to a surviving spouse or civil partner. The continuing pension is typically half of the pension that was paid to the member prior to death. This pension is liable to income tax. Therefore, the amount received will depend upon how long the surviving spouse lives following the death of the member, and the total amount received from a defined benefit scheme will depend upon the combined longevity of the couple. With a defined contribution scheme a spouse will inherit any unspent pension capital. Since any unspent capital under a defined contribution arrangement can be passed on, either to a spouse or to other nominated beneficiaries, the longevity of the member and their spouse is less of an issue although if you live a long time there will always be the risk of running out of capital.
I am in poor health
Since a defined benefit pension will pay a pension only for as long as you live, your date of death will dictate the total amount of benefit you will receive from the pension. The amount you receive will not be increased to take account of poor health. On death a pension may be payable to a surviving spouse or financial dependent. If you transfer to a defined contribution scheme you may be able to purchase an annuity which reflects your state of health and therefore provides a higher guaranteed income. Alternatively, if you elect to draw from the pension plan then any unspent capital can be passed on at death.
I am comfortable with investing
Transferring out of a defined benefit scheme involves taking on investment, inflation and longevity risks otherwise borne by the defined benefit scheme. The resulting financial outcomes may be worse than if you had remained a member of the defined benefit scheme. A Transfer Value Analysis Report will show the range of financial outcomes you can expect based on your risk tolerance. For a transfer to be suitable you will need to be prepared to accept investment risk which means that you must value the potential extra spending in retirement and you are prepared to accept the possibility of a reduction in sustainable spending compared to the defined benefit scheme.
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