Defined benefit pension transfer

If you’re looking to start your retirement in pastures new or if you are already an expat living abroad, then a defined benefit pension transfer could help you get the most out of your lifetime income.

After working hard throughout your career, we know you’ll want nothing more than to spend your retirement years relaxing with the help of a well-kept pension pot.

However, it’s more important than ever to consider your financial circumstances and take notice of how your money could be impacted by that exciting move – especially if you’ve had no previous experience transferring funds or have received poor advice from another pension provider.

If you’re looking to transfer your UK pension abroad – whether that’s to consolidate multiple pensions accrued over time, get a helping hand in managing your funds, or make the accessibility easier – we can make sense of the transfer process.

What is a defined benefit pension?

In a nutshell, defined benefit (DB) pensions are company or workplace pension schemes that can be left with the pension provider should you choose to move abroad.

Your DB scheme offers you an assured lifetime income that rises annually, aiming to protect you against factors such as inflation.

This type of pension may also be paid out at a reduced rate to your partner, should you pass away.

Whether you choose to stay at home or move abroad for your retirement plans, until you choose to draw money or tap into the benefits of your pension, it won’t be affected.

So, what is a pension transfer?

A pension transfer is pretty much what it says on the tin: simply moving your defined benefit pension plan from one provider to another. When it comes to pension transfers when moving abroad, however, you have a number of options available to you.

Of course, if you choose to take your retirement outside of the UK, it doesn’t mean you have to take your pension savings with you. You can always leave them in your existing scheme and take an active pension income from it remotely. 

However, you could be missing out on a number of benefits that could make your later years much smoother.

How does it apply - to my pension?

When you facilitate any kind of pension transfer from a defined benefit pension – whether it stays in place or shifts to foreign soil.

In place of this is a cash lump sum or value, which can then be shifted or used as part of an investment strategy in a new pension scheme elsewhere.

It is important to take note of procedures that are in place when dealing with investment decisions, especially when it comes to a defined benefit pension transfer.

These ‘lifetime pots’ are, understandably, rather valuable – so they are strictly regulated. You can choose to transfer your pension into the following options:

For expats, the latter can be helpful if you are looking to access your pension in the same country you reside in, offering potential flexibility in the same currency.

How to determine if you would suit a defined benefit pension transfer

From a financial perspective, a defined benefit pension transfer can bring with it a number of guaranteed benefits.

If you fit any of the following points, you may be a good candidate for transferring your pension:

  • If you are not married
  • If you have a life-limiting illness or a shorter life expectancy
  • If you would prefer to pass your savings to a beneficiary that isn’t a spouse
  • If you are keen on controlling your overall income tax liability
  • If you have a significant amount of retirement savings
  • If you are taking your retirement abroad or are already an expat

When can I withdraw and transfer from a defined benefit plan?

If you have a defined benefit pension plan, you can usually begin withdrawing funds from it from the ages of 60 or 65, although some plans can be unlocked sooner.

It’s also important to note that if you are in an ‘unfunded public sector scheme’, such as the NHS Pension Scheme or the Teacher’s Pension Scheme, you may only be able to transfer to a limited number of other defined benefit schemes with are subject to certain rules.

Those who will be able to facilitate a transfer to any kind of pension are those who are in a funded public sector pension scheme or a private-sector defined benefit scheme.

From here, you have the power to switch to any pension type of your choosing, although we ask our clients to remember that you will still have to comply with the regulations of the new scheme chosen.

What kind of financial advice do I have to get?

Due to the nature of a defined benefit pension scheme, transfers out of this kind of pension pot have to be in line with strict regulatory guidelines.

If your total pension pot comes to over £30,000, it’s key to seek transfer analysis and guidance from a permitted FCA regulated firm.

Once completed, you’ll receive what is known as a ‘cash equivalent transfer value’ (or CETV) in place of the benefits and guaranteed level of income you’d usually get from the scheme.

How do I find out my cash equivalent transfer value?

With all defined benefit pension transfers – whether you are planning on staying at home or switching to an overseas pension – you must first find out what the cash equivalent transfer value (CETV) is. This is what your scheme pays for you to give up your entire DB pension rights.

To find out your CETV, you can ask your pension provider or the administrator of your scheme. You will likely need to fill out a form or submit a formal request in writing.

On requesting a CETV, you should receive your transfer value within three months following your request. You’ll be given a written document that gives you all the details you’ll need to begin your transfer.

This is called a ‘Statement of Entitlement’, which will note:

  • Details of the benefits accrued from your DB scheme
  • The total transfer value
  • Any additional information that will be useful to your new scheme

Now that I have my CETV, what else should I know about the transfer process?

To make your transfer as seamless as possible, you must get things moving quickly to avoid additional costs and delays.

You might also be asked to re-seek financial advice so all your information is correct and up to date.

Once you’ve transferred to a scheme of your choosing, you’ll have given up any accessible benefits from your old defined benefit pension.

However, some pension pots may only let you transfer a portion of your benefits – so it’s crucial to check with your provider or seek financial advice to help you get the most out of your savings.

With a defined benefit pension, you should be able to transfer out at any time, as long as it’s up to one year before you’d usually start tapping into your pension income.

How do I transfer out of a defined benefit scheme to an overseas pension?

As we touched on before, if you’re thinking of spending your retirement in a new and exciting country, transfering to a QROPS – or qualifying recognised overseas pension scheme – could be beneficial, offering further flexibility and freedom.

QROPS were specially created to give expats local access to their benefits. With all pensions, a QROPS does have a number of conditions that must be met in order for the process to be successful.

How do I get the best rates for my overseas pension?

At Brite, we recommend QROPS and ROPS with minimal tax rates so that our customers can enjoy as much of their hard-earned retirement funds as possible.

We can also help you choose from a wider range of investments across a number of currencies should you wish..

You can also consolidate multiple transfers within a QROPS, which is helpful if you have several schemes accrued from different providers or workplaces over your lifetime.

Which countries can I transfer my defined benefit arrangement to with Brite?

As international pension experts, we can handle your defined benefit pension transfer from start to finish – and beyond.

We offer unmatched administration and trusteeship solutions in a number of registered jurisdictions across the globe, including Guernsey, Australia, New Zealand, Gibraltar, and Hong Kong.

Although all of these countries offer flexibility for expats and conditions are subject to change depending on where you take your retirement, the usual conditions for QROPS stand.

What should I keep in mind for my QROPS transfer?

If you have a defined benefit pension, the first thing to note for a QROPS transfer is that there is no legal minimum to the amount you can transfer.

It’s also important to remember that QROPS trustees can only accept a transfer through an appointed qualified intermediary.

In addition to this, there are further restrictions that have been put in place on transfers to certain QROPS locations.

This means you may be subject to a potential tax charge of 25% depending on where you are spending your retirement, but it may still offer attractive levels of flexibility and potential investment that make the transfer worthwhile.

You and your pension are in safe hands with Brite

At Brite, we can help you discover all of your options should you want to go ahead with a defined benefit pension transfer, whether that’s through a QROPS or another pension alternative.

To give you all the tools you’ll need to make an informed, confident decision about your plans for the future, all of our financial advice is aligned with the latest legislation and regulatory requirements spanning the countries we deal with.

All of our QROPS schemes are officially recognised by HMRC and regulated by their local financial authority. For ten years from your pension being transferred, the QROPS provider must report back to HMRC. This ensures that all compliance is being adhered to across the board and that activity is being monitored.