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Transferring a pension takes time – preparation is key



Mar 23, 2020

Clients often ask us ‘how long does it take to transfer a company pension?’

Transferring out of a defined benefit company pension is not suitable for many people but it can be highly beneficial for some. Goodmans Financial Planning has helped many such clients achieve their retirement dreams – often much earlier than expected – by transferring, where suitable.

But the transfer process takes time – often around six months from our first meeting until the transfer completes. So if you think a transfer could be right for you, timing and preparation are key.

What does a pension transfer involve?

Transferring out of a defined benefit (also known as a final salary) pension scheme, is a complex decision. It is essential to take advice and we strongly recommend using a chartered financial planning firm such as Goodmans.

The first step is to gather all your financial information, including all your pensions, savings, bank accounts and outgoings – and think about how much you will need to live on in retirement. Your adviser needs all this information to give you comprehensive, holistic advice and planning that’s right for you.

If this initial planning suggests that a transfer could be beneficial, the next step is to apply to your company pension scheme for what’s called a cash equivalent transfer value (CETV). This calculates how much your pension benefits are worth and how much you would therefore receive if you transferred out.

Don’t rush your transfer decision

Transferring out of a final salary scheme has important implications because it means giving up guaranteed benefits. If you decide to go ahead with the transfer, you must discuss the pros and cons carefully with your adviser and show that you understand these implications fully. This process should not be rushed.

But CETVs are guaranteed for three months only. It is therefore important to speak to an adviser before applying for the CETV to avoid making complex decisions under unnecessary time pressure.

The transfer value calculation is complex and the amount can change over time based on many factors. If you had to ask for a second CETV, the value may not be the same – it could be significantly lower. Furthermore, pension schemes charge for CETV requests, and will charge again for a second one.

If you decide to go ahead with the transfer, the final step is to make a transfer request, wait for the money to arrive then invest it into a vehicle that allows you to take an appropriate income.

The initial planning phase usually takes around a month. CETV requests often take up to three months because of the complexity involved. Requesting a transfer, receiving the money and investing can also take six weeks.

It is therefore crucial to start thinking about the issues and gathering information as early as possible, and starting the advice process at least six months before your retirement date.

How Goodmans can help

Goodmans Financial Planning has offices in Plymouth, Totnes, Exeter and Bristol. We provide highly personalised service, with holistic planning to help you achieve the lifestyle you want in retirement.

We are not tied to accountants, solicitors, or any large financial companies. This means we are on your side when dealing with third parties and all our advice has your best interests at heart.

Contact us for a free, no-obligation planning session.