Introduction

While defined benefit pensions provide a valuable secure source of retirement income, certain types of client may benefit more from the extra flexibility now offered by a modern defined contribution scheme. Having the benefits in the right pension is crucial to meet a client’s objectives - not only in providing for their own retirement, but also to potentially pass on a tax-efficient legacy to the next generation. With increased regulatory scrutiny on DB transfers, advisers need to fully understand the risks, processes, timescales and requirements associated with giving advice to a client in relation to transferring their DB pension entitlement.

This module should take around 60 minutes to complete. Once you have completed all the sections there is a short self-assessment quiz to check what you have learned and a CPD certificate for up to 60 minutes can be claimed.

Outcomes

On completion of this module you should be able to:

  1. Explain the reasons why a DB transfer may or may not suit a client's needs
  2. Explain the client’s right to transfer, the stages and timescales applicable to a DB transfer request
  3. Detail the steps that trustees will take in calculating a CETV and explain which factors have the most impact on the calculation
  4. Describe the implications of transferring benefits for those in ill-health or with LTA protection

Post learning assessment

Question 1

Which of the following are reasons why a client may consider transferring their pension from a DB to a DC scheme?

  1. They’re not reliant on getting a guaranteed income for life
  2. Their beneficiaries could benefit from increased death benefit options
  3. They would like the flexibility to vary their pension income
  4. All of the above

Question 2

Which of these DB scheme members has a statutory right to transfer AND can request a guaranteed transfer value?

  1. Dave, an active member of the scheme who is 2 years from normal retirement age
  2. Leanda, a deferred member of the scheme who is 6 months from normal retirement age
  3. Ian, a deferred member of the scheme who is 13 months from normal retirement age
  4. Bob, a deferred member of the scheme who is 2 years from normal retirement and received a CETV 6 months ago

Question 3

Which of the following is NOT a step in calculating a DB scheme’s CETV?

  1. Revalue the accrued pension up to normal retirement age
  2. Work out the capital value by applying a mortality factor and something akin to an ‘annuity rate’
  3. Adjust the capital value to take account of market/economic conditions
  4. Discount back to the current date

Question 4

Which of these client circumstances would be MOST likely to warrant asking the DB scheme about a partial transfer option?

  1. Client has fixed protection 2016
  2. Client has enhanced protection
  3. Client has been diagnosed with a medical condition which is likely to reduce life expectancy to 3-5 years
  4. Client has been diagnosed with a medical condition which is likely to reduce life expectancy to 6 months

Check your answers

Claim your certificate