Defined Benefit Pension transfer is not a quick process. And Defined benefit pension transfer timescales have increased massively in the past few months.
Historically, it could take around 6 months to transfer a Defined Benefit pension. However, legislation requiring enhanced safeguarding checks by scheme trustees has increased the time it takes to transfer your Defined Benefit Pension. The entire transfer process can take upwards of 6-9 months.
Scheme trustees have up to six months to perform their checks. At this point, they might refer you to MoneyHelper for additional guidance: the majority of transfers are now taking between six and nine months.
We’ve included a breakdown of the typical timescales involved at the end of this article.
How long do Defined benefit pension transfers take 2023?
Legislative changes introduced at the end of 2021 have had a permanent impact on the time it takes to transfer a defined benefit pension. The changes gave pension trustees more power to protect their members from pension scams. Unfortunately, the additional safeguarding checks mean that pension transfers take far longer than average.
Pension transfers aren’t supposed to be quick, and there is a huge deal of research and analysis needed before a pension transfer can be given the green flag. Expect your pension transfer to take at least 6 months.
Thanks to the enhanced due diligence measures, all pension transfers must go through an assessment process to show whether there are any red (heightened risk) or amber (potential risk) flags of a pension scam. In addition, there are now fewer pension transfer specialists out there: fewer people to do more in-depth work.
How can I make my pension transfer faster?
Even before your scheme administrators carry out their safeguarding checks, there is a considerable deal of communication and information gathering that needs to happen.
You can make your pension transfer process faster by having all of the required information to hand at the start, gather information like:
- Your CETV and details of any other associated benefits
- details of any other private pensions you hold
- Details of any other investments and assets you hold
- Summary of any debts and outstanding mortgages
- a clear set of retirement objectives
- state pension estimate
- Estimated retirement income requirements
The initial advice phase requires extensive information gathering and research on the part of your financial advisor. If you don’t have that information immediately to hand, the process will take far longer.
Get your ducks in a row, and you can shave some time off of the overall timeline.
Don’t rush it: a pension transfer is an enormous decision that can dramatically impact your financial future. Therefore, it’s crucial that you carefully weigh your options and consider whether it is the right choice.
Will Defined benefit pension transfer timescales affect my CETV?
Your Cash Equivalent Transfer Value (CETV) is the amount that your pension scheme will give you if you choose to transfer out of your Final Salary Pension Scheme. Typically it is only valid for three months. This should allow your financial advisor enough time to conduct the required research and analysis that you need to decide whether to transfer.
If your advisor doesn’t get the required information in time, or there are delays, you might find they can’t provide the required suitability report and recommendation in this timeframe.
As long as you have registered your intent to transfer with your pension scheme administrator within the three-month timeframe, your CETV will be honoured.
But, if you miss the deadline, you will need to start the process again and request a new CETV.
You usually only get one free CETV per year. If the extended transfer timescales mean you miss your CETV deadline your pension scheme trustees may charge you to produce a new CETV and your transfer value could change.
Your CETV is influenced by several factors including:
- Your individual scheme’s rules
- Scheme performance
- current cost of living
- Scheme investment costs and returns
- The position of the financial markets when you make your request
While this can sometimes work in your favour, it can also lead to a massive drop in value: we have seen values go up, but also decline up to £100,000. This is why recalculating your CETV mid-transfer is so problematic, as it is impossible to guess the outcome. Plus, recalculations will only add more weeks to your timeline as your financial advisor will need to reassess all of your information and investments.
Recalculating your CETV mid-transfer decision can be problematic. We’ve seen massive swings in value both ways. It’s excellent if your transfer value increases, but if it drops significantly, your financial advisor will need to rerun their analysis for transfer suitability and update your investment plans accordingly.
Simon Garber, Pension Transfer Specialist – 2020 Financial
For this reason, we strongly encourage you to get all your information neatly lined up before asking for your CETV, including:
- Choosing your financial advisor (note that this needs to be a qualified pension transfer specialist)
- Setting out your goals for the future (including your lifestyle goals – not just your big dreams)
- Outlining your current financial situation
- Pulling together details for any other pensions (and those of your spouse, if you have one)
Armed with this information, you can request your CETV, knowing that you have more than enough time to put it into practice.
Defined Benefit Transfer Timescales
Your defined benefit transfer consists of many moving parts. To understand the potential timescale of the entire process, it’s essential to appreciate the various stages that will get you there.
We’ve included an estimated timescale based on the 2020 Financial defined benefit transfer process; please be aware that other pension transfer specialists may take longer or have a different process.
Finding a financial advisor 1-4 weeks
You’ll need to find a Financial Advisor you can trust to offer you the required advice. Please do your research and ensure they’re a Qualified Pension Transfer Specialist with the required permissions.
MoneyHelper has compiled a helpful directory of authorised advisors who hold the Pension Transfer Gold Standard – so, if you’re unsure where to begin, choose someone from the list.
Request CETV 1-2 weeks
Your CETV is only valid for 3 months, so we recommend that you only request yours once you’ve found a financial advisor you’re happy with and when you’re ready to proceed.
Remember, your CETV is only valid for 3 months if you miss your CETV deadline, you will need to start the process again and you may be charged extra.
Initial call and fact-finding 1-2 weeks
During your initial call, you will be asked several questions – these include:
- Details of all your pensions and how they are invested
- Details of assets (value and type)
- Details of your state pension, value and date
- Spouse pension details and assets
- Life insurance policies
- Details of your mortgage and house value
- Details on dependents, are they financially dependent?
- When do you want to retire? And what income do you want in retirement?
- Any large expenditures over the next 5 years
You will need to gather these answers before the call to be as efficient as possible.
Research, analysis and reporting (3-4 weeks with us, up to 3 months with others)
Then it’s over to your financial advisor. Of course, all financial advisors work to different timeframes, so it’s worth asking for an estimate before you start the work – After all, their timeframe should fit in with yours.
At this point, your financial advisor may need to go to your pension scheme administrator for more information; this can very quickly add a fork in the road. We have heard of cases where it has taken up to six months for individuals to receive their reports.
Again, we cannot stress enough how important it is to choose a financial advisor who will work with you as effectively as possible.
Decision phase 1 week+
Once you have received your suitability report, you’ll have a call with our transfer specialist to discuss your report & recommendations. Again, take the time to digest the information and think through your options before making your final decision.
Remember, you do not have to transfer, and it may not be in your best interest. Instead, speak to a specialist and consider whether this will take you closer to your financial goals.
Inform pension trustees of intention to transfer – return all required paperwork 1-2 weeks
If you do decide to transfer, you will need to:
- Sign and return the suitability report summary
- Pay the balance of the fee/or the agreement that it will be taken from the transfer
- Answer relevant questions to confirm why the transfer is in your best interests, why you believe the loss of guaranteed income for life is not a risk, and how you will successfully navigate this.
There will be paperwork from the pension scheme which will need to be completed and signed by you for the transfer to go ahead. Once the initial paperwork has been completed, the scheme may send additional forms for completion.
Pension trustees to perform checks 4 weeks – 6 month
Your pension trustees have up to 6 months to process your transfer request. Due to the additional safeguarding checks, they may ask you for further information or refer you for a MoneyHelper guidance call to discuss any areas of concern.
While these extra precautions mean that pension transfers are taking longer, they work to protect people from scams that can wreck lives and dissolve hard-earned retirement funds in an instant.
RELATED: DEFINED BENEFIT TRANSFER WARNING FLAGS EXPLAINED.
Set up receiving pension scheme (if required) 1-2 weeks
While this isn’t an essential step for everyone, it is something that can add a good few more weeks to the timeline.
If you opt to use 2020 Financial and you don’t have a receiving pension scheme set up, this will be done whilst you wait for your money to be paid out to reduce further delays.
Transfer pension and set up investment strategy as per advice – 1 week
Finally, you can sign, seal and deliver your pension transfer.
Once your transfer money lands your money will be allocated to your investments as per the strategy discussed with your advisor.
Need advice from a pension transfer specialist?
We are independent financial advisors and qualified pension transfer specialists. Our ethos is built on delivering high-quality, person-centred and tailored financial advice that helps you reach your financial goals.
Get in touch to book a free, impartial consultation. We would love to help you.
