The final salary pension transfer entails technical and detailed analysis in terms of paperwork; if you have a good understanding and a good educational background in finance, it can help you speed up the pension transfer; however, without the assistance of a qualified and FCA-regulated financial advisor, the pension transfer will be disastrous. Before discussing further, you can watch one of our video below discussing the matter.
Why Do You Need To Speak With An IFA About Final Salary Pension Transfer Paperwork?
Unless you have over five years of experience in pension transfer, you will struggle to see the forest for the trees when it comes to paperwork, compliance, and due diligence of your ceding scheme.
Beginning with the paperwork, you must complete the pension transfer paperwork to confirm that you want to transfer your benefits, or a portion of your benefits, to another pension arrangement registered and approved in the UK. Your plan’s rules will dictate whether you can transfer all of your benefits or just a portion of them.
The pension transfer form is required to provide information to the trustees that will allow the scheme’s administrator to transfer your benefits. The transfer form contains sections that you and your new scheme must complete. The transfer will take place only after all sections have been fully completed.
Some Mistakes That Can Occur If You Complete The Paperwork Without Consulting With IFA
Throughout our experience assisting people in transferring their pensions, we have seen a wide range of errors, from the most basic to the most complex, when it comes to filling out the pension transfer form. For example, we received feedback from a client a few weeks ago that described a misunderstanding of filling out paperwork that could be disastrous not only for the client but also for us as qualified financial advisors.
A Client’s Case
To provide some context, we had a client who had SOCPF and wanted to transfer his pension to SIPP. Actually, he had completed all of the paperwork that was required and had sent the paperwork to the ceding scheme. It went smoothly until he received notification from the pension ceding scheme that his pension transfer could not be completed due to the indication of a scam in the process of transferring his defined benefit pension to a SIPP.
The reason for this decision is that the government has implemented rules that require one of two conditions to be met before you have the right to receive a transfer value.
The trustee can only make the transfer payment if either the first condition (generally, that the receiving scheme is a public pension scheme or a specific type of scheme known as a master trust) or the second condition (generally, that there is no reason to believe that a potential indicator of pension scheme activity exists) is met.
In this case, the scheme administrator stated that neither the first nor second condition for paying the CETV request to transfer his pension had been met. Furthermore, he no longer has the legal right to transfer his pension. The trustee stated that he has lost his statutory right to transfer because:
Because the proposed receiving scheme is not a public service or Master Trust Scheme (which does not satisfy the first condition), There is reason to believe that potential indicators of pension scam activity are present, putting you at risk of being scammed.
The first condition is standard; since the implementation of the new pension transfer regulation in November 2021, a SIPP will be classified as an international investment, raising an amber flag. If you completed a call with MoneyHelper Call during the pension transfer process, this can be resolved.
Misinterpretation Can Trigger “A Red Flag”
However, the second condition is more complicated and can be disastrous if you are unaware of the complex questionnaire that must be filled out in order to transfer your pension. The trustee has raised the red flag for our client’s pension transfer.
The pension administrator has disclosed the scam that is a part of his pension transfer process, which is the reason for this.
The trustee must determine whether one or more “red flags” have been identified by law when considering the second condition. If the trustee determines that this is the case, the transfer request must be denied. The various types of red flags are defined by law, and a summary of these is provided in the Pension Regulator’s guidance.
Based on the information available, it has been determined that the following red flags exist, though other red flags may also apply:
- Red Flag 5: The member has been offered a financial incentive to transfer.
- Red Flag 6: The member has been coerced into transferring.
In this case, no independent financial advisor at Cameron James Finance has ever offered an incentive to transfer our client’s pension. Incentives of any kind are prohibited in our opinion. You are our sole client, and we make every effort to provide you with the best advice on whether to transfer out of or remain in the defined benefit scheme.
Second, we never put our clients under any pressure to transfer their pensions. Whether or not a transfer is appropriate for your circumstances, our client has the authority to make the decision.
But why has the trustee raised a red flag in our client’s case? We discovered a detailed and complex question that our client misunderstood after careful investigation. In this case, he incorrectly answered the questions.
In this case, we discovered that the client had filled out the form on his own, and this is where the disastrous event begins. This is why we always advise clients to discuss it with their independent financial advisor as soon as they receive the documentation because, in some cases, there are a number of questions that have double negatives or tricky answers that can only be provided with the help of your financial advisor.
We asked him to send us the documentation he completed, and we discovered some questions that were not correctly answered. The first question concerned the incentive. In this case, the question is, “Did the advice or firm representative approach you’re using any of the following terms?”
Our client answered “yes” to the third tricky question about the cashback from the pension, indicating that he was offered an incentive to transfer his pension. Despite a careful investigation, our client was unable to distinguish between cash back and a pension commencement lump sum (PCLS).
He believes that PCLS is a type of cashback offered by us as independent financial advisors, when in fact it is your right to a 25% tax break on your first withdrawal when you reach the normal retirement age of 65.
The second case is significantly more difficult than the first. In the questionnaire sent by our client, the final salary pension administrator questioned him about whether he was required to transfer his pension or not. Was it difficult for you to make a quick decision to transfer, or were you under pressure? In this case, our client responded “yes,” indicating that he was forced to make a decision about the transfer.
We advise our client to expedite the pension transfer procedure because the Cash Equivalent Transfer Value (CETV) has a due date and will expire after three months in this case. He is also feeling pressured because the CETV’s expiration date is approaching.
Our client did not understand how to distinguish between a deadline and the pressure to make a decision, despite the fact that a deadline requires you to think faster, whereas pressure forces you to make a decision about the pension transfer. That’s two completely different terminologies, and because our client completed the paperwork himself, a red flag is immediately raised.
What Can Be Learned
These two examples show that even the simplest form can contain a complex question that is difficult to understand. Making an unnecessary error during the pension transfer process can slow down the process. Even if the paperwork can be revised, the process should be restarted from the beginning.
It can not only cost you money to request the second CETV while the eligibility date is approaching, but it can also ruin your DB pension transfer if the administrator raises a red flag, indicating that you have lost your statutory right to transfer.
Cameron James Expat Financial Planning – Your Trustworthy Pension Transfer Specialist
As an expat, it can be challenging to navigate the complex financial landscape of international pension transfers. That’s where Cameron James – Expat Financial Planning comes in – we are your trusted specialist in transferring your Final Salary Pension to an International SIPP. With over a decade of experience, we have helped clients in 26 countries successfully transfer their pensions, and we can help you too.
Our team of experts has the qualifications and technical knowledge necessary to guide you through the process, whether you are an expat or a US resident. We pride ourselves on providing regulated and transparent advice, so you always know what to expect and what the costs will be.
At Cameron James – Expat Financial Planning, we utilize a sophisticated cash flow management system to ensure your financial future is secure. Our senior management team has a proven track record of success in serving expats, and we are committed to continuing to meet the unique needs of the expat community for years to come. Book your free consultation today and let us help you take control of your financial future.