January 2018 Breaking News
A well known UK company pension scheme has announced that effective from February 2018, all new Cash Equivalent Transfer Values (CETVs) issued for their Defined Benefit/Final Salary Pension Scheme will reduce by 20% to help alleviate the overall scheme underfunding situation. This follows a trend Sterling Planners identified since January 2017, observing that increasing numbers of DB Scheme CETVs began to decline by circa 10-20% from previous quotes.
The announced new 20% reduction in CETVs is no doubt indicative of the likely measures many UK Defined Benefit/Final Salary Schemes will need to take in order to address their significant underfunding crisis over the next decade.”Is Your DB Scheme Secure?”
If you have an eligible UK DB/Final Salary Scheme and you are:
- Aged 55 yrs or over – with a CETV of £100k or greater & permanent residency status in Australia, we can assist you with our Over 55 SMSF Transfer Option.
- Aged under 55 yrs old – with a CETV of £100k or greater, we can assist you with our Under 55 Secure CETV UK SIPP Service.
History to UK DB/ Final Salary Scheme developments that have occurred since 2015:
- In 2015, UK legislation banned transfers of all unfunded Public Sector DB schemes (details below)
- In 2015, UK legislation placed additional safeguard requirements on DB scheme transfers with values over £30k – i.e. they must now obtain UK FCA Advice in addition to Australian Advice
- In 2016, growing speculation that the Public Sector ban may extend to Private Sector (Company) DB schemes caused a significant increase in the volume of transfer requests for Company DB Schemes throughout 2016/17 – click here for more details
- In 2017, CETVs (Cash Equivalent Transfer Values) for some DB schemes began to decline, after experiencing all time highs for the past few years
Partial Ban on Public Sector DB Scheme Transfers
Effective from 6 April 2015, Unfunded Public Sector Pension transfers (like the NHS) have been banned from overseas transfers. Funded Public Sector Pensions (like USS) however, are still eligible for transfer – see expanded list below- click here for more information.
- Unfunded Public Sector Pension Schemes include MyCSP, NHS, Police, Firefighters, Teachers, Armed Forces, SPPA (Scottish Public Pensions Agency – NHS & Teachers).
- Funded Public Sector Pension Schemes include USS (Universities Super Scheme), LGPS (Local Govt Pension Schemes), Railways Pensions and SPPA LGPS’s.
Important: – Many Public Sector/Civil Service Pensions require requests for transfer at least 12 months prior to reaching retirement age (usually 60 yrs old) therefore, we suggest investigating your pension situation by no later than 58 years of age.
Possible Future UK Legislation to Ban Private Sector (Company DB scheme) Transfers
Growing speculation that the 2015 public sector ban on DB scheme transfers could extend to private sector (company) DB schemes was discussed recently in a Professional Pensions article – click here for details. As a result, a significant increase in the number of DB scheme transfer requests has occurred since mid 2016.
Additional Safeguards – UK DB (Defined Benefit/Final Salary Schemes) with transfer values of GBP 30k or over will now require UK FCA Advice.
Effective from 6 April 2015, DB schemes with transfer values greater than £30k, UK legislation now requires members to obtain UK advice from an advisor who is authorised by the UK FCA (Financial Conduct Authority), has appropriate experience and permissions from HMRC and who is independent of the fund.
Sterling Planners can facilitate this requirement for UK advice via our UK partner, Cobens PLC
Additional Fees for the UK advice component are circa £ 900 for the UK Statement of Advice and circa £ 1,850 to set up an appropriate UK SIPP for initial transfers (as required).
Some UK DB Scheme CETVs Begin to Decline:
CETVs (Cash Equivalent Transfer Values) for UK DB Schemes have been at all time highs since 2013 and as predicted, some of these schemes have begun issuing declining values from early 2017.
This could be the best time ever to transfer a DB/Final Salary Scheme given transfer values have been at all time highs (for the past few years). The prediction throughout 2016 stated that as interest and gilt rates begin to rise, transfer values would begin to fall – which has been evidenced by some recent CETVs issued from late 2016.
PDF Version of Article:- click here to read the article ” Best Time Ever to Ditch your Final Salary Pension” by Moira O’Neill for the Investors Chronicle, Feb 2013.
If you have any questions please contact our client service team on 1300 132 737.