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Under 55 Secure Cash Equivalent Transfer Value (CETV)

If you are under 55 years of age and have a UK Defined Benefit(DB)/Final Salary scheme, or a Personal Pension Plan and looking for an alternative provider it would  be prudent to consider transferring your DB Scheme into a UK Self Invested Personal Pension (UK SIPP) – which is a personal scheme – until you turn 55 for the following reasons:

Secure your highest Cash Equivalent Transfer Value (CETV):    In recent years due to historically low UK interest and gilt rates, pension transfer values have been at all-time highs. However, since the beginning of 2017 CETVs have begun to decline for many schemes by an average of 10-15%. It may be the best time to secure possibly the highest CETV your UK scheme is likely to receive (a case study below shows how these values can fluctuate widely in a short space of time). We can facilitate an interim transfer of the lump sum value into a UK SIPP to secure the current CETV of your UK scheme until you can transfer those funds to Australia upon turning 55.

Possible regulatory changes to Defined Benefit transfers:   There is industry speculation that transfers from all Defined Benefit schemes may be become prohibited in the future (similar to the 6 April 2015 ban on all unfunded Civil Service Defined Benefit schemes). In order to safeguard your UK funds, it may be prudent to transfer the Defined Benefit scheme lump sum into a UK SIPP. Then regardless of what happens with this regulation, your funds would be in a personal scheme and still eligible to transfer overseas at a future time.

We can facilitate an integrated global solution, incorporating UK advice (if required) from UK FCA licenced advisers, known specialists within the marketplace.

Note: From 9 March 2017 QROPS transfers to New Zealand, Malta, Guernsey and Isle of Man now incur a tax charge of 25% on the total transfer value if the individual does not reside in the same country as the QROPS.

Cash Equivalent Transfer Value (CETV) client case study

Large fluctuations in CETVs

When a CETV is requested from a fund, the CETV can vary significantly (up or down) each time they are calculated. Each quote is usually guaranteed for 90 days based upon a number of factors including: current market conditions (e.g. interest rates and gilt rates), benefits to be received by members and the investment strategy of the scheme. CETVs can be much higher or much lower than a previous calculation. This can occur within short periods of time, even as short as three months, as our client case study below shows.

A client of Sterling Planners experienced large fluctuations in their CETVs for a UK Company Defined Benefit scheme over a short period. These were the different values provided by the fund during an 18 month period:

Jun 2012 £1,598,753
May 2013 £1,366,464 (↓ £ 232,289 = 14.5% drop in 12 months)
Aug 2013 £1,492,766 (↑ £ 126,302 = 9.2% increase in 3 months)

Advice requirements for Defined Benefit scheme transfers

On 6 April 2015, new HMRC regulations governing UK pension transfers resulted in additional safeguards for all Defined Benefit/ Final Salary scheme transfers (within the UK or overseas) with transfer values greater than £30,000. Impacted members must obtain advice from a financial adviser who is independent of the fund. These advisers must be authorised by the UK Financial Conduct Authority (FCA) and have appropriate experience (i.e. only UK FCA approved advisers have such permissions from HMRC. There are a limited number of these advisers).

Additional fees for the UK advice component are approximately £2,500 for the UK Statement of Advice and £150 to set up an appropriate UK SIPP for initial transfers (as required).

Please note: If you have already requested a Cash Equivalent Transfer Value (CETV) from your UK Defined Benefit/Final Salary Scheme, a 90 day Guarantee Date (GD) will be triggered the day the transfer quotation is issued. It is important to choose a QROPS specialist adviser prior to triggering the GD if possible, thus reducing the risk of a reduction in value if a second CETV needs to  be requested. The best option is to have your QROPS specialist adviser request the CETV once their Letter of Authority has been lodged with the UK scheme, this gives you the best chance of meeting the required 90 day deadline.

If your enquiry relates to a UK State Pension i.e. the Old Age Pension from your national insurance contributions or if you have an unfunded Civil Service Pension e.g. NHS, Teachers, Police, Armed Forces etc.. then our e-book will not be relevant.  You need to contact your UK scheme directly as they are not eligible to transfer to Australia.

For further information please download our FREE UK Pension Transfer E-book or contact our client service team on 02 8904 9793