The Crucial Role of Regulated Advice in Defined Benefit Pension Transfers

A DB pension transfer is an irreversible decision. Once you leave the scheme, you cannot go back. This means there is no safety net if you later realise it was the wrong choice. 

The system is designed to protect you from making a decision you may regret – particularly one influenced by short-term thinking or market hype. 

If the process were simple and cheap, many more people would transfer without fully understanding the implications. 

The reality is that, for a significant number of individuals, keeping their DB pension is the better option. 

Some of the key risks include: 

• Longevity risk – Outliving your pension pot if investments underperform or you withdraw too much. 

• Market risk – Investment returns can fluctuate, and poor timing (e.g. retiring during a market downturn) can permanently reduce your income. 

• Behavioural risk – Overspending in the early years and eroding your long-term security. 

For example, a Cash Equivalent Transfer Value (CETV) might show a figure of £500,000. To some, that looks far more enticing than £10,000 per year for life.  

But the guaranteed income is exactly that: guaranteed. Whereas the lump sum will only last as long as it is managed prudently and markets co-operate. 

And this is why it is so important to seek regulated financial advice before going ahead with any DB transfer. 

Before making any changes to your pension arrangements, you should carefully consider the risks – including the potential for reduced benefits, higher costs, tax exposure and the risk of running out of money in retirement. 

Professional advice can help ensure you avoid foreseeable harms. 

From a UK point of view, your adviser would begin by carrying out a full fact-find process. 

This involves gathering detailed information about your financial position, objectives, and personal circumstances. Once this is complete, the next step is to request a Cash Equivalent Transfer Value (CETV) from your pension scheme. 

You are entitled to one free CETV each year, and you can request it up until a year before your normal retirement age. After that point, your statutory right to transfer out of the scheme ends, although most schemes will still offer you a CETV. 

Once the CETV is available, you will review it with your adviser. Together, you will consider your broader circumstances – such as your assets, income, age, attitude to risk, capacity for loss, and knowledge and experience of the markets – to determine whether it might be a good idea to explore transferring. 

If the conclusion is ‘no’, that is where the process stops, although you can continue to review your CETV annually. 

If the conclusion is ‘yes’, and your adviser believes it may be in your best interest to look at transferring, the formal advice process begins. 

In the UK, this starts with what is known as abridged advice – a high-level overview that does not go into great detail. Abridged advice leads to one of two outcomes: 

• Unable to determine – meaning the adviser is not 100% sure whether you should proceed and needs to investigate both the scheme and your personal situation in more detail. 

• Do not transfer – meaning the adviser believes it is best for you to remain in the scheme. 

From an international point of view, the adviser would also review your CETV and have the same discussions with you. However, if they believe it is appropriate to proceed, they would move directly to producing a full advice document. 

This is a long, detailed, and highly personalised report – often around 50 pages – covering the facts and figures of your scheme. What it contains will vary depending on the jurisdiction you are in. It ensures you are fully aware of what you would be giving up, as well as the advantages and disadvantages of potentially transferring. 

The reason abridged advice is used before full advice in the UK comes down to the non-contingent nature of the fee. According to UK regulation, the fee must be fixed regardless of whether you choose to transfer or not. This ensures advisers are not financially incentivised in either direction, meaning the advice you receive is impartial and in your best interest. 

Even if you go through the entire process, the pension scheme itself can still block the transfer. This can happen if the scheme identifies “red flags”, such as: 

• Concerns that you haven’t received proper advice 

• Evidence you may not fully understand the implications 

• Potential links to pension scams or high-risk investments 

Schemes take this seriously because they hold liability if they approve an unsuitable transfer. The additional checks are there for your protection.

If you are considering a DB pension transfer, the first and most important step is to speak to a regulated adviser. 

We will explore your reasons for transferring and assess whether your objectives could be met through other means – for example, by drawing flexibility from other assets while keeping your guaranteed DB income. 

Even if the advice is to remain in your scheme, it can still be worth requesting a CETV each year to track how it changes over time. 

Circumstances and market conditions can shift, and what isn’t suitable today might become appropriate later. 

DB pension transfers are one of the most complex areas of financial planning. They involve high stakes, strict rules, and permanent consequences. 

While the process may appear costly and time-consuming, those safeguards are there for a reason – they are designed to help support your long-term financial wellbeing. 

Whether you choose Hoxton Wealth or another firm, always ensure your advisers are properly regulated, fully qualified, and experienced in DB pension transfers. 

For expats, it’s vital that both UK and local rules are taken into account, so your decision is robust from every angle. 

At Hoxton Wealth, our role is to guide you through this process with means honest advice, tailored to your circumstances – whether the right choice is to transfer or to stay where you are. 

Because when it comes to your retirement income, there’s no room for guesswork.