Cashing in pension or transferring

[aitch65]

My daughter has asked me to accompany her when seeing a Financial Advisor. As a listener rather than for any expertise I don't have.

She is considering a trio of options about her pension which at the moment is a defined benefit scheme.

I am not asking advice on what to do, that will be her prerogative.

I am asking about the tax position if she transfers the pension from the present scheme to a non defined benefit scheme.

Will she be liable to the same tax as if she had taken cash.

Aitch

[genou]

My daughter has asked me to accompany her when seeing a Financial Advisor. As a listener rather than for any expertise I don't have.

She is considering a trio of options about her pension which at the moment is a defined benefit scheme.

I am not asking advice on what to do, that will be her prerogative.

I am asking about the tax position if she transfers the pension from the present scheme to a non defined benefit scheme.

Will she be liable to the same tax as if she had taken cash.

Aitch

If she does it properly - i.e. a transfer between scheme trustees, and the money is never in her hands - then no tax effect at all. Nothing ever leaves the pension wrapper. I can't imagine an advisor getting this wrong.

[aitch65]

That is reassuring, I am sure he/she will get it right, I am just trying to get to grips with the whole thing. Many of her colleagues have used the same adviser so we can but hope.

Aitch

[Alaric]

Then it is likely not to be a good move long term to go from a DB to a DC pension scheme.

Such is the history of advice on transfers from defined benefit schemes that advisers are reluctant to recommend them, even in the new circumstances of the transfer being made to take advantage of the new rules on pension flexibility.

[dealtn]

I agree advisors are reluctant to advise a move from DB, but it's possible to ignore this advice and still transfer. The onus is on taking, not following, the advice. Such is the nature of the potential for future litigation for "mis-selling" it can still be very difficult to transfer even when you can demonstrate you understand the advice, are openly rejecting it, and that you are a "professional investor". I am absolutely sure this isn't one of those cases anyway, but in general this isn't just about a liquidity access decision, it can also be an investment decision. Provided you are offered a true valuation, and you have a sufficiently strong (investment) view on Gilt yields and/or longevity (and the appropriate option knowledge since you won't be in a position to reverse your decision), it can make sense to switch out of DB. I would suspect very few would be in that position though, and even those that are would need to carefully consider. I have seen cases where it has been done, and even where the "advisor" agreed it was the appropriate course of action. This is off topic to the OP whose concern was tax which has been answered, but may be helpful to others.