One might argue that pensioners have enough to fear with the impact of COVID 19 and the ever-changing policies on UK private and state pensions, however, there is another concern amongst defined benefit pension members, also known as final salary pensions.
The flexibility surrounding transferring your defined benefit scheme to a more flexible arrangement such as a SIPP or QROPS seems to be getting tighter and tighter through ever more stringent regulations by the FCA. This in turn has reduced the number of firms who are licensed to provide advice on these types of transfers and made the advice much more expensive.
How am I currently able to look at transferring my defined benefit scheme to a more flexible arrangement?
FCA regulated pension transfer specialists who hold certain licenses and qualifications must provide advice before a defined benefit scheme member is allowed to transfer their pension to an alternative arrangement. The number of firms who meet these criteria and are still operational has fallen drastically over recent years through several changes introduced by the FCA, such as:
- Ban on contingent charging – this has caused many members to hold off seeking advice as they simply cannot afford to pay in advance the typical fee of GBP 3,000 for this type of advice.
- Increased PI insurance costs – many small firms are simply unable to compete in price and are being pushed out the market due to high PI insurance costs as the FCA deem defined benefit advice as high risk which insurers do not like.
- Annuity payments not available for European residents – Canada life were the first to announce that they will not have the facility to offer annuity payments to members within Europe.
- Currency conversion charges and risk – Defined benefit schemes can only pay out benefits in Sterling. For members who reside overseas and require their income in a foreign currency, they will either require a UK bank account and convert the funds each month to their spending currency or get hit by large FX charges when receiving the funds to an overseas bank account.
How Brexit is further putting a strain on retirees in Europe
Many UK banks have announced that they will be closing UK banks accounts for anyone residing in Europe post Brexit, on the 1st January 2021. A lady in France who has been a customer for over 40 years was told her account will be closing!
This poses big risks and increased charges for overseas members, especially if the monthly income is low.
In addition to the above, should the currency rate GBP/EUR decrease further, the pensioners’ income will decrease removing the comfort and security that their income requirements are met by their existing assets.
What to do?
Many pensioners who have retired overseas with UK pensions have already transferred their UK private pension schemes to an international SIPP. An international SIPP is effectively the same as a UK SIPP with all the same benefits such as full flexibility about how and when you can take your benefits, multiple currency options, the facility to make payments to foreign bank accounts, conversions within the SIPP for as little as 0.07%, greater investment options plus much more.
SJB Global have an excellent rating on Trustpilot and have helped many expats transfer their pensions to a more flexible arrangement depending on what’s best for them, whether that be a SIPP or QROPS. Should you have any concerns or want to know your options, get in touch with us today by filling in the form below.