I am considering transferring my defined benefit (DB) pension to a SIPP. I am a keen private investor, with a sizeable portfolio, which I’ve managed for many years.

I am being stymied at every turn. If an IFA provides a transfer suitability report to say that it is right for me to transfer then they say they have to manage the money due to professional indemnity considerations. I want to manage my own money but am not being allowed to.

Nicola

Tom Selby, AJ Bell Senior Analyst says:

With the exception of unfunded public sector schemes, people with defined benefit (DB) pensions are allowed to transfer to defined contribution (DC) plans such as SIPPs.

However, there are restrictions in place and market dynamics which mean it might not be straightforward to do so.

Firstly, anyone with a DB pension worth £30,000 or more must take regulated financial advice (and give the scheme proof of having received that advice) before going ahead with a transfer. This requirement was put in place for a number of reasons, including:

• DB pensions are extremely valuable, providing a secure, increasing benefit throughout your retirement;

• moving from DB to DC involves a transfer of retirement risks, from the employer to you;

•  managing your pension in DC requires active engagement from you, while DB does not;

•  in DC you will have to pay costs to administer and invest your retirement pot (although these can be very low);

•  once you leave your DB scheme there is no going back.

Receiving regulated advice is designed to ensure you understand these risks before you make your decision. It’s worth noting you don’t have to follow the advice, although some providers will only accept transfers with a positive recommendation.

Secondly, as you have experienced, some advisers may only be willing to carry out a DB transfer if they can continue to manage your fund afterwards. Many firms cite fears over future claims against them if they don’t look after both the transfer and the investment of funds post-transfer.

While I understand this might be frustrating this is simply the reality of the current situation.

WHY THE CORONAVIRUS COULD LEAD TO FURTHER TRANSFER DELAYS

The coronavirus pandemic may also lead to delays in DB transfers. The Pensions Regulator, which polices DB schemes, has announced trustees – whose job it is to look after the interests of members – can suspend cash equivalent transfer value (CETV) activity for up to at least three months if it is deemed in the best interests of members.

You may also find DB to DC transfers are a bit slower than normal, with all providers having to adapt processes in order to comply with social distancing rules.

DO YOU HAVE A QUESTION ON RETIREMENT ISSUES?

Send an email to editorial@sharesmagazine.co.uk with the words ‘Retirement question’ in the subject line. We’ll do our best to respond in a future edition of Shares.

Please note, we only provide guidance and we do not provide financial advice. If you’re unsure please consult a suitably qualified financial adviser. We cannot comment on individual investment portfolios.

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