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If you have a United Kingdom Defined Benefit workplace pension and you have not yet drawn down from it, you may be eligible to request a cash equivalent transfer value.
Defined Benefit schemes pay members an ongoing income in retirement which is calculated by looking at a members years of service, their final salary during employment and the schemes accrual rate.
The income will be paid to the member continuously until they die. This income will increase gradually each year, generally close level of inflation, to ensure members quality of life does reduce as living costs increase.
Holders of Defined Benefit pensions have the legal right to request a CETV. This amount is a one-off lump sum amount which members can transfer into a QROPS (Qualified Recognised Overseas Pension Scheme) or a SIPP (Self-Invested Personal Pension).
This amount is generally around 20 times the annual income – however, it is common for that multiple to rise up to 40 times and on occasions even 50.
For example, if John who worked at British Gas was entitled to an annual income of £40,000 in retirement, he may be entitled to a CETV of £800,000 (at a 20 times multiple) or £1,600,000 (at 40 times multiple).
Multiple rates vary between different schemes and are impacted by factors such as interest rates – generally when interest rates are lower transfer values are higher.
The deVere Group assist clients in gaining a CETV from their pension scheme. deVere advisers are able to request this statement from the scheme using a ‘Letter of Authority’. This form requires clients to provide their basic details along with their National Insurance number and employer details.
To request further information on how to request a CETV and a full statement on your UK pension click on the link below.