You may have a defined benefit pension and be aware of pension transfers but not have heard of partial transfers.
A partial transfer is a pension option that allows you to cash in a portion of your retirement fund, while still retaining the rest as a guaranteed income. They are a way of accessing your defined benefit cash without taking on the risk of a full transfer and, for those with very large pensions, they can prevent you from exceeding your lifetime allowance.
Yet the vast majority of pension trustees do not offer these transfers. According to a report by The FTAdviser in March 2018, only 15% of schemes offered partial transfers.
Some trustees may be put off due to the complex administration involved. Helen Ross, actuary and investment consultant at XPS Pensions Group, however, sees no reason why offering partial transfers shouldn’t be the norm. “People are given binary options between either security or flexibility and there is nothing in between. Providing partial transfers is beneficial for businesses too, as it makes things simpler for consumers and it’s cheaper to do in the long run.”
With the reforms to the pensions market that we’ve seen in recent years, the doors have been opened to great freedom and choice for consumers accessing their pension pots. That comes with lots of opportunities but also bears the risk of people running out of money earlier than planned – particularly when performing a full defined benefit transfer. Mary Stewart, head of corporate solutions at LV, says, “we strongly believe there is a role for partial transfers to allow DB scheme members flexibility over their retirement options, while maintaining the certainty and security of a regular income.”
Members of pension schemes need to have access to the options and information to make good decisions about their retirement and personal finances. For some, a partial transfer may be what’s needed. If you think that may be the case for you, ask your scheme administrator if it’s a viable option and discuss it with your financial adviser.