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Pension Vesting FAQs

What is Pension Vesting?

This is the process by which the funds in your Personal Pension Scheme may be vested – sometimes also referred to as crystallised – to provide financial benefits.

Your pension may be vested in this way any time after you reach the age of 55 and before you reach the age of 75.

When it is vested or crystallised, you may also take up to 25% of the fund’s value as a Tax-Free lump sum – technically, this is known as a Pension Commencement Lump Sum (PCLS).

The balance of your pension fund may be invested to provide a taxable income, either directly from the fund (called Drawdown) or by exchanging the fund’s value for the purchase of an Annuity and the secured pension income which that provides.

Are there benefits in taking a Drawdown Pension?

A Drawdown has the advantage over an Annuity in that, when you die, you may pass on the value of your pension fund in some form to surviving beneficiaries.

The investment of the balance of your funds offers the prospect of additional capital and income growth, but, as with any investment, there are market risks.

That is why the financial services regulator, the Financial Conduct Authority, strongly recommends that anyone considering a Drawdown arrangement, or is thinking about buying an Annuity, takes advice from an independent financial adviser.

Are there benefits in buying an Annuity?

Compared to a Drawdown, an Annuity is risk free – it provides a guaranteed, fixed income for the rest of your life.

The drawback is that, once the purchase has been made, you are locked into that Annuity – however well other Annuities may be performing as the years go by.

Why do I need Independent Financial Advice?

Weighing up the balance of advantages and disadvantages between the secure, if somewhat inflexible, Annuity, and the potentially higher rewards, but higher risk of a Drawdown is a tall challenge.

As Independent Financial Advisers, we at Independent Pension Specialists Ltd are in a professionally-informed position to help you weigh up those comparative advantages and disadvantages, with direct reference to your own personal needs and circumstances and the financial products currently available on the market.

Some specialist pension providers do not deal directly with members of the public. They only accept business via properly authorised and regulated advisers such as ourselves at Independent Pension Specialists Ltd (IPSL). By enlisting our help in your financial decision-making, therefore, you may gain an additional layer of legal protection that may not be available if you went direct.

What service do you provide?

We are independent financial advisers and not an insurance company, an investment company or an annuity provider – our specialist advice is on pensions and retirement planning-related matters.

Our wide range of services includes:

• Independent Financial Advice.

• Pension Specialists.

• Research of the whole market.

• Finding the appropriate product for you.

• Investigating all Pension Transfer options.

• Liaising with legal advisers and scheme administrators.

• Dealing with all the paperwork requirements.

• Arranging the set-up of a new policy.

• Arranging the transfer of funds.

• Providing ongoing monitoring and review of your pension arrangements.

Can you just give me a quote for an Annuity?

If we were to do that, what assurance do you have that it is the most appropriate product for you?

Pension Vesting is no simple or easy matter – and the implications and consequences of a poor decision are likely to stay with you throughout your retirement. To illustrate how complex your decision-making may be, just consider the number of options:

• 20 mainstream pension providers in the UK offer 70 different pension contracts.

• These include schemes such as Guaranteed Income (Annuity), Flexible Income (Flexi-Access) Drawdown, Flexible Lump Sums (uncrystallised fund pension lump sum), unlocking the whole of your pension pot in one go, as well as other Third Way products.

• Any one of these schemes may change its current terms and conditions.

• Each scheme typically carries a number of options from which to select.

If you are considering investment-backed options, there are literally thousands of underlining investment funds from which to choose.

What are your fees?

We do not make any charge for the initial assessment and/or face to face meeting/telephone discussion, to determine your objectives and establish whether our services are appropriate for you.

We help you decide which service may be right for you and will agree the fee before commencing any chargeable work on your behalf

Our fees reflect the nature of whatever services you ask us to perform – the fee structure and methods of payment is fully documented in our Key Facts “about our services and costs” document. This, along with our Terms of Business document will be issued to you automatically upon receipt of your initial Enquiry Form and Letter of Authorisation. You may request a copy in advance, or you may download a copy from our website.

In addition, there may be charges made by your existing pension provider for releasing funds before or after your policy retirement date. Remember that you might be giving up guarantees in any Pension Transfer and that these are, in a way, also a cost to you if you lose them.

If a Pension Transfer to a new company is recommended, there are likely to be set up charges.

What does your initial assessment cover?

We do not make any charge for the initial assessment and/or face to face meeting/telephone discussion, to determine your objectives and establish whether our services are appropriate for you.

If your service is appropriate for me, what is the next stage?

We will agree the fee before commencing any chargeable work on your behalf. Please see Key Facts about our services and costs for more information, including the methods available to pay our fee.

When we have received your fee and instruction we:

• Write to your existing scheme providers to obtain up to date information on your existing arrangement and the options open to you.

• This includes a check on the policy conditions, up to date fund values, details of the underlying funds you hold, a check on any applicable guaranteed annuity rates, life cover or waiver of premium that may apply, a breakdown and projection of your benefits and details of any applicable penalties or charges that may apply on vesting or crystallisation.

• This information will include a check on the policy conditions, up to date fund values, details of the underlying funds you hold, a check on any applicable guaranteed annuity rates, a breakdown and projection of your benefits and details of any applicable penalties or charges that may apply, along with confirmation of the level of benefits available to you if taken directly from the existing provider.

• Only then are we in a position to confirm whether or not it may be in your interests to vest your pension.

This process can often take several weeks but is vital in ensuring that the advice we give is both accurate and appropriate for your circumstances and the pension schemes in question.

What is a Letter of Authorisation and why do you need one?

This is an industry-standard letter of authority in which you confirm to your pension company that we are acting on your behalf as your agent and that information may be released to us. We will use this letter to obtain detailed information about your existing pension contract terms and conditions.

Importantly, this letter does not enable us to make any amendments or adjustments to any of your existing contracts and neither can we transfer your arrangements or change any of the underlying investments in any way. Your policies remain exactly as they are.

How long does the process take?

It varies and is likely to depend on a number of factors including:

• The amount of data you have to hand at outset.

• The complexity of your pension arrangements.

• Any applicable fixed deadlines.

• Your specific requirements.

As a rule of thumb, but depending on all these variables and the company presently providing your pension, the process may take six to eight weeks to complete – and, of course we advise you when that is the case.

Can I arrange a Face to Face meeting with you?

Yes, you can. We would arrange a convenient appointment for you to visit our offices in Maidstone, Kent – they are just 3 minutes’ walk away from Maidstone West railway station, or if you are driving, we have a car park at the rear of the building.

Otherwise, all our business is conducted by post, email or telephone and draws on the latest technology where necessary.

If you have a question that is not covered in these FAQs, please call 01622 238000 for assistance.

Contact us
Please complete the form below for any general query.
Please enter your name.
Please enter your email.

To view our Client Privacy Statement click here