Is a Pension Transfer Right for You?
Pension transfer values are close to all time highs and many have been persuaded that a transfer is a good idea. For some it can, be but it’s not for everyone, indeed in this area perhaps more than any other independent financial advice is essential and for those with funds in excess of £30,000 it’s a legal requirement. We are experts and can help you understand all the issues…
The principle of a final salary pension is that an employer promises to provide a fraction of an employee’s final salary (typically 1/60th or 1/80th) for each year of service. So for example if John worked for Acme for 30 years in a 1/60 scheme and retired when his salary was £20,000 per annum, he would receive a pension of 30/60 x £20,000 = £10,000. State pension would also be due to him.
In theory employees should love final salary pensions as they provide the promise of a specific income in retirement. However if the employer cannot afford to contribute or goes bust, e.g:- BHS, that promise could evaporate.
Furthermore the promises made by the scheme may be restrictive and not aligned to the member’s objectives in retirement. In most cases, scheme members now have the option to forego the promises of the scheme in exchange for a cash transfer into a new or existing pension.
Following the introduction of Pension Freedoms in 2015, individuals now have far greater flexibility in how they both draw down on their pension benefits and how they eventually pass on their pension pot on their death. Therefore the opportunity to transfer out of a Final Salary pension and into a more flexible pension can be attractive. However those transferring are giving up a guaranteed income in exchange for a flexible contract where future income is governed by investment returns and there are no guarantees.
If you have a transfer value of more than £30,000 it is now a requirement that you obtain independent financial advice on any possible transfer. Facts & Figures are pension transfer experts! So if you are:
- an employee who is a current member or
- someone who has retained benefits in a final salary plan
Contact Us at Facts & Figures: the pensions experts for help and advice on all aspects of pension & retirement planning.
We are expert pension advisers (advisors) based in Ashford & Canterbury in Kent.
Independent Financial Adviser, Independent Financial Advisor, IFA, Pensions, Pension Transfer, Employee Benefits, Advice
M.D Simon Webster hosted a radio show on this topic. Check it out here: