A question of freedom?
This is an age of uncertainty. So it’s understandable why more people who are considering a Final Salary Pension Transfer now want to assess their options with a Defined Benefit Pension Adviser.
So an understanding of the implications of a potential transfer to a defined contribution pension is important. This is especially true when some scheme providers are offering attractive enhanced transfer values.
Final salary pension / defined benefit (DB) schemes don’t offer the same flexibility as defined contribution (DC) pensions. Whereas, DC pensions offer the option of being able to draw a pension flexibly each year, taking as much or as little as you need, which can help you to manage your highest marginal rate of tax.
In a non-final salary pension, any unused pension benefits can be passed to family members on death, typically via trusts
What should you consider when assessing a final salary pension transfer?
- Is your defined benefit scheme funded, partially funded or unfunded?
- Is it’s transfer value particularly generous, or ‘enhanced’?
- Are you in poor health? Transferring may allow you to get an enhanced annuity from an insurance company.
- Final salary pension transfer values can include provision for a spouse or partner’s pension within the TVAS or transfer value calculation, even if you don’t have a partner, resulting in a potentially higher transfer value.
- Are you planning to retire before the scheme’s normal retirement age? Most DB schemes will apply a penalty, or, ‘actuarial reduction’, which can reduce your returns.
- In a DC pension, you can keep your money invested in the financial markets, whilst drawing on the pension flexibly, potentially enabling you to benefit from continued growth. Although, this works both ways, as you are then subjecting your pension to market risk in a DC wrapper.
Transferring from a final salary pension to a defined contribution (DC) pension is an important decision. Make sure you understand the implications by consulting a specialist.
We are based in Bray village, Berkshire and work with local people, from Berks, Bucks, Surrey, Oxfordshire, and West London with DB pension values greater than £600k.
To make an enquiry, please call me on 01628 308138 or register below for a free call.