Final Salary Pension Transfers

Final Salary Pension Transfers

Transferring out of a Final Salary scheme is unlikely to be in the best interests of most people

The value of pensions and the income they produce can fall as well as rise. You may get back less than you invested.

Tax treatment varies according to individual circumstances and is subject to change.

What is a final salary pension transfer?

A final salary pension transfer means transferring out of a defined benefits (salary related/occupational) pension scheme. By transferring, you give up a guaranteed income for life and any other benefits you would have been entitled to under the scheme.

This cash lump sum is known as the scheme’s cash equivalent transfer value (CETV). The CETV represents the expected cost of providing the member’s benefits within the scheme and therefore requires certain assumptions to be made about the future of the member and their benefits.

Assumptions considered when your scheme puts together a CETV will include:

  • The investment returns on the fund
  • Your retirement date
  • The rate of inflation
  • Interest rates
  • Mortality rates
  • Long-term bond yields
  • Costs and charges

If you agree to a final salary pension transfer then you take on board the risk that what happens with the above and any other factors do not match the assumptions made. That can work against you in that you find the cost of securing an income is higher than expected or the fund performs poorly, meaning you aren’t able to match the benefits the final salary scheme would have provided.

Of course, this could work for you in that the cost of securing an income is lower than assumed and/or the value of the fund are higher than expected, potentially leaving you better off than you would have been in the scheme.

Should I Transfer My Final Salary Pension?

If you are, or have the option to be, an active member of a final salary pension scheme it will only be in exceptional circumstances (or if you have lifetime allowance protection) that you should consider leaving (or not joining) the scheme.

Factors that may determine whether or not you receive a positive transfer recommendation include:

  • Your needs and objectives
  • Your assets and other pensions
  • Your cash equivalent transfer value
  • Your attitude to risk
  • Your investment experience
  • Your health and life expectancy

How Pensionlite can help?

To find out more about transferring your final salary pension contact one of our expert team of advisers. They will provide you with advice and recommendations in an easy to understand format based on your own personal plans, the options available and your unique needs and circumstances.

We will communicate with you by post, email, text and telephone, at your convenience. And your own adviser will be available, on the phone, to answer any questions and address any queries, once you have had time to read your recommendation report.