Is Your Final Salary Pension Scheme Bad For Your Wealth?

Mar 30, 2016 | Tony Byrne's View

It has long been a commonly held view that so called final salary pension schemes are sacrosanct. They are generally regarded as gold-plated and secure. However, since the new Pensions Freedom rules were introduced by the government on 6 April the whole ball game has changed significantly.

One of the many pensions changes introduced was the ability to not only leave your money purchase pension to your spouse but also to other members of your family such as children and grandchildren. This means that if you want your pension to survive you and benefit your family you can now do so because your pension need not die with you.

The problem with final salary pensions is that like annuities they die with you.Pretty much the best you can hope for is that your final salary pension scheme will provide a 50% widow’s/ widower’s pension on your death. On the second of your deaths it dies with you. This is particularly pertinent if it is a large pension.

We have a male client who is in his fifties with a wife and children. He has a company final salary pension scheme worth c.£900K. In the last year he has been diagnosed with cancer and although he has recently been given the all clear his life expectancy will probably be much reduced. He is quite wealthy and has other large pensions so retirement income is going to be plentiful in any case.

We did a cashflow forecast comparing the income from his final salary scheme with that from a personal pension based on the pension transfer value offered by his previous employer’s pension scheme. We assumed investment growth of just 5% p.a. in a new personal pension. Staggeringly for all time periods up to and way past retirement his and his widow’s personal pension income was no worse than the income from his final salary pension scheme would have been. More importantly the value of his personal pension fund did not fall much at all in value! This means that his family in this situation would have been substantially better off to the tune of nearly £900K! He decided to transfer his pension preferring the “bird in the hand” approach.

Please do bear in mind this is just one isolated case. Every client’s situation is different. Professional advice is essential.

If you are approaching retirement and/or considering early retirement and need advice why not get in touch? We work with business executives aged 45+ who are ready to take their life and career by the scruff of the neck.

We are also offering a free pensions and retirement assessment worth £270 to the first 10 people who contact us before 27th April 2016. Terms and conditions apply.

Ring us on 01908 523740 or for free on 0800 980 4516 or email Or visit us at

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