Final Salary Pensions

THERE IS A LOT OF MISUNDERSTANDING ABOUT TRANSFERING FINAL SALARY OR DEFINED BENEFIT PENSIONS INTO PRIVATE PENSIONS

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We’re here to help you cut through the media stories and enable you to identify the right solution for your circumstances.

With a final salary pension, you have a guaranteed income for life. This income is calculated using a formula. Amongst other factors, the formula takes account of your salary at time of leaving the scheme and how long you’ve been a member.

These used to be considered ‘gold plated’ pensions, but is this still the case? The majority of schemes are underfunded; some are likely to go ‘bust’ in the near future. If that happens to your scheme, then the Pension Protection Fund will take over but your benefits will likely reduce.

There are other disadvantages of final salary schemes…

Your family cannot inherit your final salary pension. With a final salary pension, on first death the income payment is typically halved for the surviving spouse. On second death, the income ceases completely, leaving nothing for your children.

Should you transfer out of a final salary scheme into a personal pension?

The answer will depend on your personal circumstances, what you want to achieve in retirement and what you want to be able to pass on.

There can be risks in transferring your final salary pension into a personal pension. Whilst there are many benefits to having a personal pension, there is no guaranteed income for life. Could your ‘pot’ run out? Would a move into a private pension fit with your attitude to investment risk? It’s vital you feel fully informed when you’re making such an important decision.

How can we help?

As part of your financial planning, if you have a final salary pension, we will facilitate a review of your scheme. We work with an external agency to undertake this review, so you can be sure that we are acting completely impartially. If the recommendation is to transfer your pension into a personal one, our pension transfer specialists will implement those recommendations.

If you have a final salary, also known as a defined benefit pension, and would like to explore your options, simply call us today and talk to one of our pension experts.

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