Advice On Final Salary Pension Schemes

A final salary (also known as defined benefit) pension scheme is where an individual’s retirement income is calculated according to their length of service with their employer and their salary at the time of retirement, or at the time of leaving their employment and revalued to retirement age if earlier.

If you have final salary benefits from previous employment then in many cases, leaving the scheme benefits where they are is the right thing to do. However, there are circumstances where an individual may choose to transfer benefits away from the scheme in exchange for a lump sum which gets paid into a new scheme. This is known as a final salary pension transfer.

This is particularly relevant since the changes in legislation in April 2015 as individuals may require their retirement income in a more flexible manner, an example may be a person who wishes to work part time but needs to flexibly access their retirement provision to take less, or more, income as the amount of hours they work fluctuates. Equally an individual may have a need for capital that cannot be met by their savings, investments, or current retirement provision format, an example may be where a person has a mortgage that runs into their retirement which they wish to clear. It may also be the case that the greater flexibility around who can benefit from the individual’s pension on death may also be a factor.  For those who require greater flexibility in retirement they may wish to take advice regarding the options around their current pension schemes.

Advice on the suitability, or otherwise, of transferring benefits from a final salary scheme for value of £30,000 or over can only be given by a pension transfer specialist as required by the FCA. Even if the value of the scheme is below £30,000, it is still a good idea to take advice, unless you are absolutely certain what you want to do and understand the consequences.

Careful analysis needs to be performed to understand what the member may be giving up and whether the lump sum offers good value for the lost benefits. This begins with us understanding your needs and objectives, receiving a transfer value quote, and then performing a detailed analysis including what benefits you would lose if you transferred and how leaving your benefits in the scheme, or transferring, would meet your needs and objectives.

Unlike many firms, we do not outsource this process. This means that you have only one point of contact and any questions you may have about this process will be answered by your adviser who will have a detailed understanding on exactly what is involved and the associated benefits and drawbacks.

Whichever type of pension scheme you have, we’ll be able to advise you on your best options.  Contact us now.


Click here to view our client guide to Defined Benefit Pension Transfer.