Transfer your Final Salary or Defined Benefit Pension Pot
Following the new Pension freedoms enacted in 2015, if you have a company final-salary scheme (public sector pensions are specifically excluded) you can now transfer your Final Salary or Defined Benefit Pension Pot to the provider of your choice or another personal pension scheme and, provided you are over 55, then withdraw the money as you wish. Apart from the risks of forfeiting both an income for life and the exceptional related benefits, there are other costs in this process, including the very real danger of paying unnecessary tax.
The amount of money you will be offered by your pension scheme (the transfer value) is calculated by your scheme’s actuaries and is unique to you. However, it is possible to quote a broad range of values, and the Transfer Value Calculator provided by Tideway Wealth, a financial adviser is a useful first starting point.
Until recently, transfer values had been steadily increasing, some by more than 8pc a year compound, outstripping equity markets and many other investments. This phenomenon results from falling bonds prices and rising yields since February 2015. However, values fluctuate and at the end of June 2015 they were 2.2% lower than they had been in March 2015 (so a saver aged 64 cashing in a pension which promises to pay an income of £10,000 per year for life would receive £4,500 less today than a few months ago).
Katie Morley from the Telegraph has written an interesting article (24 Jun 2015) entitled Savers cashing in their final-salary pensions see payouts fall.
Tideway Wealth, also mentioned in her article, has a number of useful fact sheets and the calculator mentioned above for those considering transferring their final salary pension schemes.