As Final Salary Pension Transfer Specialists, we’ve seen an increase in demand for Final Salary Pension Transfer since the change in Pension rules came into force. Pension transfer is a complex and risky business that isn’t right for most people. Rather than “Should, I transfer?” We’re often asked “Can I transfer my Final Salary Pension?” and the answer is usually yes.
Unless your Final Salary Pension is part of an unfunded scheme e.g. NHS, Police, Army, Fire Service, Teachers etc You can usually transfer out of it. Although you may be restricted from transferring out if your scheme is in financial difficulties.
The rules around whether you can transfer out, and how your transfer value is calculated will be different for each pension scheme, so it’s important to contact your scheme administrator to find out what rules apply to you. More importantly, you should seek expert guidance to see if a transfer is in your best interests.
Final Salary Pension to SIPP
If you decide to transfer your Final Salary Pension it must be moved into a pension wrapper. There are 6 possible options, including a:
- SIPP (Self-Invested Personal Pension
- Personal Pension
- Stakeholder Pension
- An existing workplace Pension, i.e. group personal pension or employers Defined Contribution pension
- SASS (Small Self administered Scheme) – company pension
- QROPS Qualifying Recognised Overseas Pension Scheme – for overseas transfers only
Most people will choose to move their Final Salary Pension to a SIPP. It’s important if you do choose to transfer your pension to a SIPP that you have a robust investment plan in place and that your investment portfolio is aligned with your long-term goals and both your attitude towards and aptitude for risk.
Final salary pension transfer ban
There has been much concern over the number of people receiving inappropriate advice to transfer their pension. As a result, the Financial Conduct Authority (FCA) was looking at measures to restrict the transfer of Final Salary Pensions, although a Final salary pension transfer ban was discussed, it was not one of the measures proposed by the FCA in their consultation around Defined Benefit Pension Transfer.
There are two conditions under which a Final Salary Pension Transfer Ban might be put into place
- The financial health of the scheme is at risk
Final Salary Pension Schemes reserve the right to restrict or ban people from transferring out of the scheme if it would negatively impact those members who are left. If too many people transfer out, putting the financial health of the pension scheme at risk, then you may be banned from moving your money until the scheme has recovered.
- Your Pension Scheme falls under the Pension Protection Fund
Most Final Salary Pensions are protected by the Pension protection fund, which will pay 90% of the value of your pension should your pension scheme collapse. However, if your pension scheme does fall into the pension protection fund, you’ll no longer be able to transfer out.
Should I transfer my Final Salary Pension?
The question of ‘Can I transfer my Final Salary Pension” is not as important as “Should I transfer my Final Salary Pension?”. For most people transferring their final salary pension is not in their best interests. The risks outweigh the benefits.
For a selected few individuals, an argument can be made for Final Salary Pension Transfer.
But it will depend on your:
- Financial circumstances
- Health
- Individual circumstances and that of any dependents
- Investment experience
- Attitude to and aptitude for risk
- Income needs in retirement
- Other retirement income
Only a Qualified Pension Transfer Specialist can advise on whether a Final Salary Pension would be in your best interests. If you’d like to schedule a call to discuss a potential transfer with our Pension Transfer Specialist you can do so here.
How is my Final Salary Pension Transfer Calculated
Your Transfer Value or Cash Equivalent Transfer Value (CETV) is calculated by your pension scheme administrator based on a number of factors.
Each scheme calculates transfer values differently and most schemes don’t publish their exact calculation method but generally, your transfer value will be decided by
- The estimated value of your pension at retirement
- Your age and how close you are to retirement
- The Investment Strategy of the scheme you are in and
- The position of the Financial markets when you request your transfer value
- Your Pension Scheme’s Health
A joint research paper by Royal London and LCP showed that Transfer values tend to rise the closer you are to your scheme’s retirement age so if you’re considering cashing in your final salary pension you should consider whether it’s a decision that needs to be made straight away or whether you could postpone it until you are closer to retirement.
Final Salary Pension Transfer Value Calculator
Your transfer value will be based on a number of different factors. But our quick and easy calculator will give you an idea of how much you can expect to be offered.
Find out how much your pension transfer value could be worth using our CETV calculator.
Final Salary Penson Transfer Specialist
If your transfer value is over £30,000 you need financial advice in accordance with the FCA requirements Financial Services Markets Act 2000.
This means you need a qualified pension transfer specialist, with the required FCA permissions, to undertake a complete holistic overview involving:
- full analysis of the pension and benefits you are planning to transfer
- your current & future objectives
- your individual financial situation
- analysis of other pensions, investments & assets
- current & future income requirements
- your risk profile & risk profile for your spouse (if applicable)
- current & future work plans (incl. early retirement, semi-retirement etc).
- investment strategy
- costs involved & potential tax implications
- legacy planning
If you’re married, then this process will need to involve both you and your spouse.
Defined Benefit Penson Transfer is a highly complex area and the only advice you should be seeking and considering is that given by an expert. If you’d like to speak to our Pension transfer specialist you can book a free discovery call here.
