DB or Final Salary Transfer – ‘’Is it right for me’’?
Our starting point is that moving to an alternative arrangement from a defined benefit pension scheme won’t be right for most people unless one or more of the following is an important consideration for them. A transfer might be worth considering if –
- Flexibility: You want or need greater flexibility in your arrangements overall than your defined benefit pension scheme offers, for example you want to retire earlier than it will let you, or it offers benefits for a spouse or civil partner, but you are single and would like to leave benefits to another person.
- Tax-free cash: You need to optimise the amount of tax-free cash you can take from your pension and be as flexible as possible around how and when you can take it.
- Inheritance: You want any remaining pension savings to be left behind for your beneficiaries after you die. With a defined benefit pension scheme, when you (and perhaps your spouse if they would be entitled to a survivor’s pension) die, your pension dies with you.
- Poor health: You are in poor health that might limit your life-expectancy, in which case you might be able to get a higher income by transferring.
- Other sources of income: You have an alternative & reliable sources of income for your retirement, which mean that you won’t be relying on the guaranteed income for life from your defined benefit pension scheme to support your standard of living. An example might be if your spouse also has a defined benefit scheme and their guaranteed income for life from this is enough to support both of you.
- The future of the employer who provides your scheme: You have good grounds to be seriously worried about the financial future of the employer who provides your scheme, wonder if that might put your future benefits at risk and are not happy to rely on the back-up of the Pension Protection Fund (PPF). The PPF was set up to pay compensation to members of defined benefit schemes should the company or the pension provider go bust. You can find out more about it at www.ppf.co.uk
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