What is a Final Salary Pension Transfer?
Transferring a final salary pension will have implications for the rest of your life! Where any Cash Equivalent Transfer Value (CETV) is more than £30,000 then it is COMPULSORY, you take regulated financial advice BEFORE any transfer is allowed.
Basically, a final salary pension transfer (known as defined benefit pension transfer) is when you “trade in or swop” your schemes guaranteed pension income by transferring a Cash Equivalent Transfer Value (CETV) to a defined contribution pension scheme.
Rather than taking a fixed, guaranteed and ever increasing (inflation-proofed) income for life, you would then become responsible for the “shape” of your retirement benefits with all the risks that decision would entail. This is considered very high risk given:
· Your existing final salary pension cannot run out of money (in your lifetime). Meaning your income is guaranteed for life and secure.
· Post transfer, your money could be subject to fluctuations and if you spend it too quickly you could have no money left in later years.
Some people worry that if a final salary pension scheme goes “bust” then their money is at risk. Usually in these circumstances you would be covered by “The Pension Protection Fund” and more info can be found here: https://www.ppf.co.uk/
Pension Transfer Risks
Losing guaranteed income – A guaranteed income for life is regarded as gold standard for pensions. Giving up your guaranteed income for life with very little risk may be madness!
Releasing your pension earlier or making withdrawals at an unsustainable rate could leave you with reduced (or even no) income later on.
Investment risks – Your pension pot (post transfer) can go down as well as up dependent where the money is invested and how the investments are performing. The risk of your investment moves from your scheme to you!
Management – You will be responsible for managing your own pension and meeting any pension provider charges. Transfer & adviser fees mean it could be quite expensive too.
Financial Fortress offers an “abridged advice service” in the first instance which is free to clients. Although this cannot result in a positive recommendation to transfer it is designed to be informative and educational to assist with good decision making.
What you get with Financial Fortress
Named & qualified experts with decades of experience in helping clients.
Absolutely no cost or obligation initial review meeting. No hidden charges.
Our promise to deliver jargon free & friendly advice in a professional way.
Financial Fortress is responsible for the quality of advice and its advisers. You should always make sure any adviser and company you choose are regulated by the Financial Conduct Authority. Check the register here: https://register.fca.org.uk/s/
