Final Salary Pension Advice

If you are thinking about making any changes to your Defined Benefit (DB) Final Salary pension arrangements, speak to an expert, qualified adviser.
The advice is there to protect you and help you avoid pitfalls, and fully understand the benefits and drawbacks of making any changes to your DB Final salary pension. It is also a legal requirement to get qualified advice (if the value is over £30k)

All of Pensions Advice UK’s selected advisers for Pension transfer have met the requirements to earn the Pension Transfer Gold Standard. This is a code of good practice established by the Personal Finance Society (PFS) for safeguarded and Defined Benefit (DB) pension transfer advice. The code is based on a set of principles that firms must follow and promote to ensure consumers can find reliable advice and trust that they are working with a firm that exceeds the minimum requirements.
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Tax-free cash

 Final Salary schemes work out the amount of tax-free cash you can take in a different way to a Personal pension. You could get more tax-free cash with a defined contribution pension.

Poor health

 Unfortunately, not everyone enjoys the same level of health yet a Final Salary pension will not take your state of health into account when establishing your income. Sometimes, transferring to an annuity with another provider could offer a higher level of income, particularly if you have a limited life expectancy.

Flexibility

 A Final Salary scheme has a set retirement age and pays a fixed income that cannot be changed. A Personal pension allows you to control how much income you withdraw and at what time, and lets you alter this as your needs change over time.

Death benefits

 A Final Salary pension will normally pay a lifetime pension to your spouse or civil partner in the event of your death. Yet if you are single and have no dependants, the benefits will likely stop on your death. A defined contribution pension will allow you to nominate your chosen beneficiaries to receive the remaining fund value on your death.

IHT planning

 You are usually able to pass on pension funds free of inheritance tax (IHT), so if you are able to forego the income provided by your Final Salary pension and fund your lifestyle using assets held outside a pension wrapper, this may enable you to reduce your IHT liability and to pass on your pension savings tax efficiently.

Control tax on withdrawals

 Moving your Final Salary pension to a Personal pension plan could help with better income tax planning. If available, flexi-access drawdown enables you to control how much income you withdraw throughout your retirement, helping you manage your income tax liability.

Risk management

 Personal pension is always more risky than a Final Salary as the value of the pension could go down as well as up depending on the success of your investments. You or someone you pay will also have to manage this risk..

Income for life

 Final Salary pensions will give a secure income for life, regardless of how long your retirement lasts. A Personal pension has a fund value that you’ve built up, and once that fund has run out, you will receive no more income.

Guaranteed income for dependants

 Based on the scheme rules, your Final Salary pension will normally provide an income for your dependants when you die for the rest of their lives too. You would lose these guarantees moving to a personal pension..

Concern about overspending

 Keeping a close eye on your income and spending is important if you transfer your Final Salary pension to a private pension as you no longer have the fixed guaranteed income. There is more of a risk that you could run out of funds before you die unless you have other pension pots available.

Losing inflationary protection

 Final Salary pensions rise in line with inflation, if you transfer to a Personal pension you are not guaranteed the same inflationary protection.

Transfer charges

 Transferring from a Final Salary pension could incur charges from pension providers, platform operators, or investment managers which would be deducted from the transferred pension pot.

Fall in pension pot value

 The value of your pension pot can go up and down, you may not be comfortable with falls in the value of your investment.

Potential lifetime allowance problems

 The way Personal pensions are assessed against the lifetime allowance (the amount you can save in a pension without incurring a tax charge) is less favourable than a Final Salary scheme. A transfer could mean that you end up paying a higher lifetime allowance tax charge in the future.