Final Salary Pensions Enquiries

May 12th, 2015

Final salary pension scheme managers say the number of enquiries from members about transfers out of their schemes have soared since pension freedoms came into force in April. In a big feature, the Financial Times asked if it ever made sense for employees to give up what are commonly regarded as gold-plated index-linked pension entitlements.

Experts said that the new exemption from inheritance tax for pension funds was a game-changer, since this does not apply to final salary benefits. To get a fund you can pass tax-free to your family you have to get a transfer out of the scheme. Others cited a big increase in final salary transfer values of up to 35% in recent years, the result of the fall in interest rates.

One factor in the equation is that if interest rates rise, final salary transfer values are likely to fall. Perhaps more important is that many final salary schemes now permit members to keep part of their pension entitlement and take a lump sum transfer for the rest, so the choice is no longer the risky ‘all or nothing’ one it used to be.