Final Salary Transfer Offers

June 24th, 2017

Final Salary (Defined Benefit) pensions are very much hot topic in the financial world, with many people looking into their options – particularly what Cash Equivalent Transfer Value they may be offered.

In the current climate, a typical transfer value is in the region of 25-30 times annual pension triggering many people to get Independent Financial Advice on what’s most appropriate for their circumstances.

A recent article from Professional Adviser has looked into the how’s and why’s:

“The typical value of defined benefit (DB) pension transfers is now greater than the average price of a house, according to research by Royal London.

Royal London said the volume of transfers out of final salary pension schemes had grownmore than 50% in the last year.

The firm had surveyed more than 800 financial advisers, and found the vast majority of clients transferring were in their 50’s, with the typical cash sum offered worth between 25 and 30 times the value of the annual pension given up.

However, according to one in four advisers most of the transfers are worth as much as 30 to 40 times the annual pension foregone.

The most common reasons people wanted to go ahead with the transfer was to obtain a more flexible income in retirement,followed by the attractiveness of large transfer values and inheritance considerations.”

The article goes on to say:

“People also cited access to greater tax-free cash and to take benefits earlier than the DB scheme allowed, as reasons to transfer.

Advisers were asked for reasons they would advise against a transfer. The principle concern cited was a worry the client would lose their income from the DB scheme. Advisers said they had also recommended against transferring because they were concerned that the investment risk associated with the transfer was not appropriate for the client, or they thought the transfer value represented poor value’.

Royal London director of policy Steve Webb said: “It is clear that large and growing numbers of people are choosing to exchange the promise of a regular pension in retirement for a large cash lump sum.

“For some people, the value of their pension pot will be greater than the value of their house. This makes it all the more important that people think very carefully before making a transfer, and take full account of independent financial advice before making such an irrevocable decision.”

Please click here to read the full article.