What is a final salary pension transfer?

Within a final salary pension scheme, it may be possible to access a lump sum of tax free cash once you reach a certain age (usually 55).

Lump sums at 55 are often available from both final salary pensions and other personal pensions, and usually have a tax-free limit of up to 25% of the total value, however it may depend on other circumstances too.

Some people are advised to transfer their pension away from final salary pension schemes to get better access to a lump-sum. However, this is seldom a good enough reason on it’s own to transfer, and may be part of a scam.

It is always important to get the advice of a regulated financial adviser when considered a final salary pension transfer, regardless of where the pension might be transferred too.

SIPPs allow a greater range of control over what the pension is invested in, but this can include high-risk and non-FCA regulated investments that may be unsuitable for you, or may even be scams.

Many transfers from final salary pensions into SIPPs lose money instead of gaining it, and may have been mis-sold.

Final salary pensions are considered to be both rare and valuable, offering a guaranteed income in retirement.

When people talk about “cashing in” their pension, they may mean transferring it to another personal pension (swapping the guaranteed income for a Cash Equivalent Transfer Value – CETV), or they might mean coming out of the pensions altogether and realising the cash.

If you are considering “cashing in” your final salary pension, you should consult with a regulated financial adviser, ensuring they are FCA authorised by using the Financial Conduct Authority register, as cashing in can sometimes produce big tax bills or may be a pensions liberation scam.

If you’ve already transferred, you may be eligible to make a mis-sold pension claim.

Some people are advised to transfer their final salary pension for early retirement. This may be considered suitable in some fairly rare circumstances, but may not be needed.

Many final salary schemes may allow early retirement at the trustee’s discretion, or in the event of ill health and/or a shortened life expectancy.

If you transferred your pension for this reason alone, you may have been mis-sold.

Getting final salary pension advice needn’t be a minefield. By seeking out a regulated financial advice, the advice they give must follow the FCA’s rules and guidelines.

If not, then it may be you can hold the financial adviser accountable by making a mis-sold pension claim.

Costs for final salary pension transfer advice vary from adviser to adviser. Some may charge a standard fee, and others may charge a percentage of the pension they are transferring.

In some cases, they may also charge for investment advice for the transfer, and may take ongoing management fees.

But how much will a final salary pension transfer cost? If you’ve taken negligent advice, it could cost thousands in losses and in some cases an entire retirement fund.

Find out if you can make a claim through a free chat with Spencer Churchill Claims Advice.

Finding a final salary pension transfer specialist shouldn’t be tricky – there are plenty of them around advertising heavily.

Just make sure that you check they are authorised to give pension advice via the FCA register.

Sadly, even regulated advisers get it wrong, so if you’ve transferred your pension, speak to the mis-sold final salary pension transfer claims specialists at Spencer Churchill Claims Advice for a free initial assessment – you may be able to claim!

Transfer advice should be very bespoke to each person, and so what an individual stands to lose or benefit from a final salary pension transfer changes.

However, many defined benefit transfers may be sold to scheme members on some of these potential benefits:

• Greater investment choice
• Opportunity to grow pension faster (however this entails more risk)
• Greater flexibility
• High transfer values (many schemes offer a high CETV)
• Changes to death benefits (it may be beneficial for some people who wish to select other beneficiaries to receive their pension if they should die before retirement).

But there is a huge flip-side to these benefits:

Transferring a final salary pension usually means giving up a guaranteed income in retirement, one that is often index-linked and increases the longer the scheme member works for the company and the bigger the salary when they retire.

Generous death benefits are sometimes lost too, where a spouse may receive a large portion of the pension in the event of death before retirement.

Often called ‘Gold-Plated’ pensions, they are considered a safer and more solid foundation for retirement.

But by transferring out, many people end up investing the money through their pension back into the stock-market, which as we all know, can go wrong and regularly does!

Investments can decrease in value as well as increase, and they don’t always grow inline with the critical yield, meaning that even if the pension looks like it was growing, it may never be worth as much as the final salary pension.

Sadly, it is not unheard of for people to lose their entire pension funds by transferring and investing in stocks that later collapse or get into trouble .

Many people were mis-sold their final salary pension transfers, and you may be able to make a claim if you transferred yours!