Independent Financial Advisers and pension specialists are warning people about the pitfalls of transferring from final salary pension schemes. Advisers are growing increasingly concerned about priorities given to retired staff at the time when a scheme is wound up. This means that many people approaching retirement are being left with little more than the guaranteed minimum pension.
The Pickering review of pensions proposed to improve the situation for people approaching retirement by giving them priority over younger employees. Under present rules however advisers run the risk of advising a client to stay in a final salary scheme only to see it wound up and the client getting much less than expected.
An adviser recently commented that the priority rule means that if you retire one day after the scheme closes, you can end up with far less than a person who retired a day earlier. Nowadays you need to know whether a final salary scheme plans to close, although they have no obligation to let you know.