Final Salary Pension Transfers

Final Salary Pension Transfers

by Ashley Clark, Director

The Department for Work and Pensions has issued a consultation document suggesting that transferring pensions from a final salary pension scheme to an investment linked money purchase scheme such as Company Pension Plan or a Personal Pension plan may be banned.

This is because many people do not understand the guarantees that final salary pensions have.  This type of pension scheme provides a guaranteed pension income and tax free cash amount at retirement irrespective of investment performance.  

This compares to a money purchase pension fund that is linked to investment returns and may rise or fall in value before you retire and is not guaranteed.

We appreciate the sentiment that people need to be protected from their own lack of knowledge but placing a blanket ban is ludicrous.

What about the following?

• People who are not married or widowed who do not want a spouses benefit built into their pension
• People who are terminally ill - their pension dies with them - they could have gone down a totally different capital access route or to be able to leave the pension money to their loved ones before they die
• People who know what guarantees they are losing but still wish to exercise control and their right to choose
  
• People moving into business who have capital trapped inside a pension that they could use to grow their business
• People who may be worried about their company scheme collapsing due to capital adequacy requirements and want to move their pension elsewhere
  
• People who move overseas and will be taxed on their overseas assets (i.e.  their UK pension) today even though they cannot take their pension for years to come e.g.  if they move to Australia
• Final Salary Pensions schemes themselves that are struggling and are happy for members to transfer benefits away to reduce the strain on the scheme for the benefit of those that remain in the scheme

The Financial Services Industry already has enough regulation and adviser qualification requirements and Financial Salary Pension Transfer Value Analysis Systems (TVAS) when it comes to final salary pension transfer advice.  A blanket ban is unwise.  The current system offers a highly policed approach and we suggest remains robust and safe for pension members.

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