With more coverage in the Glasgow Herald this past weekend, our Pension Specialist Adviser, Michael Garvey, talks about the continuing trend of clients looking to transfer out of their Final Salary pension.
Final Salary pension transfers remain topical as the number of individuals transferring out of final salary (defined benefit) pension schemes continues to reach new highs. It has been estimated that a total of around £50bn in pension transfers has been transacted since pension freedoms were introduced in April 2015.
“Among these statistics is former Pensions Minister Baroness Ros Altmann,” says Michael Garvey of Glasgow Wealth, “who transferred two of her own final salary pensions as the funds represented a ‘very good-value offer’.
“…those expecting £15k each year in retirement, may be offered a Transfer Value of the order of £465,000 and £510,000”
“Transfer values have been driven up significantly by falling yields in UK government bonds, which have been in decline for some time, and by uncertainty around Brexit which has kept yields low. Based on recent experience, it is now typical for our firm to see transfer values in excess of thirty times the annual pension, with some schemes offering significantly more. For example, those expecting £15k each year in retirement, may be offered a Transfer Value of the order of £465,000 and £510,000.
“There are many reasons for the upsurge in transfers out of defined benefit schemes. Chief amongst them is the ushering in of new pension freedoms. This allows greater flexibility and control over when and how benefits may be taken from a defined contribution alternative and, to a certain extent, it grants greater control over income tax in retirement.
For others, the key driver for ultimately deciding to transfer has been the ability to cascade pension assets down to the next generation, carving out the ability to leave a – usually tax-efficient – legacy.
“Pension Transfers continue to rise so guidance is crucial”
“In some instances, the ongoing solvency of the employer sponsoring a defined benefit scheme can be an issue and high-profile cases such as Tata Steel and BHS have brought this into focus – especially for those whose income entitlement is expected to exceed the threshold covered by the Pension Protection Fund.
“Adding to complexity are the recent changes to thresholds at which the lifetime allowance – now £1m – and annual allowance – £4,000-£40,000, depending upon circumstances – will apply. This can make for some complex calculations around assets that in many cases exceed the value of the member’s home. Transferring is not without risk and the decisions around transferring from the security of a defined benefit scheme require thorough analysis and contingent explanation of the risks ahead of execution.
However, the rationale for transfer can make a compelling case. In these instances, the need for advice is crucial.”
Glasgow Wealth are a full-service, independent financial planning and investment management firm based on Glasgow’s George Square and serving clients throughout Scotland and the UK.
Specialising in Pension Transfers advice for Final Salary/ Defined Benefit Pensions – we have advised Clients on transfers from £50k to £2million+. We provide a Free Consultation and Review for those looking for advice on their Final Salary / Defined Benefit Pension.
Contact us on Tel: 0141 328 3916 or Email: email@example.com
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