British Expat Pensions

British Expat Pensions

Why Transfer a Final Salary Pension?

Pension TRansfer Specialists

 Defined Benefit pension polices, also known as Final Salary schemes, used to be referred to as

"Gold-plated". Is that still the case?

Members are being offered eye-watering amounts to transfer away from their Final Salary pension,

so what do you need to know? Taking these values and transferring it into a private arrangement, or

your superannuation is a great choice for many people. So let's take a look at what this means.

If you are lucky enough to have been a member of a Final Salary pension scheme, this can provide

a valuable guaranteed income in retirement. But how do they work?

Essentially, a Final Salary pension is an income provided from a certain age (most commonly 60

or 65) until you die. How much you will get depends on everything below:

• How many years you were a member of the scheme
• What salary you were on when you left the scheme
• What year you left the scheme
• What measure of inflation is used
• What accrual rate the scheme uses

What happens when I die?

Almost all schemes offer dependant benefits. This means that a portion of your income will continue to be received by those financially dependant on you. Most commonly this is 50% to your spouse, and upon their death this passes on to children under 18 or under 23 if they are still in full time education.

If you have no dependants as defined, the scheme will cease payments upon your death.

So why would I give this up?

There are 4 big reasons that you might consider transferring away from a Final Salary pension. They are:

Ill Health

If you are at risk having a shorter than average life, you might consider your options by transferring away. You may wish to access your funds earlier than the scheme is willing to pay you, or simply would like to provide a better legacy to your family.

If you transfer your funds away, you can access them from 55 and you can pass on 100% of the value upon your death to your loved ones.

No dependants

If you wish to leave a legacy to anyone that doesn't fit the scheme definition of dependant, then you will have to transfer to a more flexible arrangement.

Those that are divorced, widowed, or without children, often wish to leave something to brothers, sisters, nieces, nephews or friends. By transferring you can leave any portion that remains to whomever you wish.

Risk of scheme collapse

Many pension schemes have failed in recent years. High profile cases such as British Steel, Carillion and BHS have

highlighted to danger that many schemes face in their sustainability, and approximately 80% of all final salary

schemes are in deficit.

Should your scheme fail, you are covered by the PPF (Pension Protection Fund). The PPF ensures that you will get

up to 90% of your promised income, but this will then usually have a lower measure of inflation payments and your

option to transfer will be gone forever.

If you are worried about the status of your policy, it can be a more attractive option for you to remove that liability

by transferring away while you have the chance.

Preference for Flexibility

Final Salary pensions are very rigid in their nature. You are unable to vary your payments, and thus cannot adapt

for your lifestyle or even tax exposure.

If you prefer a pot of wealth, whereby you can have flexible access, as opposed to a rigid income stream, then a

transfer might be right for you.

All pension transfers can be complicated, and it is important that you speak to a qualified professional to

understand your options and goals. British Expat Pensions are here to help. Leave your details to get our guide.