Final salary pension transfers - 30/05/2017
Over recent months, we have seen final salary pension cash equivalent transfer values (CETV) increase significantly. 

The CETV is the cash sum the trustees are willing to transfer to a personal arrangement in your name in exchange for you giving up your pension rights with them.

In order to calculate a CETV, the trustees revalue the pension from date of leaving, to date of retirement, using inflation assumptions. They then capitalise the income using interest rates assumptions and finally discount this back to the present day using investment return assumptions.

Indexation assumptions are restricted due to maximums and minimums legally bestowed on trustees, therefore, lower assumed investment returns and annuity rates are driving these sizeable CETV values. 

There are many reasons to consider transferring a final salary pension.  However, the starting point as pointed out by the FCA, is the default position should be to remain in the scheme.

For certain people, there are many good reasons why it will make sense to transfer. For example:
  • You are heavily in debt
  • You have a short life expectancy
  • You are unmarried and do not have dependents 
  • You want to pass on the value of your pension to your spouse or children
  • You would like the opportunity for a larger tax-free sum at retirement
  • You are concerned over the stability of your ex-employer
  • You want personal investment control and flexibility
Pension members are protected in that the Department for Work and Pensions has ensured no pension provider will accept a transfer from a final salary scheme where the member has not received advice from a suitably qualified Pension Transfer Specialist, and it is certainly not suitable for most.

We recommend that you seek independent financial advice before you take any action with your final salary pension scheme as any action taken is usually irrevocable and there are valuable benefits that would be lost on transfer.

For more advice on final salary pension transfers, please contact Chris Slatter on 01295 250401 or cslatter@ellacottswealth.co.uk

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