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Pool House Final Salary Advice

are a FCA regulated Chartered Firm which is part of the Pool house Group.

Both Directors of firm are Final Salary Pension Transfer Specialists (they hold the AF3/G60 Qualifications) and have over 50 years industry experience.

If you have a Final Salary/Defined Benefit pension scheme and are looking at your options then one of our Pension Transfer Specialists here at Pool House Final Salary Advice will provide you with a bespoke solution to suit your individual needs.

Understanding Final Salary Schemes:

What is a Final Salary Scheme?
  • A final salary pension scheme – also called a defined benefit pension scheme – is one that promises to pay out an income based on how much you earn when you retire.
  • Final salary pensions pay out a secure income for life which increases each year.
  • Your employer contributes to the scheme and is responsible for ensuring there’s enough money at the time you retire to pay your pension income. You can contribute to the scheme too.
  • They usually continue to pay a pension to your spouse, civil partner or dependants when you die.
  • Most final salary schemes have a normal retirement age of 65. This is usually when your employer stops contributing to your pension and your pension starts to be paid.
  • Depending on your scheme, you may be able to take your pension from the age of 55, but this can reduce the amount you get. It’s also possible to take your pension without retiring.

Advantages of Final Salary Schemes

  • They provide ‘gold plated’ index linked guaranteed pensions.
  • The pension provided is guaranteed to be paid for life
  • On death there is usually a spouse’s benefit of 50% of the annual pension.
  • No investment risk to the individuals

There is however no lump sum death benefit payable from final salary pension schemes, any funds allocated for the individual are retained by the scheme trustees to be used to cover the cost of the benefits of other scheme members.

What is a Final Salary Transfer?

A final salary transfer is where you forego the guarantees of the Final Salary Pension Scheme and transfer to your own private pension scheme using the Cash Equivalent Transfer Value (CETV). This now becomes a money purchase, also known as defined contribution, pension plan.

For many individuals a final salary pension CETV is likely to be their second most valuable asset, and for many it will be even more valuable than your family home. Taking control of this by way of a Final Salary Transfer is what was behind the government announcement of Pension Freedoms in the April 2015 Budget.

What is a Money Purchase pension?

Money Purchase pensions usually build up a pension pot using your contributions and/or your employer’s contributions (if applicable) plus investment returns and tax relief, but now also include any CETV from a final salary pension scheme. There is no guarantee on the value of the fund or the level of income you can expect to draw at retirement. They work simply with the total fund value allowing 25% to be taken as a lump sum tax free, and the balance payable as taxable income (subject to lifetime allowance limits).

Advantages of Money Purchase Schemes

  • You have full control over your total pension fund.
  • You have the choice as to how you draw income and capital from your fund.
  • Higher levels of Tax Free Cash are usually available compared to those amounts in Final Salary Pension Schemes.
  • On death the whole fund is transferrable to family.
  • Complete flexibility on income.
  • It can allow you to take benefits from any age after 55 (rather than restricted to the final salary scheme rule.
What are Pension Freedoms?

Pension Freedoms is the term applied to Government legislation introduced in the April 2015 Budget, giving members of many defined benefit pension schemes, also known as final salary pension schemes, the opportunity to take control of their pension funds by transferring to a private pension scheme offering the flexibility required under money purchase and defined contribution pension schemes.

It does not apply to the government State Pension, or unfunded public sector final salary pension schemes that prohibit transfers (such as the Teachers’ scheme; NHS; Civil Service etc).

This pension freedom and control is available to Money Purchase pension schemes, but not all existing pension scheme administrators will offer these new freedoms. You may have to transfer your existing money purchase pension plans into new flexible private pension plans to take advantage of the Pension Freedoms. We believe it is prudent to review all your pension plans, and also offer a Pension Freedoms Health Check to ensure you have the most efficient plan available. Contact us on the link attached to find out more.

This new freedom brings capital control and flexibility, allow you to release funds from your pension scheme from age 55, without the restrictions or penalties applied by your company final salary pension scheme. You can draw benefits flexibly, with a maximum 25% of the fund being payable as a tax free lump sum.

Taking control of your final salary pension scheme is achieved from the cash equivalent transfer value (CETV) and allows you to manage your pension fund as a family trust, where death benefits allow not just your widow or widower, but also non related partner, children, family or even friends to become beneficiaries.

Traditionally pension schemes have provided benefits for you throughout your life, then your widow/er and possibly a dependant on your death. The new Pension Freedoms allow for successors and nominees to give full control of the capital on your death, payable tax free before age 75 too.

This control of capital is taken with the loss of the guaranteed pension provided from your precious final salary pension scheme, and because of this can also add risk and concern; so let Central Pension Solutions help guide you through this maze with the confidence of being advised by a qualified Adviser working within an authorised and regulated firm.

Do I need advice if I know what to do?

Government regulations mean you must receive qualified financial advice on any final salary transfer with a value over £30,000. This must be provided by qualified Pension Specialist (AF3/G60 Qualified) who and whose Firm is authorised and regulated by the Financial Conduct Authority.

The existing final salary pension scheme administrators will not allow you to transfer you pension fund unless you can provide evidence that you have received financial advice from such a regulated and qualified firm before proceeding.

The Chartered Insurance Institute (CII) qualifications required to be authorised as a Pension Transfer Specialist are G60 or the newer AF3. You should always ask and make sure that the individual that gives you the advice is duly qualified and authorised, so you are fully protected by The Financial Services and Markets Act 2000.

We believe it is prudent to review all your pension plans, and also offer a Pension Freedoms Health Check to ensure you have the most efficient plan available. Contact us here to find out more.

Can I just take my 25% of my pension as tax free cash?

Final salary pension schemes will not let you just take your lump sum, you must take your lump sum and pension income together when you commence drawing benefits.

If you transfer to a new flexible private pension scheme you should however be able to draw down the 25% lump sum, depending on any restrictions including the Lifetime Allowance, and leave the balance to grow and take when required at a later date. You may also be able to pay further contributions, and these new monies may give you a further entitlement to a 25% lump sum of this accumulated fund.

Pension Freedoms provide you with the flexibility to take your benefits as and when you prefer, taking lump sums alone or with an income, but also as and when you require and not necessarily all at once.

Accessing pension benefits early may impact on levels of retirement income and is not suitable for everyone. You should seek advice to understand your options at retirement.

What are Pension Scams?

This is where an unauthorised and/or disreputable company looks to try and get control of your pension monies, and quite often invest into schemes that are for their benefit.

Beware if:

  • You have been offered a cash incentive to transfer
  • You have been offered access to your pension fund before age 55
  • You have been offered a personal loan from your pension fund
  • You are being pressured to sign
  • A courier is being offered to come and collect your application form
  • You are cold called to transfer your pension

Government regulations mean you must receive qualified and regulated financial advice on any final salary transfer with a value over £30,000. This must be provided by a regulated adviser who is also authorised by the FCA as a Pension Transfer Specialist.

If you are unsure whether the advice you are being given is regulated and protected by the FCA, then check if the firm or individual is regulated on the Financial Conduct Authority register https://register.fca.org.uk

The Pension Regulator has more information on what to look out for with Pension Scams on their website http://www.thepensionsregulator.gov.uk/individuals/dangers-of-pension-scams.aspx

The Pension Advisory Service offers guidance on both Defined Benefit and Defined Contribution pension schemes, as well as how these apply to you under the Governments Pension Freedoms http://www.pensionsadvisoryservice.org.uk/about-pensions/pension-reform/freedom-and-choice

Government regulations mean you must receive qualified financial advice on any final salary transfer with a value over £30,000. This must be provided by a regulated adviser who is also qualified and authorised by the FCA as a Pension Transfer Specialist.

We believe it is prudent to review all your pension plans, and also offer a Pension Freedoms Health Check to ensure you have the most efficient plan available. Contact us here to find out more.