If you are one of those still pondering whether to transfer your final salary pension, you should seek specialist advice as soon as possible.
Transferring to a private scheme offers exciting options to many people, which is why an estimated 210,000 people moved £50 billion pounds in the two years to May.
As Yemanya, the Brazilian goddess of golden opportunity would tell you timing is everything. Such opportunities are useless if you don’t dive in and take advantage before they disappear. Whether or not you believe in exotic deities, this is sound advice when it comes to final salary transfers.
The first major reason for the appearance of this opportunity is the high transfer values available because of employers’ increasing desire to reduce their pension liabilities coupled with rock-bottom government bond yields. Many of my clients have seen their transfer values surge to 30 or 40 times projected annual income. I even saw one at 52 times.
But UK interest rates went up for the first time in a decade last month from 0.25% to 0.5%. If rates keep rising during 2018, it could increase government bond yields, which could reduce transfer values.
The second reason for the attractiveness of transfers is the pension freedom rules, which came into effect in April 2015 and which brought much greater control and flexibility over private pensions. These rules enable transferees to crystallise their pension into a capital sum to use as they please from age 55, and for their dependents to inherit.
This means you could retire at 55 rather than 65 (the typical retirement date in a final salary scheme) or use the money however else you wish. For example, you could pay off your mortgage; help your kids onto the property ladder; take a dream holiday; or use the money in your business, say to purchase premises. It is also beneficial if you have shortened life expectancy.
I don’t expect the government to change these popular pension freedom rules soon, but politicians do tinker with pensions regularly, so it makes sense to take advantage of this golden era while you can.
For many people, a transfer is not suitable, due to its cast-iron, and usually inflation-linked, a guarantee of income for life. Also, if you work in an unfunded government scheme – for example, in the police, NHS or civil service – you are not allowed to transfer.
Final salary pension transfers are irreversible, so you must consider the pros and cons very carefully and advice from an independent, qualified pension transfer specialist is essential.
As our quick questionnaire shows, there are several important factors to consider before deciding whether a transfer might be suitable for you.
Will you rely on your final salary pension income when you retire? Would you be uncomfortable risking the value of your pension savings on the stock market? Do you want your pension to be as simple, secure and protected as possible?
If the answer to any of the questions above is ‘yes’, then a transfer is probably not suitable for you. If your answers are all ‘no’, then you should consider a range of other factors.
Do you want the option to vary your pension income in retirement? Do you want to use your pension as an inheritance for future generations rather than just as a retirement income? Do you have shortened life expectancy?
If the answer to any of these is ‘yes’, then a transfer might be right for you and you should speak to a specialist adviser who can look at look at your circumstances in more detail.
Final Salary Transferwise is an initiative of independent adviser Blackstone Moregate, which has 17 years of specialist experience in pension planning.
To assess whether a transfer is right for you, we conduct a thorough, holistic review of all your financial affairs, including your assets, income, background, goals and risk appetite.
Our specialist technical skills and tools also help assess whether your retirement income will last your entire life and that the money will never run out.
The result is a fully-informed, professional, transparent and personal recommendation about whether a transfer is suitable for you.
We also have investment specialists in our team. So if a transfer is appropriate, we make sure the new investments are right for you and explain them carefully to give you peace of mind.
It could be that the goddess of opportunity is smiling on you. But spiritual guidance will not suffice. If you think a transfer might be suitable, contact Final Salary Transferwise today.