Defined Benefit / Final Salary Pensions
Over the last 12 months or so we have seen a huge rise in the number of individuals who are seeking advice on transfers from their final salary / defined benefit scheme. The reason for this is simple; transfer values have gone through the roof and news sources such as the BBC have reported on this.
Putting it in a very simple way, if interest rates are 5% then to provide a pension of £5,000pa might cost about £100,000. If interest rates fall to 2% the amount required to provide the same income increases to £250,000. Coupled with this, we have seen the introduction of “pensions freedom” and the architect of this was the former pensions minister Sir Steve Webb. We are pleased to announce that Steve will be a guest speaker at a forthcoming Pavis client event.
Just because transfer values have increased the decision to forego a “guaranteed benefit” should not be taken lightly. Generally speaking, individuals who are looking to take a transfer with a view to investing the proceeds in the hope of being able to purchase a higher annuity in the future should not do so. However, our advice looks at the overall position throughout someone’s life expectancy and takes into account their family circumstances, health, financial position, income requirements and desire to leave a “pot” for future generations.
We don’t take our significant regulatory responsibilities lightly but in the right circumstances we are happy to advise accordingly.
Quentin McCormick APFS, Chartered FCSI, CFPCM
Chartered Wealth Manager