Following the changes to retirement planning in April 2015 we have seen a significant increase in members of traditional company pension schemes ‘Defined benefit Pensions’ asking us to obtain cash equivalent transfer values.
These pensions have always been considered gold plated because they promise to pay a secure, index-linked income for life, based on final or career-average salary. This is unlike most modern employee schemes where there is far less certainty over what will be paid in retirement.
Valuations have increased to record highs in the wake of the historic June referendum ‘Brexit’. As bond yields have plunged, cash transfer values have typically been offered at multiples of 20 to 40 times the projected annual pension.
Nationwide many thousands have been tempted by record cash equivalent valuations and have moved their benefits into a more personal environment. Essentially they are foregoing the guarantees of the scheme perhaps in order to obtain more flexible access to their benefits, which may include higher levels of tax free cash.
Death benefits of company pensions should also be considered which can pay to a surviving spouse or partner at the trustee’s discretion. This is where this benefit tends to stop, which is unlike a more individual contract where benefits can ultimately be passed on to your spouse/partner and then the next generation of your family and beyond – tax free prior to the age of 75!
So who should consider this?
Well the answer is that, since the 2015 changes, most people should be reviewing their pension arrangements and if you have one of these traditional style pensions then there has never been a better time.
According to a recent Financial Times article it was reported that Baroness Ros Altmann, the former Pension’s Minister said she decided to cash in two of her final-salary pensions after transfer quotes for both doubled.
Clearly this course of action will not be right for all people. We believe it is essential that you take professional advice to achieve a clear understanding of the options and strategies available to you including the risks, costs and tax consequences involved.
So if you would like to receive advice then please contact our office today and arrange a free initial consultation.