1 October 2020
In this blog we try to shed some light on an area of financial advice that our clients often feel is a more complicated area to understand fully. Should you prefer more interactive content then a short video is attached below for your viewing.
What is a Final Salary Pension?
A final salary pension (also known as a defined benefit or DB pension) is a special type of workplace pension. Instead of building up a pension pot over time, it provides you with a guaranteed annual income for life, based on your final or average salary (hence the name). In essence, think of this a “promise to pay” from your employer.
DB pensions are most often provided by the public sector (health, education etc) and government employers. Some private sector employers do still offer them, however many of these have closed to new members so if you are lucky enough to have one then you should consider yourself fortunate.
What are the benefits of final salary pensions?
Defined benefit and final salary pensions are often seen as ”golden” pension arrangements. This is because final salary pensions give you a guaranteed income when you come to retire, which often rises with inflation each year and pays attractive death benefits (such as a pension to your surviving spouse). This kind of pension is often expensive to replicate in the open market due to these guarantees.
Should I transfer my final salary pension benefit?
Generally speaking, transferring out of a Final Salary (or DB) Pension is not in the interest of the majority of people. Furthermore, pension Transfer Advice is complex and can be viewed as expensive. It’s important you have enough understandable information about the generic advantages and disadvantages to enable you to decide whether to go on to take advice on the transfer or conversion of your pension benefits.
Firms like ours who adhere to the Pension Transfer Gold Standard and are fully regulated to provide you with advice in this area will ensure they provide you with information ‘at arms-length’ so you are able to increase your understanding of the various types of pensions and are aware of the costs that are involved before proceeding to take advice.
Reasons some people give to leave their benefits where they are:
Reasons some people give to transfer their benefits into a flexible pension:
Should you be considering taking advice in this area, please get in touch to discuss your personal situation on 01786 431 703 or by emailing email@example.com. We would be delighted to make the complex more understandable for you.