Should you transfer a final salary pension?
For most people, the FCA and The Pensions Regulator believe keeping a defined benefit pension is in their best interests. A transfer gives up valuable guarantees and is usually irreversible.
What do you give up?
A defined benefit pension normally provides guaranteed lifetime income and often inflation protection and dependant benefits. Moving to defined contribution replaces those guarantees with an investment pot whose value and future income can rise or fall.
What risks move to you?
After a transfer, investment performance, withdrawal decisions and the risk of running out of money become much more important. The transferred pot can fall as well as rise.
Advice may be required by law
Where safeguarded benefits exceed £30,000, regulated financial advice is generally required before a transfer to a defined contribution scheme can proceed.
Do not rush or respond to cold approaches
The FCA warns consumers not to transfer because colleagues are doing it or because an unsolicited company creates urgency. Take time to understand the benefits that cannot be recovered once surrendered.