In a previous article we outlined the potential benefits of a final salary pension transfer. Of course a transfer is not the right move for everyone and where there are benefits there are often also risks. In this article we cover the key risks to evaluate, they are:
- Once you’ve made your final salary pension transfer, there’s no going back.
- The transfer value offered by your employer may be low and placing it in alternative investments may not (after inflation) deliver a higher (or equivalent) return to what you may expect if you stayed in the scheme.
- Any investment (including pension investment) is a risk. It is important to consider carefully if you are better off where you are.
- If you do transfer, your investment will require ongoing management. If you are attracted to a secure lifetime income, with very limited risks and with no effort then it may be best to stay with the Final Salary Pension Scheme. Otherwise you will need to actively manage your fund or pay someone to do so. As you get older managing a fund may be more of a problem for you.
If the final salary pension scheme will be your only or main source of income in retirement and you have little or no tolerance to this income fluctuating or (worse) running out then it will almost certainly be best to stay with the scheme.
One, or more of these risks may persuade you that a transfer is definitely not the right option for you but if you are neutral on the situation it is often worth at least obtaining a transfer value (it is free) so you are in a position to evaluate your options. You can obtain a transfer value by contacting your scheme administrators or, if you prefer, we can help (there is no charge for this service). Call us on 0800 043 8341 or email email@example.com.