Let savers part-trans­fer final salary pen­sions

The Daily Telegraph - Your Money - - FRONT PAGE -

Mil­lions of peo­ple in ‘final salary’ schemes can’t use the pen­sion free­doms. One an­swer could be ‘par­tial trans­fers’. By Sam Brod­beck

first be trans­ferred out to a de­fined con­tri­bu­tion scheme to en­joy the same ben­e­fits, which also in­clude gen­er­ous tax treat­ment on death.

More than 200,000 peo­ple have al­ready moved money to­talling £50bn from final salary schemes in the past two years alone. But as Tele­graph Money has re­peat­edly re­ported, the high cost and com­pli­ca­tions of fi­nan­cial ad­vice, which must be taken for pen­sions worth £30,000 or more, are block­ing savers’ route to full pen­sions free­dom.

An­other ob­sta­cle is that it is of­ten im­pos­si­ble to trans­fer just a por­tion of your final salary pen­sion to a de­fined con­tri­bu­tion scheme.

Now some of Bri­tain’s largest pen­sion and in­vest­ment firms are call­ing on the Govern­ment to con­sider giv­ing ev­ery pen­sion saver the right to a “par­tial trans­fer”. This could of­fer schemes that do al­low par­tial trans­fers, savers are ex­tremely un­likely to know that the op­tion is open to them, said Sir Steve Webb, a direc­tor at the in­surer Royal Lon­don, who co-au­thored the re­port on final salary schemes with LCP.

“Mil­lions of work­ers who have rights in salary-re­lated schemes with their pre­vi­ous em­ploy­ers may not be aware that they also have rights that could also be moulded to bet­ter fit their in­di­vid­ual needs,” he said. “For those con­sid­er­ing trans­fer­ring out of a salary-re­lated scheme, the op­tion of a par­tial trans­fer would of­fer wel­come new flex­i­bil­ity and is strongly sup­ported by ad­vis­ers.”

‘Par­tial trans­fers re­move the all or noth­ing cliff edge savers face’

In the­ory, par­tial trans­fers work like any other trans­fer from a final salary to a de­fined con­tri­bu­tion scheme.

Let’s say that the “trans­fer value” for mov­ing the en­tire pen­sion pot was cal­cu­lated us­ing a ra­tio of 30 to 1: that is, £1,000 of an­nual in­come be­comes a £30,000 lump sum when

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