Final salary transfers ‘face effective abolition’

A quarter of a million people have cashed in their pensions – but regulators are making it harder, writes Sam Brodbeck

Savers who try to cash in “final salary” pensions may soon find it all but impossible as the financial watchdog intensifies an investigation into the practice. Hundreds of thousands of people have already swapped these generous, guaranteed pensions for riskier yet more flexible le plans, but many others have found their path to the “pension sion freedoms” blocked.

Their numbers are expected to grow as the Financial Conduct t Authority (FCA) steps up a review of pension transfers, nsfers, following concerns that at British Steel workers have been pressurised into transferring pensions inappropriately. The regulator has been criticised by MPs over its handling of the affair. In response, the FCA is contacting every pension transfer adviser in the country to request details on their transfer business. Megan Butler of the FCA insisted that the watchdog would not ban or suspend final salary transfers, but Tom McPhail, a pensions expert at Hargreaves Lansdown, the investment shop, said: “The more publicity around things like British Stee Steel, the more likely that advisers are going to think it’s not wort worth the risk. As a consequence save savers will find it harder to find th the advice they want or need.” Some Telegraph Telegrap Money readers have alr already reported difficulties i in moving their money. Other savers have b been forced to take ta costly financial fina advice about abo pension Sixty-year-old Paul Merritt is an experienced DIY investor with an existing self-invested personal pension (Sipp) worth £170,000.

He wants to move the final salary plan that he built up while working for Magnet, the kitchens company, into his Sipp. The final salary pension, which is projected to pay £6,400 from aged 65, is valued at £146,000 and the rules stipulate that he must take advice before he can move it to the Sipp. But finding an adviser willing to take on the business has proved more difficult than he expected.

“I have approached 14 advice companies,” he said. “Eleven said no outright and the others wanted an average fee of 6pc of my pot’s value.” That would mean fees of nearly £9,000.

Mr Merritt (pictured) said: “I understand there is an element of risk but I think I can do a better job than the pension scheme. Of course markets are strong at the moment, but I think I can get investment returns somewhere near those needed to match what my old pension would provide.” Richard Austin, 66, has successfully moved two final salary schemes from former employers – but he had to pay two different advisers before he could do so. Now retired and living on a canal boat, he has modest outgoings, covered by the state pension. His decision to transfer was driven by the greater control and more favourable tax treatment on death offered by an alternative “defined contribution” arrangement.

The rules say that transfers worth