You now have the freedom, if you wish, to move out of your final salary pension scheme, but many people don’t realise that the clock is ticking.
The recently introduced Pension freedoms legislation has led to a significant increase in the number of people considering whether they should transfer out of their final salary pension scheme in exchange for a lump sum cash payment.
People fortunate enough to have one or more final salary pension schemes should be aware however that there is often a deadline after which this option is no longer available.
For many schemes your Normal Retirement Date, normally aged 60 or 65 depending on the scheme’s conditions, is the last point at which you can obtain a transfer value and move your funds over to a personal pension. After this date the option to transfer is not always available and you must then accept the regular pension payments that have been accrued in the scheme.
The best time to review your Final Salary Pension Scheme will always be dependent on your own unique personal circumstances but, in my opinion, everyone should definitely review their scheme(s) in the twelve months leading up to their Normal Retirement Date. This is especially the case if you are a “deferred member” i.e. somebody who no longer works for the company offering the pension scheme and is therefore not still paying into it via their employment.
For many people the right decision will be to stay in their scheme and no further action will be necessary but, by asking a pension expert to review your situation prior to your Normal Retirement Date rather than after it, you will have at least preserved your choice of either staying in the scheme and drawing a regular income for life in retirement or moving your benefits away and you won’t have missed an important opportunity.
Everyone has the right to a cash equivalent transfer value in the 12 to 24 months leading up to their Normal Retirement Date and so, if it’s available, it is definitely worth considering.
