A Shropshire finance company has seen a rise in defined benefit pension transfers over the last few months as more people take advantage of the pension freedoms.
Pension freedoms was introduced by the government in April 2015 giving people aged 55 the ability to transfer their defined benefit schemes to private plans or even take a 25% tax free cash lump sum.
Pensionlite director Andrew Hawthorne said: “There are many reasons why people might transfer their pensions including greater flexibility and being able to pass on any unspent pension to family members or loved ones when they die.
“However, transferring is not without the risks and it may not be in the interests of most people because of the loss of guaranteed income.
“After transferring they have to accept that the value of their pensions and the income they can produce may fall as well as rise, and they could get back less than invested.”
Defined benefit pensions, or final salary pensions as they are otherwise known, is a type of workplace pension.
Rather than building up a pension pot over time, it provides people with a guaranteed annual income for life which is based on their final or average salary.
Mr Hawthorne said: “Even after leaving service with a company, the pension is preserved and increases every year, normally to keep up with inflation, and the security of a guaranteed lifetime income can’t be understated.
“For those wishing to consider their transfer options, it is a legal requirement to seek advice where the transfer value is greater than £30,000.
“This is designed to protect the interests of the pension holder by making sure that any decisions are reached from a fully informed position about the guarantees that will be lost together with the flexibilities to be gained.”
Pensionlite, which is located on Stafford Court in Telford, are a firm of Chartered Financial Planners.
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