As of this writing, if you ask who offers Final Salary Pensions you would be hard-pressed to find any private organisations offering any kind of defined benefit pension to newcomers. Even the public sector which has held on the longest has moved over to defined contributions arrangements.

According to new figures from the Pension Protection Fund (PPF) and The Pensions Regulator, only 1,013 of the UK’s 6,400 Final Salary Pension Schemes remain fully open to employees. This is about 200 schemes fewer than in 2019.

Recent companies to announce the closure of their final salary schemes include Shell, Unilever, and Alliance Boots. The figures are contained in the PPF’s so-called Purple Book, an annual snapshot of the UK’s Final Salary Pension Schemes.

The reduction means that in the last 12 months alone around 400,000 fewer employees have access to generous retirement plans. Under defined benefit schemes, a person’s income in retirement is based on their final or average salary. The pensions are largely paid for by the company.

Joanne Segars, chief executive of the National Association of Pension Funds (NAPF), which represents pension schemes with 15 million members and assets of £800 billion, said that the new figures show the “relentless” closure of final salary schemes.

Ms Segars added that new regulations from Europe which will make it even more expensive to run Final Salary Pension Schemes could force more businesses to close their schemes.

The vast majority of the Final Salary Pension Schemes run by companies have either been closed to new members, closed to existing members or are in the process of being wound up.

Companies are closing the schemes which are also known as defined benefit schemes because of the massive liabilities they need to manage for decades to come.

Companies are increasingly switching the retirement schemes they offer to cheaper so-called defined contribution schemes, in which pay-outs are based on contributions from both employer and employee.

Although defined contribution schemes are cheaper to run for companies, they can also be less generous in what they payout, meaning that members are likely to have a poorer retirement unless they become actively involved with their retirement planning.

According to the PPF, 3.73 million employees are currently members of fully open Final Salary Pension Schemes, down from 4.1 million a year ago.

She said that an ageing population, too much red tape, and tough economic and investment environments are all responsible for this trend.

Joanne Segars, chief executive of the National Association of Pension Funds (NAPF) says: “Whatever the type of pension, the main thing is to get more people in the private sector saving. The UK simply isn’t salting enough away for its old age.”

This article looked at who offers Final Salary Pensions but there is a great deal more to consider than is covered in this article. Individual Financial advice should only be given to a person after a thorough assessment of all personal (and their partner’s) financial circumstances so that suitable and appropriate advice can be given.

Would you like to get some professional advice to gain increased financial peace of mind and family security? If the answer is yes, the next step is to have an informal exploratory chat with a qualified financial adviser to see if it is worthwhile proceeding to the formal process known as regulated financial advice.

Regulated advice can only be given by an appropriately qualified person who is regulated by the Financial Conduct Authority (FCA). Pension advice should only be given by pension specialists working with financial advice firms holding the relevant pension advice permissions.

When you hear about employers and companies failing, you could be left feeling unsure about where you stand with your pension and asking the question, is my Final Salary Pension safe? Will the promise to provide guaranteed income for life be kept?

People with Final Salary Pensions are likely be wondering whether their schemes will be able to keep paying them for the next 30 to 40 years. Will their old employers remain able to afford to keep the pension fund solvent?

The Pension Protection Fund (PPF) might need to step in and pay Final Salary Pension Scheme members retirement income as compensation if employers become insolvent and the scheme doesn’t have enough funds to pay their benefits.

The compensation might not be the same as if the employer hadn’t gone bust. The level of protection depends on whether you had passed your normal pension age when your employer became insolvent.

High-profile stories of company collapse and pension scheme deficits from the likes of Tata British Steel, Toys’R’Us and Carillion, many members of Final Salary Pension Schemes are justifiably feeling anxious about the security of their long-term pension income.

You work hard to build up your pension during your working life, so it’s important to make sure your retirement savings are safe. Defined benefit pensions include Final Salary Pension and ‘career average’ pension schemes. These are generally now only available from the public sector or older workplace pension schemes. These types of schemes pay an insurance premium to be protected by the Pension Protection Fund (PPF).

If the scheme needs rescuing and you were over the Normal Retirement Age (NRA) of your scheme or started receiving your pension early due to ill-health, you’re entitled to receive a full pension from the PPF. Anyone receiving a survivor’s pension, such as a widows/widower’s pension, is also fully protected.

However, if you were under the NRA, you’re entitled to receive a pension of 90% of the amount you’ve built up when your employer became insolvent. This is also subject to an upper cap set by the government.

Whilst many schemes have been in a deficit for many years, generally, the funding position has improved in recent years. Even where a scheme does go bust, there is a well-managed insurance scheme in the form of the Pension Protection Fund (PPF) to make sure members still get most of what they were promised.

There are currently around 5,000 schemes and over 10 million members, the vast majority of members are concentrated in a relatively small number of very large schemes. There are a number of small schemes with nearly 2,000 schemes having fewer than 100 members.

Many pension members have transferred out of these traditionally safe and generous pensions in recent years, tempted by high Cash Equivalent Transfer Value (CETV) offers, flexible access with lower income taxes, higher tax-free cash and being able to pass on their pension pot to loved ones or indeed any beneficiary they choose.

But those considering transferring out should seriously consider whether they have sufficient capacity for loss if exposed to a significant financial drawdown as they will be without the protection of an employer or the PPF.

The Financial Conduct Authority (FCA) view is that advisers should start from the assumption that a transfer will be unsuitable for most people. Under rules introduced a few years ago, all pension transfer specialists are required to hold a specific qualification for providing advice on transferring safeguarded benefits. 

There are certain circumstances in which transferring out from age 55 can make sense but getting professional pension advice is essential. You need to have a clear understanding of the risks of swapping safeguarded benefits inherent in defined benefit schemes for flexible ones i.e., defined contribution schemes and personal pensions.

This article looked at is my Final Salary Pension safe but there is a great deal more to consider than is covered in this article. Individual Financial advice should only be given to a person after a thorough assessment of all personal (and their partner’s) financial circumstances so that suitable and appropriate advice can be given.

Would you like to get some professional advice to gain increased financial peace of mind and family security? If the answer is yes, the next step is to have an informal exploratory chat with a qualified financial adviser to see if it is worthwhile proceeding to the formal process known as regulated financial advice.

Regulated advice can only be given by an appropriately qualified person who is regulated by the Financial Conduct Authority (FCA). Pension advice should only be given by pension specialists working with financial advice firms holding the relevant pension advice permissions.

The straightforward answer to how long does a Final Salary Pension last is that it will last for as long as you live and then if your spouse is still alive, a portion of your Final Salary Pension is paid out to them for the rest of their lives. Unfortunately, it stops there as this type of pension cannot be passed onto other beneficiaries.

Final Salary Pensions payout from the Normal Retirement Age (NRA) of the particular scheme you belong to unless you have requested Early Retirement and have accepted your scheme’s reduced pension offer. Again, this will last for the rest of your life, spouse etc. The pension income is index-linked so increases in line with inflation.

A defined benefit scheme’s Normal Retirement Age (NRA) is often different from the state pension age (currently 66 but rising to 67 in 2028). Many bank-sponsored schemes have a retirement age (NRA) of 60. Many other Final Salary Pension Schemes are set at 65 and some at age 67.

Retiring before reaching the age of 55 is not usually possible unless you are in serious ill-health, but this is at the discretion of the Final Salary Pension Scheme. The Office of National Statistics (ONS) has data showing the average life expectancy for a male in the South of England to be approximately 85 and a female 3 years older.

People often have a mix of pension types built up by the time they reach retirement as a result of working for several different organisations. The most common type of pension people pay into now are defined contribution pensions with Final Salay Pensions and career-averaged pension becoming a thing of the past.

Auto Enrolment (AE) is a type of defined contribution pension (DC). As are all other workplace schemes and personal pensions including SIPPs.

DC pensions have a point-in-time cash value, and this is used to estimate an annual income if that money was used to buy a secure income for the rest of your life. However, buying a secure income is optional and you can instead withdraw funds flexibility curtesy of Pension Freedoms. Retirement planning is the specific area of financial planning that addresses this need.

People are now living more than 30 years in retirement and managing money over the long term to ensure you don’t run out needs very careful consideration. Good Financial Planners will help you work out how much money you need for the rest of your life by using sophisticated software and doing regular forward planning reviews.

Calculating how much Lump Sum Tax-Free Cash (TFC) to take whether from a Final Salary Pension on commencement or from a defined contribution pension flexibly, should be done with a view to how this affects your long-term financial planning requirements, goals, and aspirations.

It is also important not to pay more tax than you need to by carefully analysing your income options. Spreading income from a drawdown personal pension pot so that the income is taxed more favourably should make the pot last longer. There is a way of taking income from a DC pot that includes 25% Tax-Free Cash (TFC) as part of the income so that only 75% of it is taxable.

Many people are phasing in their retirement by either working fewer hours or by changing careers for a less stressful job. Some are drawing a pension income and continuing to work. Tax relief on pension contributions continues until age 75. National Insurance contributions cease to be paid at your state pension age. All these retirement factors need to be factored into a well-worked retirement plan.

This article looked at how long does a Final Salary Pension last but there is a great deal more to consider than is covered in this article.

Individual Financial advice should only be given to a person after a thorough assessment of all personal (and their partner’s) financial circumstances so that suitable and appropriate advice can be given.

Would you like to get some professional advice to gain increased financial peace of mind and family security? If the answer is yes, the next step is to have an informal exploratory chat with a qualified financial adviser to see if it is worthwhile proceeding to the formal process known as regulated financial advice.

Regulated advice can only be given by an appropriately qualified person who is regulated by the Financial Conduct Authority (FCA). Pension advice should only be given by pension specialists working with financial advice firms holding the relevant pension advice permissions.

Teachers who started work before 2015 will have been in a Final Salary Pension Scheme so these teachers do get a Final Salary Pension. A Final Salary Pension pays a higher level of benefits than the newer career-average deal.

Older teachers who had a normal pension age of either 60 or 65 and were within 10 years of that on 1st April 2012, remained in the final salary scheme as protected members.

To be eligible to receive a pension from the Teachers’ Pension Scheme you must have completed a certain minimum length of service. This is:

How much you receive in your pension depends on which of the teachers’ pensions you joined and your Normal Pension Age (NPA). The date you joined will either put you in the final salary arrangement or the career average arrangement.

Teachers’ pensions can be confusing to a lot of people, and they are the source of much debate. If you’re a teacher working in a state-funded school in the UK, you will automatically be enrolled in the Teachers’ Pension Scheme (TPS). The amount you pay and the amount you’ll receive when you retire depends on which of the teachers’ pension schemes you have joined.

Teachers’ pensions are complicated things and can make planning for retirement a confusing prospect. Unless you’re a mathematics teacher or have a financial adviser, you could be forgiven for glossing-over the small print on your pension contract.

Those of you in the career average arrangement with a Normal Pension Age (NPA) ranging between 65 and 68 will have an accrual rate of 1/57th of your pensionable salary for each tax year (April to March) you contribute to the Teachers’ Pension Scheme, plus a variable amount (Consumer Prices Index plus 1.6 per cent) dictated by HM Treasury.

The Government ‘Proposed Final Agreement’ on pensions contained provisions for transitional protection. Whether you have protection depends on your age on 1 April 2012 and your TPS Normal Pension Age (NPA) (the age at which you can get your teachers’ pension in full).

If you were within ten years of your NPA on 1 April 2012 (i.e., 50 or over if your TPS pension age is 60 or 55 or over if it is 65) then you will stay in the final salary scheme provided that you don’t have a break from the teaching of five years or more. This applies even if you work past the scheme retirement age.

If you’re working part-time, your service counts at its full-time equivalent for the purposes of qualifying for a pension. Like full-timers, you only need two years’ pensionable employment at any time after 5 April 1988 (as an example) to qualify.

You can opt-out of making pension contributions by logging into your account and filling in an online form. You’ll be entitled to claim back payments as long as forms are completed by you and your employer within three months of enrolment.

This article looked at an introduction to "Do teachers get a Final Salary Pension" but there is a great deal more to consider than is covered in this article. Defined Benefit Teachers’ Pensions are state-funded and as of the time of writing this article, cannot be transferred out to a private pension pot.

Private school teachers are being transitioned to defined contribution pension arrangements. Defined contribution pensions are a fixed amount of money and can be transferred to other defined contribution arrangements.

Individual Financial advice should only be given to a person after a thorough assessment of all personal (and their partner’s) financial circumstances so that suitable and appropriate advice can be given.

Would you like to get some professional advice to gain increased financial peace of mind and family security? If the answer is yes, the next step is to have an informal exploratory chat with a qualified financial adviser to see if it is worthwhile proceeding to the formal process known as regulated financial advice.

Private sector Final Salary Pensions still exist, but most are not in their original form. Recent statistics from the Pension Protection Fund (PPF) and the Pensions Regulator report that just over 1000 of the United Kingdom’s original six and a half thousand Final Salary Pension Schemes remain fully open to employees.

The term ‘fully open’ means the scheme continues to accept new members and benefits continue to accrue. Many schemes are closed to new members meaning the scheme does not admit new members. However, existing members can continue to accrue pensionable services and benefits.

Or a scheme might be closed to new benefit accrual meaning the scheme does not admit new members. In which case, existing members no longer accrue pensionable services and or benefits.

Even in a scheme where you cannot build up any new benefits aka 'closed to new benefit accrual’, there are trustees overseeing the fund, which is a ring-fenced pool of assets set aside to pay the future liabilities (members pensions) of the scheme and ongoing responsibility of the sponsoring employer to keep the fund topped up in the event of a shortfall.

Because many larger employers have adopted the strategy of migrating their pension provision towards Defined Contribution (DC) by opening a DC section in an existing Defined Benefits (DB) scheme, many hybrid schemes may accept new members but no longer allow new or existing members to accrue defined benefits.

Often referred to as ‘Gold plated’, Final Salary Pensions still exist and continue to accrue benefits for the lucky few.

According to Steve Webb former Pensions minister, more than four million people under pension age have rights from past service in a salary-related pension scheme (defined benefit pension schemes).

Final Salary Pension Scheme’s pensions are calculated by multiplying your length of service measured in years by the annual value of the last salary you received (hence - final salary). Note: This could be an average of the number of your last years. Then multiplying by a fraction known as the Accrual Rate commonly set at 1/60th or 1/80th

A final salary pension lump sum might be paid in addition to your pension entitlement but more commonly, you have to give up some future pension income to take a specific lump sum which is known as pension lump sum commutation. Each scheme sets its own commutation factor so there are no hard and fast rules for calculating this.

The other type of defined benefit scheme is the career average scheme where your pension is based on the average of your pensionable earnings throughout your membership in the scheme. All defined benefit pension schemes are revalued in line with inflation.

The value of pension earned in each year is calculated using the scheme’s accrual rate – such as 1/60th or 1/80th of your pensionable pay. Your final pension is calculated by adding together all the revalued pension earned in each year of membership.

The pension scheme’s rules will define what is meant by your salary or earnings, and how the calculation of ‘final salary’ is made.

For example, some schemes don’t normally count extra earnings, such as overtime, commission, and bonuses. In addition, the value of benefits in kind is other benefits that are not paid as cash to the member, for example, a company car or car allowance.

The scheme might also only count a proportion of your wages or salary. The amount of earnings used to calculate retirement benefits is often referred to as pensionable earnings and can be found on your benefits statement.

Also common with many DB schemes, the purpose of a state pension deduction was to consider the basic state pension is built up throughout your membership of your Final Salary Pension Scheme. This means that you were ‘contracted out’ of National Insurance contributions and therefore, need to be aware you may not get the full state pension at your state pension age.

This article looked at an introduction to what happens to do Final Salary Pensions still exist but there is a great deal more to consider than is covered here. The advice can only be given to an individual after a thorough assessment of all personal (and their partner’s) financial circumstances.

Would you like to get some professional advice to gain increased financial peace of mind and family security? If the answer is yes, the next step is to have an informal exploratory chat with a qualified financial adviser to see if it is worthwhile proceeding to the formal process known as regulated financial advice.

A Final Salary Pension is not a sellable commodity so to try to answer the question can you sell a Final Salary Pension in an indirect way; it is necessary to step back and think about its purpose and value first. Its purpose is to provide the Final Salary Pension Scheme member with a secure, index-linked retirement income for life.

Therefore, the value of the Final Salary Pension is what this fixed income for life means to the individual member. The monetary value can be determined by the scheme before the pension is drawn by way of a Cash Equivalent Transfer Value (CETV). A simplistic view of the CETV is to say it represents a number of years’ worth of retirement income over x number of years.

What is the x-factor? Crudely put, it is the number of years you expect to live in retirement.

For example, a life expectancy of 30 years in retirement at £20,000 per year is £600,000. In the case of a transfer, the £600,00 would sit in a personal pension pot which is in a defined contribution arrangement.

At age 55, 25% would be available as tax-free cash up to the Lifetime Allowance (LTA) which currently stands at £1,073,100 in the 2021/22 tax-year. However, unlike defined benefit Final Salary or Career average pension schemes, defined contribution schemes allow you to take the tax-free sum flexibly and not as a commuted part of the annual benefits you forgo to receive a one-time lump sum.

As part of the transfer analysis process, we commonly lookout to 90 plus years of age to properly assess the risk of ruin. AKA running out of money before you die. How much someone needs for the rest of their lives naturally depends on the lifestyle they aspire to at their chosen retirement age and beyond.

Typically, we spend more money in the early years of retirement going on holidays and such like and then we spend less when we are less mobile.

We could argue that this common spending pattern is better met by having flexible access to your retirement funds however, the counterargument says you can always save up for times of higher expenditure. Which approach would suit you best?

With a Final Salary Pension as fixed income every month you can only spend what you receive as you get it but, if you transfer out into a flexible arrangement you can spend the whole lot in one go! This is one reason why the Financial Conduct Authority (FCA) says that a transfer is unlikely to be in the best interests of most people.

Reading between the lines and paraphrasing, they (the FCA) don’t trust most people to manage their financial affairs well enough to not run out of money and then become a burden on the state. Are they right and who is ‘most people’ anyway?

Retiring on a Final Salary Pension means you should never run out of money. It may not be enough to meet all your goals and aspirations, but it is secure regular annual income paid monthly.

Obviously, running out of money would not be a good outcome for anyone, so we look to avoid the possibility of this happening by checking there is enough secure income to at least cover essential household expenses.

This applies to individuals as well as couples so if one person in a couple is a financial dependent of the other, secure income must cover them both.

If there is not enough secure income, it is unlikely that any firm would recommend a transfer unless there is a substantial amount of highly liquid capital available. Rental income from a property portfolio would count as secure income if the intention were to keep it as retirement income for the foreseeable future.

Some people may also consider buying an annuity with part of their capital to receive some guaranteed income for a fixed period. This may seem at odds with transferring out of a defined benefits arrangement that offers a regular secure income for life.

However, if the goal is to achieve a combination of guaranteed income plus flexibility this could be suitable in some situations but always seek professional advice first.

This article looked at an introduction to can you sell a Final Salary Pension but there is a great deal more to consider than is covered here. The advice can only be given to an individual after a thorough assessment of all personal (and their partner’s) financial circumstances.

Would you like to get some professional advice to gain increased financial peace of mind and family security? If the answer is yes, the next step is to have an informal exploratory chat with a qualified adviser to see if it is worthwhile proceeding to the formal process known as regulated financial advice.

What happens to a final salary pension on death?

Final Salary Pension (Defined Benefit) schemes usually provide entitlement to a spouse’s, civil partner’s, or dependant’s survivor’s pension in the event of the member’s death pre-retirement or post-retirement.

However, if the member is a deferred member of a deferred benefit scheme (e.g., Final Salary Scheme), there is unlikely to be any lump sum death benefit paid out. As most schemes are now closed and many employees have moved onto new arrangements, this is the most common situation we see.

The scheme may allow a refund of contributions, but it might be a more attractive solution to transfer benefits to a money purchase arrangement (defined contribution – pension pot) that will allow the whole fund value (via a Cash Equivalent Transfer Value) to be paid out in the event of death.

Analysing death benefits for different types of pensions is essential when considering passing wealth down through the generations. This is where defined contribution pensions are vastly superior as they can be inherited either as a cash lump-sum or as a pension and, any beneficiary can be nominated, not just family members.

A Final Salary Pension cannot be passed down the generations as it was never designed to do this. The original design was based on a job-for-life (i.e., one employer for life) followed by a pension until death for the member and their spouse only.

If you have a Final Salary Pension, there is no pension pot to pass on because the benefits are designed to be used as a secure income stream.

However, the terms of your scheme will make provision for your spouse and any other financial dependents in the form of a reduced survivor’s pension. The scheme rules will dictate exactly what will happen in the event of your death.

Alternatively, Final Salary Schemes should give you the option of transferring out into a defined contribution pension (pension pot), which you can pass on to your family. However, a transfer may not be the best option for you, so it is best to ask a suitably qualified and regulated financial adviser to review your full circumstances.

Any secure and guaranteed benefits will be lost on transfer, but this will not be an important factor for a single transferee with no financial dependants. Also, a shortened life expectancy reduces the attractiveness of remaining in a defined benefit scheme.

In the event of death in service, a defined benefits lump sum death benefit is paid to the members’ beneficiaries. The lump-sum would be free from tax for members who were under the age of 75 at the date of death and the benefits are paid out within two years.

In addition to any lump sum paid to those who die in service, there is often a spouse’s, civil partner’s or dependant’s pension paid too. The scheme rules will state how these benefits are also calculated, usually as a proportion of the member's benefit and it is common that 50% of the member's pension would be payable.

If the lump sum was in excess of the Lifetime Allowance (LTA) a tax charge of 55% is levied on the lump sum excess paid over the LTA limit which currently stands at £1,073,100 for the 2021/22 tax year.

For members over the age of 75, the money will be taxed in the hands of the recipient at their marginal rate. However, at age 75 a crystallisation event will have occurred which may have meant additional tax was paid from the pension funds.

If a member died in retirement, then their pension would usually be payable for the remainder of any guaranteed period (often 5 years starting from the commencement of retirement) and a spouse’s, civil partner’s or dependant’s pension paid as a fixed percentage of the member’s pension at the date of death (usually 50% of the pension before the member’s death).

This article looked at an introduction to what happens to Final Salary Pensions on death but there is a great deal more to consider than is covered here. The advice can only be given to an individual after a thorough assessment of all personal (and their partner’s) financial circumstances.

Would you like to get some professional advice to gain increased financial peace of mind and family security? If the answer is yes, the next step is to have an informal exploratory chat with a qualified adviser to see if it is worthwhile proceeding to the formal process known as regulated financial advice.

The crucial factor here is the age at which all private pensions can be accessed in the UK and this is set by pensions regulation. The current age is 55 but this is rising to 57 in 2028. There are exceptions to this rule notably, ill-health and a shortened life expectancy.

Under normal circumstances, Final Salary Pensions start to pay out when the member reaches the Normal Retirement Age (NRA) of the defined benefit scheme they belong to. This is often between the age of 60 and 65 but it can be younger or older depending on the scheme rules.

It is usually possible to take a Final Salary Pension from age 55 by requesting an Early Retirement Quote (ERQ) from the defined benefit scheme administrator. They will calculate the reduced annual pension income amount and reduced tax-free lump sum compared to taking the pension at the scheme’s NRA. The ERQ is a quote and does not have to be accepted.

Another way to answer the question: Can you take a Final Salary Pension at 55 is to consider transferring to a personal pension pot and taking it as flexible pension income from there if that is more beneficial overall.

Selecting the option to transfer a Cash Equivalent Transfer Value (CETV) to a defined contribution pension scheme such as a personal pension pot may be suitable but the reasons for doing this must be well thought out and be suitable given current personal financial circumstances and the likely pattern of expenditure in retirement.

Final Salary Schemes must not give advice about whether transferring out is in the best interests of the member which is why they require members to take independent advice from a suitably qualified financial adviser. The advice must be independent of the scheme rather than referring to the status of the financial adviser who is often restricted to a provider’s own offering.

The Financial Conduct Authority (FCA) say that a transfer from a defined benefit scheme is unlikely to be in the best interests of most people because they believe most people would be better off with a guaranteed income for life. Whilst this may be true it is important to recognise that people’s circumstances vary considerably in terms of health, wealth, and attitude.

A fixed income for life will not be suitable for everyone and for single people in poor health, they will not be able to pass on any Final Salary Pension benefits to their loved ones.

The purpose of taking financial advice when considering a transfer is to do a deep analysis of the suitability of taking this option. If the advice comes out in favour of a transfer, then this advice is insured against the possibility that it may be found to be unsuitable advice at some point in the future. This is one reason why the professional indemnity insurance premiums are so high for this type of advice.

If the advice is not to transfer, then the member will be able to refer to the suitability report as to why the financial adviser has concluded it is not in their best interests to transfer. The FCA has recently changed how this advice is charged for by banning contingent advice (October 2020) which means the advice must be paid for regardless of the outcome of the advice. To make matters worse, the fees are chargeable to VAT if there is no transfer!

Taking your pension at 55 is currently possible for anybody wanting to do this. The type of pension is not relevant as they are all subject to UK pension regulations. All Scheme trustees have discretion over whether to allow taking benefits younger than this due to ill-health and terminal illness.

Opting to take a Final Salary Pension early means becoming a pensioner of the scheme which means the income is guaranteed for life and is fully covered by the Pension Protect Fund should the pension scheme get into difficulties.

This articled looked at an introduction to can you take a Final Salary Pensions at 55 but there is a great deal more to consider than is covered here. Advice can only be given to an individual after a thorough assessment of all personal (and their partner’s) financial circumstances.

Would you like to get some professional advice to gain increased financial peace of mind and family security? If the answer is yes, the next step is to have an informal exploratory chat with a qualified adviser to see if it is worthwhile proceeding to the formal process known as regulated financial advice.

Final Salary Pensions are good for pensioners compared to other types of workplace pension with respect to their guaranteed benefits in payment. However, Final Salary Pensions are no longer offered to new employees, and many have closed to future accrual meaning they no longer accept any new contributions from members.

Closed to future accrual takes away a big part of why Final Salary Pensions are good for employees building up their retirement savings. Salary increases are not reflected in a Final Salary Pension arrangement once the scheme is closed to future accrual.

However, the benefits already built up in the scheme are very valuable as they increase with inflation and all the investment risk lies with the scheme and not the member. The future liabilities of these schemes need to be managed carefully so they do not fail to meet their commitments.

The Pension Protection Fund (PPF) is there as a safety net for any failing defined benefit schemes.

Are Final Salary Pensions good for those who have built up pension benefits? The answer has to be a resounding yes, they are because the member generally has a choice as to whether they take the benefits as regular income at their retirement age or whether they convert the benefits to a Cash Equivalent Transfer Value (CETV) before retirement.

Even though Final Salary Pensions are good, Final Salary Pension transfers are not uncommon with thousands of transfers being completed every year. However, they are getting progressively harder to implement because the Financial Conduct Authority (FCA) is continually raising the bar for advice firms higher and higher.

Adviser Firm permissions are being taken away from poor operators and the cost of insuring this type of advice has skyrocketed. This means that advice firms are either choosing to stop providing this service due to spiralling costs or they are being told to stop by the regulator (FCA).

The Pension Freedoms Act 2015 (pension freedoms) ushered in a major change for UK pensions. Historically, the expectation was that all types of pensions would be taken as a guaranteed annual benefit for life so, whatever retirement lump sum you had built up would be converted into an annuity.

Mandatory annuity buying caused a lot of dissatisfaction with pensions putting people off from saving for retirement. Now with pension freedoms, modern pension contracts allow for maximum flexibility on drawdown from age 55 (rising to 57 in 2028).

Funds in a Final Salary Pension Scheme cannot be accessed flexibly. They can only be paid out as fixed pension benefits and usually, from set retirement age. Defined benefit schemes such as Final Salary Schemes comply with the Pensions Freedom Act indirectly in so far as they must offer transfer valuations for eligible members so they can take advantage of pension freedoms.

This way a member could transfer a Cash Equivalent Transfer Value (CETV) into a defined contribution scheme so that the funds can be accessed flexibly. Financial advice is mandatory if the CETV is over £30,000 and a full and proper assessment should be carried out to ensure that a transfer is suitable.

The advice must come from a Pensions Transfer Specialist who works with an advice firm regulated by the Financial Conduct Authority that has the appropriate FCA permissions for pensions advice. The advice process is rigorous and often takes around 2 months to complete.

Transferring out of a Final Salary Pension Scheme would result in having a personal pension with one or more pension pots which could be invested in different investment funds with different risk attributes. This is where a financial adviser would explain how specific investment funds would meet long-term income and or lump-sum requirements.

State pensions are an important part of the retirement income mix as they do provide guaranteed income which ideally meets most of the essential household expenditure such as utilities and food. To be entitled to a full new state pension requires 35 years’ worth of National Insurance contributions credits.

Further retirement income from either a Final Salary Pension or from drawing on a private pension pot makes all the difference to the lifestyle attainable after ceasing to work for an income.

This article looked at an introduction to "are Final Salary Pensions good" but there is a great deal more to consider than is covered here. The advice can only be given to an individual after a thorough assessment of all personal (and their partner’s) financial circumstances.

Why wouldn’t you want to get some professional advice to gain increased financial peace of mind and family security? The next step is to have an informal exploratory chat with a qualified adviser to see if it is worthwhile proceeding to the formal process known as regulated financial advice.

When did Final Salary Pensions stop… Effectively, thinking of them as a collective, they are in the process of stopping however, that process is more one of metamorphosis! Over the past few decades, many have already defaulted and have been dealt with by the Pension Protection Fund (PPF).

Many schemes are currently underfunded, but it is very difficult to get enough reliable information to determine whether a particular one will fail and need rescuing by the PPF as they may already have a rescue plan underway and who on the outside really knows how well that is going?

Generally speaking, Final Salary Pensions stopped being offered to new employees when they became too costly for the employer’s business or the taxpayer in the case of a publicly funded scheme.

To find out when a particular Final Salary Pension or Career-Averaged pension stopped you can look this up on the website of the sponsoring company or the relevant public organisation’s website.

Some private-sector Final Salary Pension Schemes closed to new entrants over 20 years ago. More recently, public sector schemes such as the Teacher’s Pension Scheme have also moved over to cheaper-to-run defined contribution schemes from CARE defined benefit schemes.

After closing to new entrants to reduce costs, the next step was to move active members i.e., those still working for the employer, from their defined benefit pension scheme (e.g., Final Salary Pension) to a defined contribution scheme (Workplace scheme with Personal Pension Pot) often outsourced to a Life company such as Standard Life or Aegon.

The scheme move did not affect the already built-up benefits the member had in the original scheme, but new pension contributions could no longer be made to the defined benefit scheme. Instead, contributions are allocated to a new workplace pension as a defined amount with the associated investment risk now being borne by the member.

This change meant that the number of years’ service and the pensionable salary amount both froze for the purposes of the scheme’s future liabilities. Not so good for the member because the scheme’s future liabilities are the members’ guaranteed income for life.

The third factor in calculating the annual pension benefit at retirement age is the scheme’s accrual rate which is typically one-sixtieth or one eightieth. The common goal used to be to aim to retire on two-thirds of your Final Salary, but life expectancy was lower then so paying it out for 10 to 15 years rather than 30 or perhaps 40 years was much more affordable.

Indeed, the move from a Final Salary based arrangement to a Career-averaged salary arrangement was a cost-cutting exercise used by some organisations to manage overall costs in order to keep the future pension benefit going for as many employees as possible.

But average salary based defined benefit schemes still proved to be too costly a type of pension to run and had to give way to cheaper workplace pensions which do not guarantee an annual income but instead are projected amounts usually based on expected stock market returns and other related pension assets.

This is where on-going financial advice should be sought if you do not fully understand what this means to your financial security.

Gradually, over time, defined benefit schemes will stop completely but they still need to meet the commitments they took on or, they are taken over by another body (PPF) that continues to do so. The Pension Protection Fund has been set up to step in as a last resort to take over when a scheme defaults.

Now with fully flexible pension arrangements, higher tax-free lump sums and longer life expectancy, the old measure of two-thirds of the last salary for life is rarely an available choice for new retirees. The main problem with a fixed annual income is that you can’t hold it back if you don’t need it. You can’t take more when you start your retirement and less later on when you are less active.

Personal Pensions are the new normal and seeking good advice from a regulated financial adviser about how to get the most from them and your state pension combined is the sensible thing to do. Other financial assets come into play if you have them and taking them in the most tax-efficient way helps you and your loved ones reap the maximum benefit of all that hard work building them up.

This article looked at an introduction to when did Final Salary Pensions stop but there is a great deal more to consider than is covered here. The advice can only be given to an individual after a thorough assessment of all personal (and their partner’s) financial circumstances.

Why wouldn’t you want to get some professional advice to gain increased financial peace of mind and family security? The next step is to have an informal exploratory chat with a qualified adviser to see if it is worthwhile proceeding to the formal process known as regulated advice.

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