Final Salary Pension Transfer

Final salary pension transfer

What is the risk of me running out of money?

This question requires serious consideration and the understanding that transferring out of a guaranteed arrangement means taking on the risk of running out of money. Transferring to a flexible arrangement where you could conceivably withdraw all your retirement funds in one go would be liberating but would it make financial sense for you? Do you need the flexibility of access to varying amounts of cash during your retirement phase or would a regular fixed income suit your lifestyle better?

Ending up penniless when you had enough secure income to live on for life is a dim prospect. We are fortunate enough to have social services to provide for those who can’t provide for themselves, but the point of retirement savings is to be able to afford a decent lifestyle in retirement.

The full state pension is a good baseline income for a lot of people, especially if there is no mortgage or rent to pay.

The essential household expenses should be covered by secure income such as the state pension, an annuity, rental income or guaranteed private pension income.

Transferring a Final Salary Pension to a money purchase pension and then spending the funds too quickly would be a big mistake if there are no other resources to fall back on. A recommendation to transfer is based on all your financial assets not just on the Final Salary Pension CETV. If you are married, then it is based on all the financial assets of both married partners (or civil partners) including state pension forecasts for both partners.

It is fair to assume that people who have managed their personal finances diligently for decades are unlikely to suddenly blow all their hard-earned retirement savings in short order.

Having a good understanding of the cost of your lifestyle now and the expected cost in retirement is required so that sufficient resources can be safely assumed to last for the rest of your life and avoid the risk of ruin.

Ultimately, there is nothing to stop you from spending all your retirement savings early if you transfer out of your Final Salary Pension Scheme. Remaining in the scheme prevents the chance of this happening as the pension income would be a fixed amount paid monthly for the rest of your life.

Advisers that help you make a suitable decision to transfer out of your Final Salary Pension will want to continue to provide you with ongoing advice and help with managing your investment funds and personal finances. The ongoing advice fee is an optional service that you can turn off if you feel it does not provide enough value for you but having a professional financial planner on hand certainly helps most people feel more confident about their finances.