Pension Transfers - 10 Key Points To Consider
9) Be aware you may face an unavoidable delay if…
Your old company goes into liquidation. They will then go into what’s called a “Winding Up” period which can last several years during which no transfer values can be paid - you will only be able to sit it out and wait to see what transpires.
10) Final reasons for Pension Transfer Value reductions…
Here are final key differences between money purchase and final salary schemes which can affect Transfer Values, particularly concerning reducing values…
a) Money Purchase transfer values normally reflect the value of your fund which relates of course to how much has been paid into your scheme in the past.
Because your fund may be invested in the stock market it is subject to market fluctuations which can cause values to go up or down. Your transfer values may also reduce because of charges or penalties linked with these type of schemes.
b) With Final Salary Schemes it’s important to note that you are given entitlement to a future deferred pension and not a fund of money.
Your transfer value is not related to contributions paid to the scheme. The scheme actuary will assess how much needs to be invested within today’s current market conditions to give a projected pension which will equal the scheme’s normal retirement age deferred pension.
The actuary uses a calculation based on equity investment and gilt returns to make this assessment.
Therefore if investment conditions justify the use of a higher rate of return, transfer values will reduce while the opposite effect occurs when lower expected future investment returns show the need for higher transfer values to provide an adequate deferred pension for members.
There we are then. If you keep your eyes on the ten points I’ve covered above then it will go some way to ensuring you make the right decision regarding transferring your pensions.
As I mentioned at the beginning it can be complex stuff as you can see - so if you are unsure on any of the above please do get in touch with your nearest Independent Financial Adviser.