Retirees continue to take advantage of DB pension transfers

In Defined Benefit, News, Pension Freedoms by Wealth of Advice

Jar of pennies marked with pension

Retirees continue to take advantage of DB pension transfers

Up to 80,000 people have opted to transfer out of their defined benefit scheme in the past twelve months.

30TH JUNE 2017

Members of defined benefit pension schemes have continued to cash in their pension pots, according to the latest figures.

In the past year alone, over 67,000 people have opted to transfer out of their final salary schemes in favour of increasingly attractive lump sums. Since not every scheme reported their DB transfer statistics, it is thought that the actual number of people transferring out in the last twelve months could be as high as 80,000.

In previous years, these schemes were considered to be gold-plated, owing to the fact that they pay out a set amount per year for the rest of a retiree’s life, but many older savers are taking advantage of the pension freedoms introduced two years ago.

Why are savers cashing out?

First and foremost, the aforementioned pension freedoms have offered a new degree of flexibility to retirees. The new measures, introduced by George Osborne in 2015, allowed pensions to be accessed in a number of different ways; savers were no longer required to buy an annuity.

However, these freedoms are only available to those in defined contribution schemes; should members of defined benefit schemes over the age of 55 wish to access their pot in the same way, they would have to transfer out.

The transfer sums offered by companies have also caught the eye. DB schemes are increasingly expensive, largely owing to low gilt yields, and businesses are keen to reduce their pension liabilities.

Some are offering scheme members seven-figure fees to cash out their pension; such eye-watering numbers have encouraged retirees to think twice about remaining in their final salary scheme.

Will the current trend continue?

Pension transfer values remain high, and payouts from final salary schemes leapt up this year by 17%, according to research conducted by Willis Towers Watson.

Some insiders have predicted a surge which will be evident in the next round of statistics. However, a rise in interest rates could well be on the horizon. Should this happen, DB scheme transfer values will lower accordingly.

Should I transfer out?

Transferring out of a defined benefit scheme is not without its risks, and anyone looking to transfer over £30,000 must seek professional, independent advice.

At Wealth of Advice, we will assess your current status desired lifestyle and future goals, determining whether transferring to a defined contribution pension is right for you. Only when we have built up a full financial picture will we make a recommendation regarding your pension.

For advice on DB schemes and further information, please contact us via this page, or call 0191 384 1008.

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