Five questions you must ask before swapping your final salary pension for cash


The Telegraph, Sunday 28 May 2017

A staggering 80,000 people have given up their “final salary” pension entitlements in the past 12 months alone, prompting renewed fears that they are not being adequately warned about the value of what they are relinquishing.

Final salary schemes promise to pay members guaranteed, inflation-protected incomes for life.

The downside is that the way in which you draw an income is tightly controlled. Nor is it usually possible to pass on any of the pension other than to your partner.

Alternative, and generally less valuable, “defined contribution” pensions are far more flexible – but savers have to bear the risk their investment might underperform. These are becoming the norm as employers seek to limit their liability to the unknown costs of meeting final salary promises.

But another way in which they are limiting risk is to “buy” employees out of their final salary entitlements, often by offering very large sums. This has led to a surge in the number of final salary “pension transfers”.

One firm of pension transfer specialists told Telegraph Money it is moving around £50m a month out of final salary schemes.

In many cases savers are required by law to take financial advice before making such a move. For many, the transfer may be an appropriate move. Others may come to regret the decision.

Here Telegraph Money lists the five questions you should ask yourself before ditching your pension...

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