People who have changed jobs and left behind a Defined Benefit Pension Scheme should review their positions – and now there could be some urgency to this, as the options available could be cut down by proposed new legislation.
The government’s new flexible approach to how people may be able to draw upon their pensions when they retire has been universally welcomed, but the changes from April next year only relate to Defined Contribution schemes, such as personal pensions, SIPPs and stakeholder schemes. However welcome these new rules will be to savers with this type of pension, they may be completely unavailable to savers who are in Defined Benefit schemes, typically final salary occupational schemes.
Savers in Defined Benefit schemes are currently able to transfer to a Defined Contribution scheme at any point prior to retirement, giving them the option to make the most of the new rules or better terms if more beneficial. However, the government is consulting on a possible ban on these transfers and it is possible that this transfer option could be closed down. If this happens – and it looks likely to for at least some types of scheme – then hundreds of thousands of people will have this facility removed.
Defined Benefit schemes offer valuable guarantees and benefits, and in most instances it is still more beneficial in the long term to stay in a Defined Benefit scheme rather than transfer out.
However, there could be scenarios where a transfer to a personal pension arrangement is beneficial. Although a minority position, this still means that some people could lose out if the transfer option is closed, and will not have anywhere near the same levels of flexibility as members of Defined Contribution schemes.
For a very short period the transfer option is still open. No-one knows if, or when, this may close - or exactly how the restriction may be applied. With this in mind we would strongly recommend that anyone who has left a Defined Benefit scheme should have their position reviewed.
If you are an active member of a Defined Benefits scheme then we cannot help, as you would have to opt out of the scheme to be able to transfer. This would only be advisable under extremely rare circumstances.
We want anyone who has an old Defined Benefit scheme who wants to find out what their position is to be able to do so as quickly as possible, because they may have options today which they will not have in the future. We are therefore able to help those with Defined Benefit schemes find out more about their transfer value and the options they have available to them
Click here to view case studies for people we have really helped before, by reviewing their Defiend Benefit Pension position.