Defined Benefit, or Final Salary Schemes, have been hitting the headlines recently. Historically, these have been seen as the ‘Rolls-Royce’ of the pension world, as they pay out a guaranteed income for life. Some of the other benefits that they offer are incredibly valuable, so, in years gone by, Financial Advisers would pretty much universally recommend that you keep hold of these schemes.
However, in recent years, company’s have realised how much these schemes cost them to maintain. Paying a former employee a large sum of money each year is possibly not great for business, so companies have, in some cases, been offering very large sums in exchange for the former employee to give up their Final Salary benefits.
One of our clients, Ray, had discovered that the company he had once worked for was offering former employees who had a Final Salary Scheme a lump sum payment to give up their benefits. Ray didn’t really know what he could stand to be offered, or if this was the best route for him to take, which was causing him some confusion and uncertainty. He had a good idea of what he wanted to achieve in retirement but didn’t want to throw this into jeopardy by accepting a transfer value that may not be sufficient.
Transferring a pension requires expert analysis and should not be done without professional guidance, so Ray chose to approach Efficient Portfolio, as we are a Chartered firm with years of experience and specialist qualifications. This gave him confidence and peace of mind that his pension would be properly and thoroughly assessed, and that his needs and goals were at the forefront of the decision.
Working together we looked at exactly what was important to Ray and assessed what benefits he could stand to gain if he remained in his Final Salary Pension. We also looked at the transfer value and the benefits of his existing scheme and compared these to what he could stand to gain from a Personal Pension. Through careful research, ‘stress testing’ and the plotting of various scenarios, we were able to provide Ray with his options, so that he could make a fully informed decision.
Once Ray had achieved this clarity, he was able to confidently decide upon the best way forward with his retirement funds. He now feels far more in control over his future and really values the ongoing reviews, new flexibility and ongoing support and guidance. He also knows that he can retire happily and not worry about running out of money.