Final Salary Pension Transfer

A final salary pension is also known as a defined benefit pension. A final salary pension offers a guaranteed prearranged pension income based on your final salary. Unlike a defined contribution pension where your pension income can go up and down depending how well the pension scheme investments perform.

Final Salary Pension funds are invested just like any other pension fund. However the company providing the pension will take all the investment risk. If the funds go down in value, you will still be guaranteed your prearranged pension income. If the value of the pension fund goes down there will be a “pension shortfall” or “pension deficit” where there is not enough money to cover the pension schemes obligations. Any deficit will have to be made up by the company. This is why final salary pensions are often known to be the best type of pension you can have.

Many companies no longer offer final salary pensions due to all the risk being borne on them. People are also living a lot longer which puts increased pressure on the amount of money needed in pension funds.

Final Salary Pensions are suitable for the vast majority of members. Transferring from a final salary pension scheme is an irreversible decision and it could have a detrimental effect on your retirement planning. The detail on this website is for information purposes only and is not to be taken as a personal recommendation. Before taking any action, you should take financial advice from a suitably qualified professional financial adviser. Any potential advantages of transferring from a defined benefit scheme to a defined contribution scheme are often outweighed by the costs, risks and loss of benefits involved.