Solicitors, should your clients transfer their final salary schemes?

Transfer values are going sky high!

Owing to the current level of Gilt yields, the transfer values for final salary benefits has increased significantly over the past year. For individuals who have left an employer but have retained a deferred final salary benefit, it is worth considering whether they should retain the pension or contemplate transferring it.

There are very strict rules relating to the transfer of final salary schemes and the calculations needed in terms of the benefits available from the scheme or future gilt yield forecasts. We would therefore always recommend undertaking a full analysis to ascertain whether a transfer is absolutely in the client’s best interest.

Historically when we looked at final salary transfers we would usually consider a value that exceeds 20 times the pension due at retirement as a potential starting point – with values below that being evaluated based on a client’s circumstances i.e. single person with no dependents, where the spouse’s pension is irrelevant or if there is potentially ill health issues. It is not a one size fits all scenario.

At Carpenter Box, we have had two cases we have been asked to review recently where the transfer values were 32 times and 42 times the pension for members of deferred final salary schemes. A year ago the transfer values would have been nowhere near that.

In addition, if a client is getting divorced and a transfer value has been calculated more than six to nine months ago, it is certainly worth getting another done as the value is likely to have increased.

If you would like further information or advice on how this may affect your clients, please get in touch with our Wealth Management team on 01903 534587.

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