Final Salary Schemes place the full onus on the company to ensure that at retirement there is sufficient in the pension pot to provide the retired employee with his salary based pension for the full period of retirement, and frequently a widow’s pension as well. With investment returns falling behind old inflated estimates of just how much money a pension fund may return, and retirees living significantly longer, what has been termed “Pension Black Holes” have emerged. That was also before The Bank of England introduced Quantitate Easing, which further exacerbated the problem. Now a new issue arises, with a revision as to the current method of calculating the retail prices index reckoned to add a further £20 billion on top of the current estimated deficit of £50 billion, just for the FTSE 250 Companies alone. However, if you have pensions held in a Final Salary Scheme, this may be the best time to transfer to a QROPS or SIPP, provided you understand and recognize the risks. This is because transfer values are some 80% higher than they were six years ago.
Most certainly the decision whether to transfer needs a great deal of thought and consideration. However, my belief is that you are not able to make a judged decision without having all the information in front of you. I suggest that if you do hold an old final salary pension scheme and have held off considering a switch that perhaps it may be politic to obtain the relevant information, and make that decision based on facts and not blind judgment.
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