EQ Investors launches final salary pension guide

EQ Investors launches final salary pension guide

Boutique wealth manager EQ Investors has launched a guide on final salary pension transfers in response to the record high cash transfers being offered by some defined benefit schemes.

Pension funds rely on bond yields to fund yearly payouts, and when yields are low, as they are now, they have to spend more to get the same annual return.

Low government bond yields mean DB pension schemes looking to offload their obligations are offering transfer values at multiples of up to 40 times annual payouts, meaning individuals with long service on medium to high earnings are being offered several million pounds.

The EQ guide discusses both the risks involved in final salary pension transfers and potential benefits, and includes case studies and a warning on scams.

John Spiers, chief executive of EQ, said: “For many people, leaving their final salary pension untouched is the right thing to do. But for some, with transfer values remaining high, transferring is seriously worth considering.

“Most final salary members fail to appreciate the complexities and hurdles they will need to overcome before proceeding down the irreversible track of transferring their pension scheme. The first step is to always seek advice.”

The guide covers topics such as flexible access, leaving an inheritance, investment control, running out of money, taking investment risk, and losing additional benefits.

The April 2015 Budget introduced radical changes to pension rules that allow retirees to take their pension as a lump sum, but this is only available to personal pension holders. In order to use the new rules members of a final salary scheme must transfer to a personal pension.

Commenting on record high transfer values, Mr Spiers said: “This situation will last as long as low bond yields remain. Therefore, if you are considering a transfer it makes sense to seek advice soon."