What on earth has happened? The gilt-edged final salary pension scheme used to be untouchable. Once upon a time, if it was offered, a final salary pension was one of the main reasons to work for an employer. However, since the new pension freedoms have arrived in town, people are almost being rounded up and advised to transfer out of these schemes in droves. A casual observer could be excused for thinking that we’ve returned to the lawless wild west; the gunslingers are after the gold!
The recent pension freedoms have been engineered by the Government to make it more attractive for individuals to transfer from the safety of final salary pension schemes. There are varying opinions on whether this is really for the good or bad; but let us consider the very ugly consequences if all goes horribly wrong.
All of these examples mean you run out of money early… now that’s really ugly!
You should get qualified and regulated advice from someone who really knows what they’re doing. They need to have a strong pensions background and preferably have been involved extensively with final salary schemes for employers.
For me, one of the big issues is the role of advisers. Will some of them one day be seen as the outlaws who were responsible for robbing these poor unsuspecting individuals of their right to a stable and predictable retirement?
We’ve seen the regulator move the goalposts before – with the benefit of hindsight. This does worry many firms offering final salary transfer advice. So don’t expect this kind of advice to come cheap; there are simply a hell of a lot of costs and risks associated with providing it.
If I have one message for you, it is make sure you find a tried and tested adviser (not a salesman) who comes highly recommended. Someone who helps you fully understand the implications of any decision and who provides cash flow forecasts. An adviser whose firm has a track record for investing and managing money wisely, at a transparent and fair cost.
Transferring could be a great decision for many people. But for some of you, for goodness sake stay put and whatever you do, watch out for those outlaws!