The surge in final salary transfers explained

The spike in demand to cash in final salary or DB pension schemes has been one of the big trends to emerge since the pension freedoms were introduced in April 2015. Financial advisers are reporting a surge in the number of final salary scheme members who are trading in their pension plans for cash.
According to a survey of advisers carried out by Royal London, the volume of transfers out of final salary pension schemes – which pay a guaranteed income for life – has grown by over 50% in the last year. Advisers claim that transfer values for those cashing in their plans are typically between £250,000 and £500,000. Royal London points out that this is greater than the average UK house price – currently £233,000
However, while transfer values might be looking very tempting, Royal London’s director of policy, Steve Webb, says scheme members must not rush into a decision: “It is clear that large and growing numbers of people are choosing to exchange the promise of a regular pension in retirement for a large cash lump sum. For some people, the value of their pension pot will be greater than the value of their house.”

The attraction of transfers have also been boosted by rule changes allowing cash to be taken from a pension from age 55 and residual funds to be bequeathed on death. Of note, current rules mean that if your transfer value is worth more than £30,000 you must seek financial advice first.  

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