Transfer values are at, or near all-time highs but they won’t be at this level forever. This is because UK Gilt yields are so low. Put simply a transfer value is the lump sum of cash that can be transferred from a final salary scheme to a private pension. It is the cash value of the benefits that you would be expected to receive if you were to remain a member of the scheme with a normal life expectancy. It is inversely correlated to gilt yields. Gilt yields are expected to rise from their current historical lows and as they do transfer values will fall. If you are considering transferring out of your final salary scheme now is a great time to request a transfer value from your scheme and explore the option.
Unlike a typical final salary pension scheme, if you transfer to a private pension scheme, typically, you can access your pension from the age of 55 and won’t have to wait till the schemes retirement age. You can take 25% Tax free cash after the age of 55.
Flexible access and total control over when and how you take your pension. Instead of having two options, either a lump sum and a fixed income, or no lump sum and a fixed income you have complete control from age 55 over how you access your pension. You can take income flexibly, taking more when you need it and less when you don’t.
Thanks to record high transfer values the growth required to provide equivalent benefits from the final salary scheme is relatively low. You could even end up with a higher income in retirement if your transferred pension grows well.
The tax treatment of the Pension Commencement Lump Sum -PCLS for short – will depend on where you are resident when you take it. It may be possible to receive a larger tax free payment as PCLS are typically significantly bigger from personal pensions compared to defined benefit schemes. Transferring out of a final salary pension scheme and drawing benefits from a personal pension arrangement can also be more tax efficient in certain circumstances.
Former Pensions minister cashes in her final salary plans
Source: The Telegraph
Read here: https://bit.ly/2N974fJ