Can I Transfer Out of a Final Salary Pension Scheme?
Question asked by Jonathan Purley
Now that I’m nearing retirement, I’m trying to rationalise my various pensions so I can see what’s what and make the most of the new rules around drawing down lump sums from your pension pot. However, I’ve found that I can’t transfer nearly 10 years of pension savings in my old fire service pension. Why is this and is there anything I can do?
Like a number of other public sector pension schemes such as those of the armed forces, police, civil service, NHS and teachers, the Firefighters’ Pension Scheme is what’s referred to as an ‘unfunded’ scheme which is paid out of general taxation rather than a large pot of scheme cash.
With little advance notice, the government announced in early 2015 that members of unfunded public final salary schemes had just one month to undertake transfers before the door was closed by the legislation introduced in April of 2015 as part of the new pension freedoms.
The move was intended to protect government from the need to borrow in order to meet the huge potential cost of the transfer values that might be involved. It’s estimated that around a fifth of adult Britons will have deferred rights in one of the UK’s unfunded schemes. But, as it stands, unless they transferred out before April 2015 they’re now stuck with these scheme benefits.
This may be no bad thing. Such schemes benefits are far more generous than those found in the private sector and, as they’re government backed, they’re among the most secure of all pensions.
We usually recommend that clients maintain final salary benefits as they provide an excellent source of guaranteed income in retirement. This can be used to ensure that regular ongoing costs such as food and household bills are always met.
You can always use any money purchase benefits you may have to plan for tax-free lump sums and the additional income you may need over the course of your retirement.