While transferring your UK final salary pension could unlock more flexible pension arrangements, savers need to be aware that they are sacrificing their guaranteed retirement income.
Until now, the choice has been for savers to make. But as a consequence of the Covid-19 pandemic, the Pensions Regulator has introduced emergency measures. Some 5,500 defined benefit pension schemes covering more than six million members now have the right to suspend all transfers and requests for transfer quotes for up to three months. Transfer requests put in before the regulator’s announcement can also be put on hold.
The regulator says its chief concern is that volatility in financial markets is making it difficult for pension schemes to calculate transfer values i.e how much they should pay out to members moving on. Some schemes might pay too much, leaving them short of assets for remaining members.
The measure is also designed to protect savers themselves. One fear is that savers will be targeted by scammers and rogue advisers who see Covid-19 as a chance to persuade people to make decisions they will later regret.
Growing numbers are worried their employer will not survive the crisis and want to move their benefits before the industry lifeboat is called in. Others are facing financial pressure because of Covid-19 and may be able to cash in their pension earlier if they are over 55 and move the money elsewhere.