Three million savers with ‘final salary’ pensions have a 50:50 chance of losing up to a fifth of their income

Three million workers with final salary pensions have 50 per cent chance of losing up to fifth of their income because their employers have made unaffordable promises, a report has warned.

A growing number of employers who have offered staff so-called “final salary” pension schemes are coming under extreme pressure to meet their obligations, the Pensions and Lifetime Savings Association said.

This is down to a range of factors including people living longer than expected, making guaranteed pensions more expensive to provide.

Companies who find they cannot afford to pay the pensions they have promised staff will have their pension schemes rescued by a lifeboat service called the Pension Protection Fund.

Workers whose pensions are taken over by the fund are still paid a pension, however the amount they receive can be up to a fifth lower than what they were originally promised.


Different types of pension | How are “defined contribution” and “defined benefit” different?


“Defined benefit” or “final salary” pensions were the main way most people saved for retirement in the past.

You and your employer save, with the retirement income you receive based on your length of service, the accrual rate of the scheme, and your salary. The income is guaranteed and linked to inflation.

Commonly, the amount was based on the salary at the end of your career, hence “final salary”. Many schemes now use an average of your earnings, which normally reduces the income paid.


“Defined contribution” schemes now dominate pension savings after spiraling costs caused many employers to close “defined benefit” plans.

Under these rules you and your firm save into a pot, but there are no guarantees over the income it will produce.

At retirement, you simply have a pension value and it is up to you to decide what to do with it. You can buy an annuity, go into “income drawdown” or take a number of cash lump sums.

Recent high-profile cases of doomed pension schemes, such as the BHS collapse, have highlighted concerns over the future of workplace pensions in the UK.

The PLSA said one solution to the problem could be the pooling of resources into “superfunds”, to reduce costs and give pension schemes the best change of survival.

Its analysis showed the most vulnerable employers have a 50:50 chance of not having an insolvency event over the next thirty years.


Ashok Gupta of the PLSA, said: “More than 11 million people rely on defined benefit pension schemes for some or all of their retirement income but there is a real possibility that without change we will see more high profile company failures such as BHS or Tata Steel.

It is vital that action is taken to address covenant risk, underfunding and the current lack of scale in the majority of schemes.

“Our proposals have the potential to transform the industry – helping to ensure more members get their full benefits, reducing sector inefficiency, addressing the issue of stressed schemes and enabling sponsors to concentrate on growing their businesses.”

A spokesperson for The Pensions Regulator said: “While some pension schemes are facing significant challenges over the longer term, most will be able to pay members their promised benefits.

“However, we are clear that while the majority of DB schemes remain affordable, many should do more to tackle increased deficits and reduce risk to pensioners. We are prepared to use our powers where employers and trustees fail to tackle problems.”


There are some well funded DB Schemes and some seriously deficient DB Schemes, for a pension analysis and valuation please email me at

All the best



Farringdon Group

+60 3 2026 0286



Courtesy of The Daily Telegraph

‘Why will no one help me cash in my Pension?’

Savers are being thwarted from cashing in their “final salary”-style pensions because financial advisers are refusing to work with them over fears of compensation claims.

Millions of people with final salary pensions, where income is based on salary and length of service, have the right to move their savings into other pension arrangements.

Thousands have chosen to do this because, while the schemes offer guaranteed, inflation-linked income paid by their former employers, they do not allow lump sum withdrawals and are less tax efficient on death. The terms that savers are offered are often very generous.

It is not unusual to be offered a “cash equivalent transfer value” of 40 or 45 times the projected annual income that a final salary pension would pay. So £6,000 of annual income could become £250,000 once moved into a personal pension.

Under rules set down by the City watchdog, financial advice must be sought before the pension can be moved if the transfer value is £30,000 or more. Charges vary, but are typically thousands of pounds.

However, savers are finding that firms are wary of advising them if they suspect they will not be able to recommend a move. At the same time, the path is blocked by personal pension providers that will refuse to accept a transfer from a final salary scheme without a “positive recommendation”.

Many cite the “pension review” of the Eighties and Nineties, which led to billions of pounds being paid in compensation after advisers were judged to have wrongly recommended people to give up company schemes for personal pensions.

As a result, dozens of people are being prevented from taking control of their money. Transfer values are unusually high at the moment and there are fears that the delay in finding advisers and firms willing to help will mean savers lose out, we can help !

Members of final salary schemes can receive a transfer value free of charge once a year. But the offers are only guaranteed for three months, meaning that savers have to pay for new valuations if they can’t arrange a transfer quickly enough.

We can assist anyone to get a valuation and work out the best option for your future, there is a number of calculations we can put together along with a report, peace of mind and accountability

Please email me at

All the best



Farringdon Group

+60 3 2026 0286

Courtesy of Daily Telegraph

There has never been a better time to consider cashing in a Final Salary Pension


As things stand today, there has never been a better time to consider cashing in a final salary pension AKA DB Scheme.

This is down to the fact that transfer values (the transfer offers on the table from employers) are at record highs.

Some schemes are offering transfer values of 40 times the annual pension, so £800,000 today for an inflation-linked pension of £20,000 a year for life. Offers on the negotiating table are much more generous compared to previous years. As a rule of thumb, prior to the pension freedoms transfer values were typically around 20 times



Transfer values have risen so dramatically because yields from bonds – in which final salary and defined benefit pensions are mainly invested – have fallen to record lows.

Low bond yields increase the cost to pension schemes as they need larger funds to produce the same income, which is why they are keen to reduce their liabilities and get pension savers with financial salary pensions off their books.

For those who have other assets to help generate retirement income, transferring can work as a means of passing the pension on to younger generations of the family.

In the case of defined benefit schemes, the full benefits stop when your spouse dies. If you both die early – it is simply a case of tough luck. Moreover, if you are widowed or divorced the pension will end on your death, with no benefits paid to children or grandchildren.

By transferring out, your pension pot can be passed on to whomever you wish. For those who are seeking to leave a legacy to their family, then by transferring out and into a personal pension plan they can leave the whole fund to them on their death.

In addition, thanks to new rules brought in a couple of years ago, transferring may prove worthwhile for inheritance tax planning purposes. Heirs now just pay income tax at their marginal rate when the money is withdrawn – and that only applies when the person from whom they are inheriting the money was over the age of 75.

For pensions inherited on deaths before the age of 75 there is no tax to pay. Therefore, for those in the position of being able to draw on other assets, the pension pot should be the last thing to touch.

A pension valuation is free and you may be very pleasantly surprised at how much its worth. These high transfer valuations are not going to last however, with interest rates set to rise in the next 6 months now is the time to strike.

Please don’t hesitate to contact me by phone on +60 3 2026 0286 or by email if you’d like to consider getting a free valuation of your UK pension


All the best and have a great week



Farringdon Group

+60 3 2026 0286

UK Pension Transfer Values and GILT Rates







Mark Carney, Governor of the Bank of England indicated this week that he was prepared to see interest rates rise at least one time before the end of this year.

The announcement caught markets off guard as they had been expecting a slower rate rising cycle in the UK in the run up to Brexit. However, with UK unemployment at record lows and inflation running at 2.9% it seems unlikely that The Bank will be able to maintain rates at record low levels for long without causing a major inflationary surge in the UK economy.


Effect on Pension Transfer Values


Final Salary Pension Transfer Values are based on annuity rates which are in turn based on government bond rates. As the interest on government bonds drops it costs more to provide an annuity and hence the transfer value offered to you must rise.

Last year Government bond rates were cut from 0.5% to 0.25% following the Brexit referendum result. This had the effect of boosting transfer values by 40%.

However, this process will now be rapidly reversed. By the end of 2018 we expect to see as many as three UK rate rises.

Our analysis suggests that this will have the effect of cutting current transfer values by almost half (48%). If Interest rates rise back up to a level of 4% where they were in 2007 then transfer values could be cut by as much as 64% from their current levels.

If you never intend to take a transfer value from your scheme then this will not affect you. However, if you are considering an eventual transfer it is likely a future transfer value will be substantially lower even if you pay more money into the scheme in the coming years.


For a no-obligation consultation and our advice please drop me an email to

All the best and have a good day



Farringdon Group

+60 3 2026 0286

Week 37 In Review – North Korean Tensions Intensify











  • UN votes to impose new North Korea sanctions
  • China scraps deposit requirement for trades
  • BOE holds rates steady amid high inflation
  • US CPI rose 1.9% year on year in August
  • US household income rises for second year
  • US retail sales disappoint


As tensions continued to escalate between North Korea and the rest of the world, global equities rose slightly. The yield on the US 10-year Treasury note jumped to 2.20% from 2.06% last Friday as the United States began to recover from two major hurricanes. The price of West Texas Intermediate crude oil rose to $49.87 from last Friday’s 47.59 while the Chicago Board Options Exchange Volatility Index (VIX) declined to 10.32 from 12.34.



North Korea faces new sanctions

In response to North Korea’s nuclear test conducted a week ago, the United Nations Security Council unanimously voted to adopt the watered-down US draft resolution to impose new sanctions on the country. The resolution is designed to cap the country’s oil imports, ban textile exports, end additional overseas laborer contracts, suppress smuggling efforts and stop joint ventures involving other nations and sanction-designated North Korean government entities. Additionally, China’s five biggest banks froze new accounts of North Korean individuals and companies — an unprecedented effort to suppress financial flows with the country. In response to the resolution, North Korea carried out a ballistic missile test in which it launched for the second time a missile that overflew Japan and landed in the Pacific Ocean. South Korea retaliated for the launch by conducting military drills and its own missile test


Yuan surges, China scales back on measures

The yuan strengthened 6.7% against the US dollar this year, recovering all of last year’s decline of 6.6%. However, the surge is causing a drag on China’s export growth and threatening to deplete profits for many manufacturers selling in foreign markets. In response to this, the People’s Bank of China has removed a deposit requirement for currency forward trades. This will make it less expensive for companies and investors to buy dollars while selling the yuan. In conjunction with this, the central bank removed the reserve requirement on foreign banks’ yuan deposits last week, which will potentially make it easier for foreign investors to bet against the currency. By the end of the month, China is also expected to phase out measures to limit its outbound investment and will instead put in place formal guidelines issued by its State Council in August that encourage foreign deals in areas such as technology.


BOE holds interest rates steady

At Thursday’s monetary policy meeting, the Bank of England voted to keep interest rates at 0.25% but indicated that inflationary pressures may prompt an increase in the coming months. British inflation increased to 2.9% in August, well above the central bank’s target of 2%. The BOE expects inflation to rise to 3% in October before declining. UK unemployment fell to 4.3%, the lowest level in more than 40 years, but wage growth continued to lag behind price increases. Average weekly earnings grew 2.1% over the three-month period, well below inflation.


US consumer prices increased in August

In response to the surge in gasoline and housing rental prices, the US Consumer Price Index jumped 0.4% in August, up from 0.1% in July, and increased 1.9% year on year compared with July’s 1.7%. Gasoline prices increased 6.3% and are expected to rise further in September as a result of the temporary closure of refineries in the wake of Hurricane Harvey.


US household income on the rise

After a long period of stagnant income growth following the 2008 financial crisis, US median household income sustained strong growth for the second consecutive year, rising to 59,039, a 3.2% more than a year earlier, after adjusting for inflation. Income rose across all ages, ethnicities and geographical areas. Simultaneously, poverty levels fell to 12.7%, the lowest level since 2007.


August retail sales miss

Headline August retail sales were down 0.2% month over month, below consensus expectations of a 0.2% rise and worse than July’s downwardly revised 0.3% increase. Core retail sales, which feed into GDP, were down 0.3% month over month, confounding expectations of a 0.3% increase. Auto sales decreased 1.6% month over month, possibly as a result of Hurricane Harvey. Further, sales excluding autos rose just 0.2% compared with an anticipated 0.4% gain. Electronics and appliance stores, building materials and clothing accessories all recorded month-over-month declines. On a brighter note, the Empire manufacturing index for September beat expectations, coming in at 24.4 versus the 18.0 expected. In addition, labor market indicators pointed to a modest increase in employment and hours worked, and both input and selling prices rose at a faster pace than last month.


Repairing damage from US hurricanes expected to cost billions of dollars

In a preliminary analysis, Moody Analytics estimates that damage caused by hurricanes Irma and Harvey could cost between $150 billion and $200 billion to repair, but these figures are expected to change as more information is gathered. The economy could suffer an additional $20 billion to $30 billion in lost economic output from the two storms. As a result, Moody’s expects US GDP to decline a half point to 2.5% for the third quarter but added that it expects fourth-quarter GDP to rally, depending on rebuilding efforts.


Fed expected to announce plan for reducing its balance sheet

At its September policy meeting, the US Federal Reserve will most likely hold interest rates steady at 1.25%. Fed officials are also expected to announce when they will start to reduce the central bank’s $4.5 trillion balance sheet.


Republicans continue to struggle for consensus on tax reform

Despite a barrage of headlines on the subject, the scope and timing of any tax reform remains unclear. At a Politico event on Thursday, US secretary of the treasury Secretary Mnuchin said that a widely anticipated blueprint on taxes due from the “Big Six” group of senators late this month will propose a specific corporate tax rate and discuss in detail the deductibility of corporate interest. He also said reports suggesting that negotiators are far apart are untrue. Reuters reported that Senator Orrin Hatch (R-Utah) said the Big Six will not dictate the direction that the Senate Finance Committee takes on tax reform. Reports noted that some Republicans viewed this comment as one that will widen rifts among Republicans in the Senate, House and White House and could jeopardize reform.







All the best and have a great week



Farringdon Group

+60 3 2026 0286