The Pension Debate Continues: DB Pensions AKA Final Salary Schemes –Things you NEED to know and my Opinion


Ok, so I get asked ALL the time ‘what should I do with my UK Final Salary Pension and what guarantees & benefits do I get’, WELL below I have highlighted just a few of the main points you should consider when looking at this and reasons why you should or shouldn’t look at a potential transfer in to a UK regulated SIPP.


There are so many articles being published and it makes me frustrated that they try to make people confused about retirement….Yes you do need to retire with a pension pot, Yes, you should always try to save and Yes, Final Salary schemes or DB’s may not be around when you retire…But to scare people with articles, trying to confuse them because the UK government and FTSE companies will be affected isn’t fair, especially when its these FTSE companies who have underfunded their pensions for their loyal employees.


You as an employee or ex-employee should be able to decide what the best option for you in retirement is and be able to control this, after all you’ve worked your life to retire happily without having to worry about what and or who is going to affect you and it should be easy to do….It sometimes isn’t and this puts people off asking for help.


I/we can help and I will try my best to educate and inform rather than scare and confuse, take control of you pension, be fully informed, understand how retirement is calculated, how annuity rates are compiled, I am happy to share this information with everyone. A pension transfer is not for everyone, BUT in my opinion it’s definitely something to look at very closely with all these companies previously mentioned trying to change rules and under-fund their schemes..


Questions Answers
Is my Final Salary a Guarantee? NO, DB or Final Salary pension is NOT a guarantee, it is a promise and promises can be broken! The government are changing rules and regulations constantly as most schemes are dangerously under-funded, like Carillion, BT, BA, Shell, Tata, BHS etc.
How does my UK pension perform compared to other options? Government may be looking to change the benefit increase from RPI (3-5%) to CPI (2-3% or even get rid of any increase each year)
Expected Performance? UK Pensions are proving to seriously underperform currently at 0-1% growth, we would be looking at 4-5% and the saving on the costs above
Can I still take 25% lump Sum at 55? Yes, you are still able to take 25% PCLS after 55.
What are the succession Benefits? Most DB schemes pass on 50% of the pot to your spouse and then 25% to the children if they are in fulltime education and below 23 years of age. The entire pension may be lost if these boxes are not ticked.

If you move to a SIPP, the wife will receive the pension minus death taxes and if you were above 75, there is no death tax.

What happens if the company I worked for goes in to Liquidation or files for bankruptcy? Once a company begins to struggle to fund a pension, they are within their right to reduce your benefits and effectively take from that pension pot. In the event of total collapse, you may end up on the Pension Protection Fund, whereby your pension benefit may reduce significantly. We believe that if a larger company goes under, the PPF may well fail and pensioners may be left with no pension at all.
Will the UK government stop pension transfers? We don’t think they will stop transfers out, but they may well tax pensions differently or put other restrictions to help protect the UK pension industry.
Will interest rates in the UK affect my pension? Yes, 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.
Is it still a good idea to look at transferring? Yes, 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. Pension valuations are still at an all-time high and getting a valuation is imperative to making the correct decision before transferring.
Is it easy to get a valuation? Yes, we are able to assist and valuation can take up to 3 working weeks, then we can make the correct calculations as to whether your pension is better served controlled by you.
Does it cost me anything to get a valuation? NO, generally you are allowed 1 or 2 valuations per annum and will be fully calculated by actuaries so your figure may change between valuations
Am I locked in? Pensions, can be accessed via flexi drawdown, but you will be taxed at UK income tax rates. There are a number of options available for drawdown, so it’s always worth exploring these scenarios with an adviser. All SIPPS provide an early retirement date (if chosen) at 55
I have over 5 years until I retire, what’s the best option? Please get a valuation on your current benefit, this will give you the best info of what the expected pension at retirement will be. Be fully informed
Does getting a valuation mean I have to transfer? Absolutely NOT, it is your right to be fully informed about your pension and you MUST know what is best for you and your family
How long does my Valuation last? Once you get a valuation, the benefit is locked for 3 months, to decide if the best action is to transfer is best to do within 4 weeks and transfer to a SIPP can take 6 months
Can I retire early? It depends, because all UK Pensions are regulated by the FCA to ensure that they will provide enough financial support to the individual and their family past their working years and protect them from falling short, the earliest retirement achievable for draw-down of a SIPP is 55. In most cases, Final salary scheme retirement dates are set at 65 resulting in smaller sums paid out by companies and delayed overall retirement dates of individuals.


The main thing that every pensioner should ensure, is that the fund selection within their SIPP is clean and suitable for its purpose. We only use highly regulated daily liquid funds, hence you can be safe in the knowledge that our fund selection is within your risk attitude and from leading fund managers, such as Templeton, Schroders etc.

I hope you find this information useful and informative and you can always contact me directly via email or call our office +60 3 2026 0286, I am here to help and explain how all this information works, just let me know

All the best




International Adviser – Latest DB Article

This shows companies are trying to change the way pensions are valued

DB pension deficit headache worsens for struggling employers

The UK High Court has ruled that communications group BT cannot change a pension scheme from the retail price index (RPI) to the generally lower consumer price index, placing more significance on an imminent government white paper on defined benefit pension schemes, a legal expert says.

BT is the latest in a line of companies that are struggling to deal with increased pension scheme deficits and have sought to implement a change in the inflation rate they use.

Each scheme has its own contractual rules and some are “broad enough to allow the calculation to be changed, and sometimes not”, pensions law expert Stephen Scholefield of Pinsent Masons said.

“Where there is no flexibility, some had hoped that the courts would decide that RPI was simply inappropriate, regardless of what the rules said,” he said.

The news follows the collapse of Carillion where it is understood its pension scheme has a deficit of about £580m.



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