There has been an increase in final salary pension savers transferring to flexible pension plans seeking to gain access to extra cash due to the economic effects of COVID-19. Concerned, The Pensions Regulator has been issuing guidance to trustees of defined benefit schemes. This article from FT Adviser outlines some of the key considerations.
According to this interesting piece we saw in the FT Adviser, amidst the economic impact of Covid-19, the government and the nation’s financial regulator have issued a number of warnings to savers about making hasty decisions about their finances; especially concerning transferring their pensions from final salary or annuity schemes to flexible drawdown options.
Regulators have been warning that “rash decisions prompted by fear surrounding the coronavirus crisis and market crash may be exploited by scammers.” The FT Adviser said that the Pensions Regulator (TPR) issued a statement to pension trustees, calling on them to encourage savers to take regulated advice and to use the free guidance provided by The Pensions Advisory Service.
According to TPR: “Transferring out of a Defined Benefit pension scheme into a different type of pension arrangement is unlikely to be in the member’s best long-term interests. A Defined Benefit scheme promises a pre-determined level of benefits that is underwritten by an employer, usually with an additional layer of protection offered by the Pension Protection Fund.”
Charles Counsell, TPR’s chief executive, said; “A decision to transfer a pension pot that’s taken a lifetime to build is a very serious one and we’d urge members to be very, very careful making any transfer decisions at this time.”
Our thoughts at free2, are that Defined Pension schemes have been structured in a careful way to provide important benefits, often a guaranteed income for life, and anyone considering transferring from such a scheme should consider all the ramifications, and seek appropriate independent advice. We’re looking closely at ways to help people retain their full final salary benefits whilst improving their access to lump sums without the need to transfer.
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