Defined Benefit Pension Scheme
Do you know what type of Pension scheme you are contributing to? Do you have a Final Salary pension scheme, or a Career Average pension, both known as a defined benefit pension scheme?
The Defined Benefit pension scheme is one where the amount paid to you is set using a formula based on by how many years you’ve worked for your employer and the salary you’ve earned rather than the value of your investments. If you work or have worked for a large employer or in the public sector, you may have a Defined Benefit pension. In most cases, these pensions offer great benefits but they are expensive to fund and many employers have phased out this option.
Due to changes in legislation in April 2015, you now have more freedom and choice around retirement options, you might be able to transfer your Defined Benefit pension out of your existing scheme and choose the type of scheme that will give you greater control over the pension benefits you receive when you retire, your income and planning and your death benefits.
You could have many reasons as to why you are considering transferring your pension scheme. It could be you wish to access your money at 55, but your existing Defined Benefit pension scheme stipulates that payment will not be received until the ages of between 60 and 65, perhaps later. Maybe you have left the organisation and have a deferred pension scheme and you want to understand your options.
Staying in a Defined Benefit pension scheme is not risk free. If your employer is still in business, it usually has to make sure the scheme has enough funds to provide the full entitlement to members. Unfortunately, some of the employers sponsoring these schemes have stopped trading, leaving insufficient money to pay the pensions promised.
It is very important if you are considering transferring out of a Defined Benefit pension scheme to financial advice. Our experts at People and Business are here to guide you through the complexity of your Defined Benefit pension scheme. To contact us click here.