Transferring a Final Salary Pension into a SIPP

  • What is a final salary pension?
  • Why do people transfer their final salary pensions into SIPPs?
  • How can you find out your transfer value?
  • Is now a good time to transfer my pension?

Final salary pensions, also known as defined benefit pensions, are types of pensions which pay a fixed amount to a member in retirement until you pass away.

These types of schemes are beneficial to members as they provide income security in retirement. However, final salary pension schemes also have their disadvantages including inflexibility of income and lack of death/inheritance benefits.

Certain members of UK private-sector defined benefit pension schemes have the option to swap their ongoing pension benefits for a one-off lump sum.

Why do people choose to transfer their final salary pension into a SIPP?

The main motivators behind transferring a final salary pension into a lump sum are:

  • Greater flexibility around your income
  • Earlier access to your pension
  • The right to pass your pension benefits onto your spouse/children/beneficiaries following your death
  • The ability to switch your pension into a different currency
  • Investing your pension competitively to achieve growth 

What transfer value will I be offered from my scheme?

Members of a defined benefit pension scheme will have an ongoing pension income. 

Your pension transfer value will depend on several factors including the number of years you were a member of your scheme, your final salary, interest rates and the schemes multiple. 

These factors create a ‘deferred income’ this is what your scheme will pay you as an ongoing retirement income, members will often receive a 20-40 times multiple of this amount. This is known as your cash equivalent transfer value or CETV.

A £25,000 deferred income will commonly create a transfer amount between £500,000 & £1,000,000.

How can I calculate my transfer value?

In order to calculate your CETV, you will need to request it from your scheme, follow this link for more information.

Is now a good time to request a transfer value?

Now is an excellent time to request a transfer value from your scheme. Firstly because it is always good to gain a greater understanding of your pensionable options and secondly because transfer values are currently very high, due to high-interest rates.

Request a Transfer Value Here

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