An Overnight millionaire?
The decision whether to stay or go will hinge on the transfer value of your pension versus the amount it promises to pay you each year in retirement.
For our high earning clients the transfer value is often well in excess of £1 million. When the transfer takes place this has the side effect of adding the wealth onto their personal balance sheet. Whilst the fund has to be transferred into a new pension, if you are aged over 55 you can take up to 25% as a tax free lump sum straight away to spend how you choose.
Upon transfer your personal balance sheet wealth will improve significantly because you own and control your own pension fund.
Spouse will get more on your death
One of the most significant benefits of moving from a final salary pension scheme to a personal pension is the effect it will have on your surviving spouse when you die.
Instead of receiving 50% of your pension your spouse can continue to use your pension fund to maintain her lifestyle. Alternatively, your spouse could now re-invest the entire remaining fund if so required.
Company pensions rely on you dying sooner rather than later so your fund can start to pay newly retired members. This means when you die their liability is typically cut in half and when your surviving spouse dies it’s gone altogether. If your spouse dies before you, when you die their liability also ceases. There are no liabilities remaining.
The result – unless you have chosen a specific option on retirement your children, grandchildren, wider family and friends, favourite charity and so on will get absolutely nothing more from your pension.
However, if you have re-invested your fund in a personal pension, it can be left to whomever you choose. The choices are outside of your Will and estate and can be easily changed as your wishes change.