Should I transfer my defined benefit (final salary) pension to a personal pension?

Full answer

A defined benefit (DB) or final salary pension pays a guaranteed income based on your salary and years of service, typically increasing with inflation and including a spouse's pension on death. Giving that up is rarely in your interest, and the FCA's starting assumption is that a transfer is unsuitable for most people. If your cash equivalent transfer value (CETV) is more than £30,000, you must by law take advice from an FCA-authorised pension transfer specialist before any provider will accept the transfer. Worked example: your scheme offers a £10,000-a-year inflation-linked pension from 65, or a £250,000 CETV to move into a personal pension or SIPP. That £250,000 sounds large, but buying an equivalent inflation-linked, spouse-protected annuity could cost more than that, so the guaranteed pension is often worth keeping. Reasons people still consider transferring include serious ill health with a short life expectancy, wanting flexible access, or estate planning, since DC pots can usually pass to heirs more easily than DB pensions. Risks include investment losses, running out of money, and scams, so check the adviser on the FCA register. Note the lifetime allowance has been abolished, but new lump sum allowances now cap total tax-free cash. Use the pension calculator to compare a guaranteed income with a drawdown projection. For guidance see gov.uk and MoneyHelper at https://www.gov.uk/transferring-your-pension.

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