One of the fairly common rewards for working on behalf of a local council or government scheme is a valuable Defined Benefit pension, sometimes even a Final Salary pension. In the case of people who worked for local authorities in West Yorkshire, this was usually provided by the West Yorkshire Pension Fund Pension Scheme.
Final Salary pensions are considered safe and valuable, because they promise a guaranteed income in retirement, one that won’t run out before the member dies no matter how long they live.
They don’t cost the member to run either, and are protected up to 90% of their value by the Pension Protection fund.
Final salary pension schemes like those from the West Yorkshire Pension Fund Pension Scheme represent relative certainty when it comes to retirement options – you know what you’re getting, and generally, you don’t need to worry about it.
So why do people transfer final salary pensions?Make a Claim
Let’s be clear, there are some situations where a final salary pension transfer might be in somebody’s best interests.
For instance, if they have a shortened life expectancy and therefore want a larger sum earlier, and don’t have a spouse or children to benefit from the pension if it stays where it is, this may be a reason to move it, if other factors are involved.
But these circumstances are rare.
In most cases, people move their local authority pension because they are told they could make more money by investing it themselves.
This may be true for some people, but the FCA rules often state that this is seldom a good enough reason to transfer a pension, as it exposes it to too much risk in comparison to the potential reward.
As a result, many people have received negligent financial advice to move their pension, possibly including former members of the West Yorkshire Pension Fund Pension Scheme.
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Moving a final salary or other defined benefit pension is rarely advisable, except in certain situations.
While moving your pension may earn your adviser big fees and commissions, you may lose more than you hoped.