Should I move my old final salary scheme to my current pension?

admin
9 September 2014

Q

I have an old final salary pension with Boots that has not been active since 2003 and I also have a pension with my present employer that moves with me if I change companies. My question is whether I should keep the final salary pension where it is or move it to my pension with my present employer? I have been advised previously that I should leave it where it is because this type of pension does not exist anymore but I am aware of some changes and have read in some newspapers that final salary pensions are getting cancelled in favour of a new government scheme.
From
MT/London

A

The government is introducing new flexibility from April 2015 but this only covers defined contribution schemes.

This includes the ability to withdraw as much as you want from your pension, when you want, once you are past 55 - although you do pay income tax on any withdrawals above the 25% tax-free cash allowance.

Defined benefit arrangements, like the one you have with Boots, aren't affected. You do have the option of transferring from your Boots scheme to a defined contribution scheme so you can make use of this greater flexibility.

However, the benefits under your Boots scheme are valuable – the scheme promises to pay you a certain level of income each year, however long you may live. There are also likely to be valuable benefits for your spouse or partner.

If you transfer to a defined contribution scheme, you lose this promise, and you will take on risk – that the investments you choose will perform.

In most cases, it is sensible to keep benefits within a defined benefit scheme, although there are a few exceptions when it can make sense to transfer.

If you are considering transferring, I would strongly suggest you speak to a qualified financial adviser, as this is a complex and important decision.

Andrew Tully is pensions technical director at MGM Advantage

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