Changes to Defined Benefit Pension / Final Salary Pension Advice

Some fortunate employees have Defined Benefit (Final Salary, or Career Average) pension arrangements. They might be the current pension, but more likely are from an earlier career. In the past the only option was to just accept the guaranteed income payable that may also have been accompanied by a tax-free lump sum.

Then in 2015 legislation changed. One of the new options was Flexible Drawdown, which for some is an attractive alternative (although, of course not suitable in all cases). There were fears that some individuals might have access to a substantial sum of money, spend it and then have no income in retirement – therefore specialist pension advice was, and still is, a legal requirement.

Until recently it was possible to research whether a switch to flexible drawdown would be appropriate or not, then pay for the advice depending on whether you went ahead with it from out of the pension fund itself. However, those rules have now changed. From October 1st this will not be possible, excepting for two very minor concessions, unless the work has been started. If paying for the advice from other funds is not a problem, this will have little impact. However, if paying in advance for the work would be difficult, and this is something that you wish to consider, I suggest raising the matter with your Independent Financial Adviser at the earliest opportunity.

There are very few specialist pension-switching advisers carrying out this work. There are many schemes that are so good that you may be ill advised to make any changes, but there are also schemes and personal circumstances that could make switching very helpful.

Apart from Defined Benefit schemes, there are some Personal Pensions that do not provide access to all the current features and benefits that a modern arrangement does. It is not possible to know whether action should be taken or not without understanding all the circumstances, but if you need advice then seek out an Independent Financial Adviser for a free initial ‘meeting’. This might be by phone or a virtual meeting via the internet rather than face to face for now, although even this option is still available.

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