Should you join the 200,000+ people who are planning to cash in their pension this year? In this case, it is “final salary” pensions that savers are thinking of “cashing in” by transferring them to other types of pension. Many companies who were giving the final salary schemes are now offering seemingly generous incentives to get their members to transfer their savings elsewhere, in order to reduce their own costs. Some financial experts are saying that the amounts being offered, to encourage people to switch, have reached their peak – so now may be the best time to act?
ThisIsMoney reports –
“These old-style company plans pay a set retirement income based on how long you worked and how much you earned, rather than how much you’ve put away for old age. They are often described as ‘gold-plated’ deals because the payouts are generous… But in a bid to cut costs, many companies are now offering enormous cash sums if you switch to a plan that is linked to the stock market… Figures from pensions transfer administrator Xafinity show the amount you could get has soared 14 per cent in a year. A 64-year-old man with a scheme due to pay out £10,000 a year at age 65 would typically have been offered £206,000 to cash in last year. Today that offer would be nearer £235,000… These transfer values have risen primarily because of falling interest rates — the Bank of England base rate was cut from 0.5 per cent to 0.25 per cent in August — and lower returns on government bonds, experts say.”