Reasons Not To Transfer2019-09-18T09:34:54+00:00

Reasons Not To Transfer

Don’t do it, the FCA say don’t do it, it’s a gold plated scheme, why would you transfer?  The regulators stance is that it is in the members best interest to stay in their final salary scheme.

9 out of 10 people should not be transferring from their gold plated Final Salary Scheme, what makes you the 1 in 10 member that should be transferring?

As a defined benefit Pension Transfer specialist I agree with the FCA in that transferring is not something that should be done unless all reasons point to a transfer.

Why would you give up a guaranteed and often very healthy increased income for life and replace it with a flexible scheme that puts you at risk in the stock market?

There is a reason there are only a handful of these schemes actually still in existence and most are shut completely.  The reason is they are too expensive for scheme trustees to run, they are too good and offer benefits that are almost impossible to replicate.  So why would you want to give up these benefits?

Do your reasons to transfer outweigh the benefits?  If you are looking to transfer for some of the following reasons then please consider the alternatives before we speak.


Why you might want to transfer and why you should not:

Pay off a mortgage

Other Options-Use alternative funding, other pensions, partners pension, savings.  Think about the rate you are paying on your mortgage, a low interest rate of 1 or 2% is likely to be a fair bit less than the return on your pension so is it really wise to take a lump sum from a pension to pay off this considerably cheap loan?  Paying off a mortgage is often a psychological milestone, take that out of the equation and do the numbers, does it really make sense?

Death Benefits

Other Options-Life insurance, don’t dismiss life insurance as yes it’s a cost but it often pays for that ‘no brainer’ option of transferring and not having any money left for the kids or the estate.  Paying for life insurance to pay out until age 85 could actually offer you a safety net of money going to your estate and you also having the benefit of 20 or 25 years worth of payments from the pension.  The numbers should be always explored.


Risking a guaranteed income for a flexible one is akin to leaving a well paid job to be self-employed, you wouldn’t do it unless you had a really good plan and even so, you know there are risks.  Flexibility is great and we don’t know what life will bring but how much is it really worth or even needed especially in retirement.  For reference, flexibility alone is not a good enough reason for our compliance department to sign off such a transfer but can be part of other reasons.

Better performance in my own portfolio and under my own control

I get many members who will tell me how great they have done in the markets recently and how they want to transfer the pension into their own pot and manage it themselves, so they can keep on achieving these high returns, with all due respect these are not clients that we take on.  Yes I suspect you have experienced good returns in the markets but if you are returning 16% returns plus, then you are clearly taking risks.  It’s simply not possible to get such returns with cautious low risk funds and if there were to be a market correction or fall then I do not want to be picking up the pieces of a 10% drop in your portfolio.  Be realistic, we do aim to achieve above average returns but we also aim to minimise substantial losses and unfortunately, if we cannot help manage funds on an ongoing basis then we don’t feel comfortable advising on transfers, as we are not party to investment decisions in the future.  We offer many good investment solutions, which we can talk about.

The pension on offer is awful and won’t offer me anything significant in retirement

Many people who come to me have a figure in their mind that they think they are to be offered at retirement from their fund and the transfer value is often 40 times what is on offer.  It’s a no brainer, of course I should transfer.  One big red flag is that trustees often quote a pension at the time of leaving and this is often misinterpreted as the actual pension amount that will be received at retirement.  The reports we do (TVAS report) will give you the actual figure at retirement.  These amounts can often be vastly different and this puts a stop on the process of transferring and the member realises that actually a transfer is a really bad idea.  The advice in these instances is invaluable.


Are you psychologically in the right mindset at this current time?  Are you at a low point?  Have you lost a job, looking to get back on your feet, looking to pay off a debt?  If you looked forward 5 yrs and looked back on yourself now would you feel this time in your life right now is the best time to make a huge financial decision that could affect the rest of your life?