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Final salary pensions buyout

6 replies

mumtomoley · 17/09/2012 10:27

DP has been approached about potentially being made an offer from his ex employer wrt buying him out of his final salary pension.

I'm sorry if this is a stupid question but can you use the buyout for other purposes (i.e. to clear debts) or do you have to transfer it into another pension scheme?

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Notmadeofrib · 17/09/2012 13:14

If your DP is under 55 then the money can't be touched. It must pass to another pension. If DP is over 55 then you could crystallise the benefits and take 25% tax free cash (and any protected amounts) and then use the rest to purchase a pension, or go into drawdown and leave the pension until you need a regular income.

Ensure he takes INDEPENDENT advice on this. The figures can look tempting but a buyout unless done on a nil risk basis is often more for the benefit of the closing fund and not the ex employee.

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mumtomoley · 17/09/2012 13:25

Thank you. He's under 55.

I had heard about companies that have final salary pensions in place making offers with a cash incentive, but actually it seems this isn't the case with this one.

Thank you for your reply.

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GooseyLoosey · 17/09/2012 13:29

There has been a recent clamp down on offering cash incentives - the Pensions Regulator does not like them.

Would second the advice to talk to an IFA.

Do you have any idea as to what will happen to the pension scheme in the medium term? This may inform the decision what to do.

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MoreBeta · 17/09/2012 13:33

By definition, if he is being approached by the firm asking him if he wants to be bought out of his final salary pension it is almost certainly to teh advantage of the firm and not him.

They are hardly likely to be offering him more than it is worth.

Be very careful and take advice.

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mumtomoley · 17/09/2012 13:48

In terms of his pension it would be better to stay with his final salary pension, but we have major debt problems at the moment so taking a look at the whole of our finances if there was a cash incentive to change it would be beneficial for us to do so.

However, it turns out there isn't in this case. The offer is transfer only, so there is no point in us doing it.

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Notmadeofrib · 17/09/2012 14:06

there is no point in us doing it I'd argue that it is not quite that cut and dried. How big is the pension (is it bigger than the PPF maximums)? www.pensionprotectionfund.org.uk/About-Us/Pages/About-Us.aspx

What is the funding position of the pension? How strong is the employer financial position?

If the pension goes into the PPF, would he lose out or not?

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