The pensions advisory firm most investors wouldn’t and shouldn’t ever leave their final salary arrangements but a "significant" minority of investors have valid reasons for moving out of their schemes and could be denied this option and could lose pension benefits as a consequence.
The DWP has laid down draft legislation to abolish contracting out of the State Second Pension into a money purchase pension from 2012. Part of this legislation abolishes transfers from final salary schemes to money purchase schemes, yet it gives no reasons for doing so. The consultation on this legislation closes this week.Hargreaves Lansdown says it is advisable for most final salary scheme members to stay in their schemes, but in some instances it can make sense to transfer out. It has urged the DWP to revisit this legislation, pointing out some consumers could lose out.
Laith Khalaf, pensions analyst at Hargreaves Lansdown, said: "Final salary scheme members who know their employer is in trouble will have to stand by and watch their pension go the same way if this legislation is enacted. The Government is proposing to abolish the right of millions of pension scheme investors to take control of their own pension; there is no balancing benefit which in any way justifies trapping scheme members in this way."
