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More than half a million people to transfer from DB pensions

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More than half a million people are set to transfer from their defined benefit (DB) pensions schemes to embrace flexibility, according to research by Hargreaves Lansdown

The financial services company surveyed more than 1,000 people, of which 7.8% said they would transfer out of their DB schemes. Based on 6.87 million deferred and active DB scheme members, this equates to 535,860 people.

Those who have decided to transfer are attracted by increased control and flexibility. More than half (53%) said they wanted “more flexible income” at retirement, 43% want to transfer for the ability to pay any leftover pension to their children in the event of death, and 29% want to retire early. Almost a fifth (18%) said they would prefer a lump sum to an annual income.

The majority of DB members (67%) do not intend on transferring out, with 80% of those recognising their DB scheme as 'very valuable'. However, Hargreaves Lansdown pointed out that anecdotal evidence suggests many people are unaware of the option to transfer and take advantage of the pensions freedoms, and that there may be greater interest come April.

Hargreaves Lansdown head of corporate pension research, Nathan Long said: “The majority of scheme members recognise the value of their defined benefit pensions and have already rejected the idea of a transfer.

“However, many are potentially interested in a transfer and a minority of them have expressed a firm intention to transfer to a money purchase pension.

“Most retirees will be well served with a mix-and-match approach – a bedrock of guaranteed income to cover essential spending in retirement, coupled with some additional flexibility for the non-essentials. Defined benefit schemes can be used to help cover the essential spending.”