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Pensions experts unhappy about proposals to ban transfers from final-salary pensions to personal schemes


The Department of Work and Pensions has announced proposals to abolish transfers from final-salary schemes into personal pensions from 2012 onwards.

According to pensions experts, this will restrict the choice available to members of these schemes and will mean they won’t be able to take advantage of the new rules allowing personal pension investors to take funds from their pension as and when they wish. While most people are best served by staying in their final- salary scheme, some people have legitimate reasons for wanting to transfer out.

Laith Khalaf, pensions analyst at Hargreaves Lansdown, said: "Abolishing transfers out of final-salary schemes would restrict members’ choice without delivering any benefits. It would also exclude final-salary scheme members from taking their pension as and when they want, using the new flexible pension rules arriving next April."

"While most members of final-salary schemes should stay put, there are some circumstances in which they might want to transfer, such as fear their employer will go bust and their scheme is in deficit, if they are in poor health and can get a higher income from an enhanced annuity, if they don’t have a spouse and can get a higher income from a single life annuity or perhaps death benefits might be better in a personal pension.

"What is more, from April 2011 members of defined-contribution (DC) pensions will be able to draw their pension as and when they want, provided they have secured a certain minimum level of income. If final-salary scheme members cannot transfer their pension into a DC scheme, they will not be able to take advantage of this flexibility.

"If this proposal is adopted we can expect a firesale of final-salary liabilities in the next 18 months. Many companies are likely to seek to offload some of their liabilities by offering members incentives to transfer out while they still can. The Pensions Regulator could be in for a busy time making sure all such transactions are conducted properly and members’ interests are not compromised."