The number of retirement savers considering a transfer out of their gold-plated company pension scheme is soaring, according to a recent survey.
Tens of thousands of workers are concerned about the fate of their pension pots if their employer should go bust and are looking to move the money into a personal pension.
Many expats are also mulling a move from a UK employer’s fund to an offshore Qualifying Recognised Overseas Pension Scheme (QROPS).
Financial software firm Selectapension claims the number of transfer fund analyses provided by IFAs has surged by two thirds in the past year.
Overall, the numbers for 2016 reflect a 120% increase in cases handled by the software compared to 12 months earlier.
Transfer is a slow process
But, says the firm, although more retirement savers are thinking about moving their money out of a company pension, the number of transfers has remained static.
Peter Bradshaw, national accounts director at Selectapension, said: “Transferring out of a defined benefit scheme is a complex process, and it can also be a lengthy one. With full scheme information, a transfer value analysis system report can be produced within an hour, but the whole transfer process can take months.
“We welcome the recent Financial Conduct Authority guidance on pension suitability which recognised that clients’ personal circumstances can trump critical yields.’’
Big cash offers from employers to try to encourage workers to leave their final salary pensions are one of the factors driving the demand to consider a transfer value analysis.
Cash promises v guaranteed retirement income
FTSE350 firms are offering between 20 and 50 times projected fund value to employees to leave – which could mean a cash offer of up to £1 million for an employee expecting a £20,000 a year pension on retirement.
The analysis weighs up the pros and cons of leaving an index-linked guaranteed pension payment with a transfer to a personal scheme with no guarantees and reliant on investment performance.
“It’s difficult to ignore the pull of such big transfer values,” said Bradshaw.
“Of course, workers discuss their pensions with colleagues who ask for their own transfer value analysis, which is one of the reasons why the number of requests we are handling has increased so much.”
