If you are planning to transfer retirement savings out of a final salary company pension, then you may be too late.
Retirement savers who want to switch their money to another scheme are finding their plans are thwarted by a recent High Court ruling that has left financial providers uncertain how to work out the value of pension pots.
According to official figures, more than 250,000 retirement savers have left the safety of a company scheme offering a guaranteed monthly payment that rises with inflation and other benefits.
Around £34 billion was switched in 2017 and transfers this year look set to beat that figure.
Savers were offered ‘golden goodbyes’ to leave their company pension schemes that could add up to a £900,000 lump sum for a pension scheduled to pay £30,000 a year.
£15 billion bill
The average pension transfer value is around £235,000, according to monitor XPS Pensions Group.
But judges at the High Court in London have thrown doubt into the market by ruling Lloyds Banking Group should equalise benefits between men and women savers in the company pension scheme.
The court agreed with three women who complained that their savings were undervalued because of the way guaranteed minimum pensions (GMPs) were worked out when they left the earnings related state pension between 1990 and 1997.
Lloyds is estimated to face a bill of £150 million to match women’s pensions with those of male employees, but industry wide, the figure is estimated as much higher – even as much as £15 billion by consultancy LCP.
Alasdair Mayes, a partner with LCP, said: “Trustees and scheme sponsors will not relish having to recalculate benefits going back almost 30 years, but the ruling does give clarity that something needs to be done.”
Pension provider Royal London says some firms have decided to stall pension transfers until they can see how the GMP ruling will affect them.
“It is vital that pension savers who are considering a transfer out are not left in limbo while the industry works out what exactly this ruling means,” said Royal London director Steve Webb.
“The pensions industry and pension savers urgently need to hear from the authorities what they should do now about pension scheme valuations and pension transfers.
“With some pension transfers already on hold, a public statement is urgently needed.”