Barnett Waddingham, the pension consultants, have conducted some interesting analysis.
Roughly one tenth of big listed companies have sought to coax their employees, past and present, to shift out of traditional pension schemes over the past five years.
That's according to analysis conducted by pension consultants Barnett Waddingham. The study, released last week, revealed that these 'transfer exercises' have been offered by roughly 10% of schemes sponsored by FTSE 350 companies - diminishing their pension deficits by as much as £2.5bn.
Such exercises can be contentious, as they encourage members to swap guaranteed retirement incomes, for life, for a lump-sum. Of course, they can be justified where members have other generous pension arrangements or short life expectancy.
Due to rock-bottom gilt yields, pension transfer values have soared. Participants of customary final-salary-style schemes can be offered lump-sums of 30 times their pledged retirement income or more. Some employers have offered supplementary perks, including top-ups of as much as 20%.
''About 20-30% of pension fund members aged over 55 were taking up transfer offers.''
Employers enjoy transfer exercises, because they slash the ambiguity of long-term liabilities and speed them up to the point where, they can contemplate an insurance company buyout, passing over the complete assets and liabilities of their scheme to a life company for an arranged upfront fee.
Earlier this month, Barnett Waddingham revealed that roughly 20 to 30% of pension fund managers, aged over 55, were taking up transfer offers. The take-up rate was far lower for those under-55, who can't gain access to their pensions instantly.
The calculations were estimates only, based on analysis of spikes in total benefit payments, made by FTSE 350 companies. These climbed, in aggregate, from £20 billion to £25 billion a year from 2012-14, to as high as £42 billion in 2017. That's before dipping to £38.5 billion in 2018.
It may all seem a bit confusing, between what you should and shouldn't do, between what's right and what's wrong. That's where professional advice can be of great value to you - and that's where Reeves Independent can help.
Reeves Independent is a FCA (Financial Conduct Authority) regulated company, with over 20 years’ worth of experience in offering expert financial and retirement advice. We will determine your attitude to risk, in order to see what you're comfortable with, in regards to your investments. Thereafter, we will assess all the options available to you. From there, we will work with you, in order to help you achieve a sizeable pension pot - with the aim of enabling you to realise your retirement goals. Reeves will aid you in this via smart and confident investment. Furthermore, we'll communicate with you on a regular basis to let you know our recommended course of action for you, as well as to let you know how your investments are performing.
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Taken from an article in The Times by Patrick Hosking on 14th October. These articles are for information only. No advice should be conferred from the articles. No action should be taken without independent professional financial advice as any actions on your pension may be irrevocable and have a big impact on your income in retirement.