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Final Salary Pensions: How Safe Are They?

 Final Salary Pensions: How Safe Are They?
 
     
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For years, final salary pension schemes offered an attractive guaranteed pension benefit, typically around one sixtieth of final salary for every year of pensionable service. However, while advantageous for employees, years of increased longevity and troubled investment markets have plunged the vast majority of such schemes into deficit. Companies incurring increasing pension deficits are forced to make additional payments; for them, such schemes have become an open chequebook they cannot afford to maintain, and most choose to close the plan completely.

By offering high transfer values, many companies encourage employees to transfer out of schemes and thereby reduce long-term liabilities. In addition, many scheme members have well-placed concerns regarding their pension’s ability to remain solvent. These days, such moves are hard to resist; with gilt yields being at an historic low, transfer values are particularly high.

Whether or not to transfer is a thorny question, particularly considering the availability of tax advantaged Qualifying Recognised Overseas Pension Schemes (QROPS) for UK expatriates. Members must weigh the guarantees of final salary scheme against greater tax efficiency, greater flexibility, and the solvency of their particular plan. Rochester International provides qualified advice to ensure members make the decision best for them.

This article is sponsored by Rochester International. For more information, please contact Anna Morris at anna@rochesterinternational.eu or tel. +4402033030596.

 

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