The majority of final salary pension scheme members are wary of transferring out of their scheme for fear of losing the guaranteed retirement income and making an irreversible mistake, research from Prudential has found.
The research found two-thirds (66%) of respondents have not considered transferring out of their final salary scheme, while 3% had already transferred out, and 16% said they were considering it.
The main reason people were cautious of transferring was because they did not want to make an irreversible mistake (29%).
Meanwhile, a further fifth said they did not want to lose a guaranteed income for life.
Others were put off by fears of a ‘long and complicated process’ and worries about getting the right advice. About 14% were unsure where to get advice altogether.
Prudential had surveyed 1,047 adults with defined benefit (DB) pension schemes.
High transfer values
Almost a fifth of those questioned said they had requested or received a transfer value from their final salary scheme provider in the past year, with 29% of those saying the value they received was higher than expected.
About a third of members transferring out of a final salary scheme or considering doing so said they wanted to take control of their pension fund.
Meanwhile, about a quarter of respondents would consider moving because of high transfer values.
Other reasons cited included a desire to manage their own investments, being able to leave the fund as an inheritance and paying off debt.
‘Reassuring’ customers are cautious
Prudential retirement expert Stan Russell said: “Interest in transferring final salary pensions has increased dramatically since 2014 for two reasons; transfers values are currently high and the pension freedoms reforms also mean that a transferred final salary pension can now be more easily left as part of an inheritance.
“However, it is reassuring to see that so many consumers are cautious about transfers. They are right to be wary of giving up a guaranteed income for life, and instead having to rely on the investment returns from their pension fund for income over a retirement that could last 20 or 30 years.”
Up to £50bn has been taken from DB pension schemes since pension freedom implementation in April 2015, according to research from professional services group Mercer.
Last week the Financial Conduct Authority released a consultation on final salary transfer advice that proposed to replace the current negative starting assumption of transfers being unsuitable with a statement in the regulatory handbook saying that for most people “retaining safeguarded benefits will likely be in their best interests”, alongside guidance “that advisers should have regard to this”.
The post Two-thirds of DB scheme members wary of transferring out – research appeared first on Retirement Planner.