Enhanced pension transfer value – money for nothing?
So you’ve been offered an enhanced pension transfer value from your pension provider and you can hardly believe your luck?
Well, hold on…
Do you understand what an enhanced transfer value is, why you’ve been offered one and what you should do?
An enhanced pension transfer value is a cash sum which you can transfer to another registered pension arrangement and will be more than what the current pension fund value is today.
It is not untypical to see offers of 25% uplifts to current fund values, which may seem compelling. For example, today your pension fund could be worth £75,000 but the pension scheme is offering you £93,750 if you transfer it to another registered pension scheme.
Why have you been offered an enhanced pension transfer value?
We’ve all read articles about under-funded pension schemes but did you know that many are in fact in a position of surplus?
That is, their funds exceed their liabilities – the monies owed to current and future retirees.
Such offers to scheme members, prepared to transfer their accrued benefits to an alternative registered pension scheme, is one way pension schemes can address such surpluses.
Another reason why a Scheme may be offering you an enhanced pension transfer value is that they recognise that other pension schemes may be able to offer you more pension choice and flexibility compared to the Scheme – something that may be an attractive option and one that you’re actively considering.
Furthermore, by doing so, the Scheme making the offer may be able to reduce some of the risks the Scheme is exposed to, helping to make its future costs more predictable.
What should you do?
Although the offer of a financial uplift to your pension may seem compelling, scheme members are often advised to seek independent financial advice.
The first port of call may be to seek free and impartial government guidance from Pension Wise.
Also, you would be well-advised to speak with an independent financial adviser who will be able to tailor their advice to your specific needs.
We will talk you through your options and provide you with advice tailored to your individual needs.