Transfer Risks

Risks of transferring to a defined contribution scheme

Your future pension income can’t be predicted with certainty if you transfer to a defined contribution scheme, regardless of whether it’s run by your employer or it’s a personal or stakeholder pension. 

With a personal or stakeholder pension, you will give up any benefits you had in your employer’s scheme. The income you get in retirement will depend on:

  • The amount you invest (the transfer value and any further contributions)
  • The investments you choose and how well they grow
  • The charges taken out of the plans, and
  • The amount of retirement income your pension pot can provide for you at retirement

Anytransferring from a defined benefit pension scheme to a defined contribution mus weigh the costs, risks and loss of benefits involved against the flexibility and control offerred by the new pension rules.

Risks of staying in your defined benefit scheme

Staying in a defined benefit pension scheme is not risk free.

If your employer is still in business, it usually has to make sure the scheme has enough funds to provide the full entitlement to members. But some of the employers sponsoring these schemes have gone bust leaving insufficient money to pay the pensions promised.

If an employer is going out of business without enough funds in its pension scheme, the Pension Protection Fund may be able provide compensation but this may not be the full amount of the pension you’ve accumulated.

If you are evaluating your pension, we strongly advise that you seek professional advice. To arrange for a no obligations, initial free telephone consultation click here.