There are a variety of reasons to look at a QROPS transfer –
- Consolidate all your old pensions
- Hold your pension in a variety of major currencies, not just GBP
- The opportunity for better tax treatment depending or where you end up retiring
- Have more control over where your money is invested
- Transfer values from final salary schemes have been at all time highs since the Brexit vote meaning moving out of a final salary scheme an increasingly popular option
Moving a Final Salary
A final salary scheme, also known as a defined benefit scheme, is a pension that pays you a per annum amount from your date of retirement, typically 65 under most UK rules. Whilst historically a final salary was considered the ‘gold standard’ among pension schemes this is no longer the case.
May final salary schemes are now under huge pressure to pay their members with annual deficits spiraling out of control and annual increases, that whilst historically were quite generous are now barely equaling inflation. Furthermore with final salary transfer values now at all time highs, with many schemes offering in excess of 30 times the annual payment for members to leave the scheme, cashing in a final salary scheme can be a very lucrative option for many final salary members.
Moving a Defined Contribution
A defined contribution, also know as a money purchase plan or an AVC, is a pension that is a pot of money invested in the stock market. This type of pension has various methods of drawing down, either through an annuity or through flexible annual draw down. This is now the most common type of pension available to people in the UK as the vast majority of employment related schemes have moved away from expensive final salary schemes.
The main reason people seek to move a defined contribution schemes is often due to the inflexibility of a UK based pension. Many people often have limited options as to where there funds can be invested and there is no currency flexibility. Furthermore many old defined contribution pensions are very expensive to run and offer zero active fund management.
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