Although less common these days, final salary pension schemes are company pension schemes. They still exist, but you're more likely to possess one if you've worked for the same company for a long time. Typically, offered by larger firms.

The idea is simple upon retiring the pension holder receives a pension based on your earnings. The benefit of having a financial advisor look over your final salary pension scheme are many. Firstly, if you're over the age of 55 you may be able to release some of the capital in your scheme.

Secondly, the cash equivalent transfer values are extremely high at the moment due to low annuity rates.

With the recent press surrounding Sir Philip Green and the mishandling of BHS. It is a good idea to make sure who-ever is in charge of your pension has kept their hands out of the cookie jar.

Do you have a final salary pension scheme and what to release some equity or just make sure your money's safe?

At Regulated Advice, we can match you to a financial advisor that can provide final salary pension advice. Please click here to get matched.

Search previously posted final salary pension schemes case studies.

Calculating your final salary pension?

A final salary pension, often known as a defined benefit pension. It is a retirement scheme provided by UK employers and is a benefit in addition to a salary.

It guarantees a specific pension income based on an employee's final salary and years of service.

Accrual rates and length of service are factors used to calculate a final salary. The accrual rate determines the proportion of the final wage converted into a pension. 
Thus, an accrual rate of 1/60 means that 1/60th of the final salary for each year of service.  The more years worked, the bigger the pension. The final salary pension is an average of the last years of employment.

It also reflects career advancement and inflation. One key benefit of UK final salary pensions is retirement income security. Some UK schemes protect pensions from the eroding impact of inflation.

UK final salary pensions often include benefits for spouses or dependents following the employee's death. This is usually 50%.

What is good about final salary schemes?

• A retirement income until you die.
• Some final salary pensions offer indexation to keep up with inflation. 
• Benefits for the spouses and children of members (usually 50%). 
• Plans may offer lowered payments for retiring at a younger age. 
• Employers take on both the investment risk and funding obligations.

Advantages of transfering out of your final salary scheme

You will need final salary pension advice to transfer out. Transferring out to a personal pension scheme can provide security for your family. 
However, you must carefully consider the related benefits and trade-offs before making a decision.  The rules for transferring out have tightened in recent years. Not only will you need regulated final salary pension advice. 

Now you must be at least 55, have other substantial pensions and have children who would otherwise have lost out once both parents died. When transferring out, you will get a cash equivalent transfer value (CETV).  

This is to ensure you can purchase the same retirement income through the annuity market. However, before interest rates rose in recent years. CETV were extremely high, making the transfer out of final salary schemes very popular.
Once you have transferred out. You can amalgamate multiple pots of pension into a single scheme for ease of management and control. 

Transfers can provide new benefits, such as flexible drawdown options. 
Should you pass away upon receiving a cash equivalent transfer value (CETV). Your family will inherit 100% of the final salary scheme, instead of only half going to your spouse.

The commutation of your final salary scheme

Commutation refers to taking a part of your pension as a lump sum upfront. This is instead of paying it out in regular instalments. 

Some UK pension schemes permit partial commutation, offering you a lump sum and an annual amount.

Remember, pension rules and options can change. Careful attention must be given to the decision to transfer or commute.

Specialist qulaification for giving advice for final salary schemes 

To get final salary pension advice. Look out for advisors with relevant expertise such as a G60 qualification.

In addition, you must seek advice from a qualified specialist financial adviser if the CETV is over £30,000. 

Get expert final salary advice?

Final salary pension advice is typically not free. Fees for this complex work can be a fixed fee, (typically around £3,000). 

Meaning you may save money with a fixed fee. This is good as many final salary schemes come with a high cash equivalent transfer value (CETV). The fees would be far higher based on a percentage.

Let Regulated Advice match you with a financial advisor for expert advice.