Helping you plan your finances to achieve the lifestyle you deserve

The introduction of pension freedoms in 2015 means that there are more options than ever when it comes to planning for your retirement.

Retiring is no longer a standard, singular event. As you get older, you may want to reduce your working hours, access capital to repay mortgages and other debt, make the most of your health and take those holidays you’ve been thinking about or support your children and grandchildren with their key life events.

As we are continuing to live longer, you will need your retirement fund to last significantly longer than your parents did and as part of this planning you will also need to take your long-term care provisions into consideration.

You will need your retirement fund to last significantly longer than your parents did

Final Salary Pension



Pension Transfer Advice

Throughout your lifetime, you may have worked for several employers to further your career prospects. 'Job for life' for many is not an option as you move up your career ladder to achieve broader experience and off course better remuneration. As you change jobs more frequently during life, you may have accumulated several pensions along the way. It can be hard to keep track of all the pension plans and difficult to really know how much your total retirement benefits is worth. As a result, many individuals like you may have found your pension plans becoming increasingly fragmented therefore in most cases being left unmanaged in an increasingly volatile market.

Final Salary Pension

A final salary pension provides a retirement income for life which is based on your salary and service period.

In a final salary pension, your income is calculated according to your pensionable earnings and the number of years that you have been a member of the scheme. Your employer / former employer carries the investment risk.

How does a final salary work?

Contributions are paid into the scheme by both employer and employees. All contributions effectively go into a pot with other members of the same scheme. You do not have your own individual fund value as you would in a defined contribution scheme. This ‘pot’ is invested on your behalf by the trustees of the scheme.

While you have no control over your funds or where they are invested, you are protected from falls in the stock markets because your company must make up any shortfall. This is because the company takes all the investment risk. Irrespective of the performance of the investments, you will receive a pension based on your salary and service. This is a pension paid for life and provides a great deal of security.


Pension Transfer Advice is complex and can be viewed as expensive. It is important you have enough understandable information about the generic advantages and disadvantages to enable you to decide whether to go on to take advice on the transfer or conversion of your pension benefits. Firms adhering to the standard will ensure provision of this information ‘at arms-length’ so you are not under any undue influence in deciding whether to incur the subsequent cost of advice. You may sometimes hear this referred to as a ‘triage’ service.

An independent company called Money Alive have produced a short video that gives you some basic details about the different types of pension schemes. This will help you understand some of the issues around different pension arrangements. We would like to thank money alive for making this video available Video: Money Alive - Stay or transfer?

Considering your options

There are many reasons to consider the transfer option. While transferring may not be for you, knowing your options is always the best way to make an informed decision.

Below are a few statements which will explain some of the more common circumstances that cause people with safeguarded pension benefits to either leave those benefits where they are or to transfer them into a flexible pension.

Please note if any of these scenarios are relevant to you, this does not necessarily make transfer suitable. It may however be worth reviewing your scheme benefits to see if they are appropriate to your circumstances.

Reasons some people give to leave their benefits where they are:

  1. This pension will be my sole or primary source of income in retirement and the fact that it is guaranteed and has built in indexation is reassuring to me
  2. I believe that I have a normal life expectancy so the fact that the pension will pay out until I die, whenever that might be, is important to me
  3. As this is my sole or primary source of income in retirement I am reassured that it will not be reduced if stock markets fall
  4. I have a partner who will also be dependent on this pension income, and I am pleased that it will continue to support them if I die before they do
  5. I am happy that, although this pension is a reduction in income from the level I earn in employment it is enough to meet my financial needs in retirement

The final salary pension is suitable for most scheme members. It will pay you an index linked income (usually) throughout retirement where you are not responsible for the investment risk.

Reasons some people give to transfer their benefits into a flexible pension:

  1. My retirement is likely to be a gradual affair and I expect to have varying income needs from year to year, so it is important for me to be able to vary the income I receive from my pension accordingly
  2. Unfortunately, I am not in good health and as a result my life expectancy is likely to be below average; I understand that a flexible pension gives greater options for my heirs and dependants
  3. I am planning to take early retirement – at least partially – and value the flexibility that a flexible pension can give me in this regard
  4. I have a range of financial assets at my disposal to support my retirement, so this pension will not be my sole source of income. The guarantees within this pension are therefore not important to me and flexible pensions give me more options.
  5. I fully expect to manage my various pension and non-pension assets myself and together with my adviser decide where to take income from as appropriate


Do I need a CETV?

A CETV (Cash Equivalent Transfer Value) is required in circumstances where a pension member wishes to switch from a final salary scheme (also known as a ‘defined benefit’ plan) into a defined contribution scheme. Your pension scheme administrator will be able to provide you with a CETV statement. You will need a CETV in order to consider whether it is suitable to transfer a Final Salary Pension into an alternative vehicle such as a Personal Pension or a Self-Invested Personal Pension (SIPP).

The CETV and statement of benefits will usually show:

  • Your pension at date of leaving the scheme
  • The way that the pension will increase in value up until the point of retirement
  • The way that your pension will increase in payment
  • The transfer value available to you.

This means that CETV statement is a vital piece of information for any individual who wishes to consider transferring their final salary pension plan.

It is important that any individual seeking a CETV statement also seek additional financial advice. This will help to give you information on the implications of transfer, and an assessment of whether transfer is suitable for you.

How is a CETV statement calculated?

The CETV is calculated by working out the lump sum that will be required to provide an equivalent pension to the scheme pension at your retirement age. This lumps sum is then reduced (discounted) depending upon how far away from retirement that you are. The scheme makes various assumptions in order to calculate the cash equivalent transfer value.

Do I have a right to a CETV?

If you are in a funded Final Salary Pension Scheme you have a right to a Cash Equivalent Transfer Value. The scheme must provide this within 3 months of any request. You do not have a legal right to a CETV in the 12-month period before retirement (although some schemes will provide this.) You are entitled to one free CETV in any 12-month period.

Next Steps with my CETV?

If you have a CETV or are thinking about requesting one and wish to discuss your options please make contact using our online contact box.

The Pension Transfer Gold Standard

The Gold Standard is a voluntary code of good practice for safeguarded and defined benefit pension transfer advice, based around a set of principles.

Heritage have adopted these standard and principles, so consumers can better understand and find good advice, and be confident they are dealing with a firm that is going beyond minimum requirements when giving financial advice. For further information about the Gold Standard click here

A pension is a long term investment. Depending on the pension arrangement you have, the fund value may fluctuate and can go down. Your eventual income may depend on the size of the fund at retirement, future interest rates and tax legislation.