Relaxation of defined benefit retirement rules gives pensioners more choice
21 July 2014
Government proposals to allow transfers from defined benefit to defined contribution pensions means scheme members have greater choice over their retirement benefits than ever before, says Deloitte.
Andy Mewis, pensions advisory partner at Deloitte, said:
“The decision to allow transfers from defined benefit to defined contribution schemes has huge implications for trustees, sponsors and scheme members.
“In some instances, a transfer from defined benefit to defined contribution could be more attractive to both members and sponsors. Future pensioners will have more flexibility when accessing their pension funds, a quarter of which can be taken tax-free with the option to draw down the balance as cash or income subject to their marginal rate of income tax.
“There is a danger that large cash outflows from pension schemes could destabilise existing asset allocations and funding levels. However, I expect that transfers will be spread over many years as members will transfer their benefits as they approach retirement rather than immediately.
“The Government is right to insist that scheme members take independent advice before transferring. Defined benefit schemes offer valuable guarantees and switching out of them means members might have to take much higher levels of risk to generate similar levels of income.”
Notes to editors
Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee (“DTTL”), its network of member firms, and their related entities. DTTL and each of its member firms are legally separate and independent entities. DTTL (also referred to as “Deloitte Global”) does not provide services to clients. Please see www.deloitte.com/about for a more detailed description of DTTL and its member firms.
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The information contained in this press release is correct at the time of going to press.For more information, please visit www.deloitte.co.uk.
Member of Deloitte Touche Tohmatsu Limited.
“The decision to allow transfers from defined benefit to defined contribution schemes has huge implications for trustees, sponsors and scheme members." - Andy Mewis, Pensions Advisory Partner