In our November newsletter, we revealed just how dramatically the value of some final salary pensions have risen since the Brexit vote last summer.
Pressures on some pension schemes had led to some making hugely inflated offers to people to swap future income for a cash lump sum.
We have seen cases where the transfer valuations have gone up by tens of thousands of pounds in just a handful of weeks.
For some individuals this has meant cash sums equivalent to more than 30 times the projected annual income on retirement being offered to final salary (otherwise known as Defined Benefit) pension schemes.
While we are still seeing examples of sky-high valuations, there is no question that the tide is beginning to turn with some valuations falling by as much as 10%.
The sharp rise in transfer valuations has been caused by the dramatic fall in AA-rated corporate bond yields which, in turn, track 15 to 20 year gilt yields.
While the increased valuations may look appealing, anyone considering leaving their final salary scheme should do so only after careful consideration with their financial advisor.
There are a number of issues that need to be taken into account, the first of which should be considering your wider asset base. For example, do you have sufficient secure income from other assets to meet your basic living costs in retirement? Is the lump sum going to meet your future income requirements? What are the tax implications of withdrawing from your final salary pension scheme? What will the financial effects be on any spouse and other dependants?
If you are considering investigating the possibility of cashing in your final salary pension early, we recommend that you speak with Alan Mellor as soon as possible. Alan can be contacted on 0151 353 1066.