Is it foolish now to scorn the benefits of a DB scheme, in light of the new pensions flexibility?
Oppose their outrageous good fortune?
And take up arms against them with FAD?
There’s no doubts that (for some) the new pension flexibility rules make the DB/DC transfer argument a lot closer.
Are the new rules heralding a wave of partial transfers from DB schemes?
Is this a win-win scenario for DB scheme owners (employers) and members (employees), who want the best of both worlds; de-risking the employers liabilities and providing more flexibility for members?
There is now a lot more pros and cons (on both sides) to retaining a DB benefit, against transferring to a money-purchase self-invested contract.
It’s much more than comparing income yields; it has gone way beyond that now. This is about income flexibility, tax planning and a tax-efficient family legacies. In this weeks pensions flexibility module we consider BCE 2: Scheme pensions.
On the face of it there is nothing much in the TOPA 2014 for scheme pensions and that’s what makes it interesting.
Not much has changed. It’s all happening on the MP/DC side and if you are sitting on the other side of the fence the grass might start looking a lot greener.
The legislation has changed much, but it’s making employers and scheme administrators think twice; are the new pensions flexibility rules making final salary schemes more flexible in their outlook?
What might you want to consider as a comparison of DB benefits (not just critical yields), with the the options on the other side?
Neither side is always right, or always wrong.
Either side could be right, or wrong.
A gold-plated pension fully inflation proofed, for the rest of your life.
Or, an investment which can be accessed at any time, any amount, any where and by anyone you nominated.
No decision required on DB.
Or, always in control of your pot.
Accumulate DB benefits in your bank account.
Or, plan withdrawals from tax-efficient pension pot.
DB benefits are certain; like taxes.
Or, plan tax and choose FLUMPS when you need them.
DB scheme stops with no dependent; no choice. It is finished.
Or, plan your legacy; family wealth planning down the generations.
Does it all have to be ice-cream or all umbrellas? Can’t we have some ice-cream when the sun is shining and an umbrella for the rain?
I’ll be posting regular updates on the pensions flexibility rules every Monday.
There are still important details we are awaiting from HMRC and as soon as these are available, I’ll be updating and re-issuing our pension flexibility notes once updated. I’ll also be keeping you up-to-date with the workshops we’re planning.
All those who have purchased the pensions flexibility module will get the first opportunity to book a workshop aimed at making sure you are fully prepared for 6 April, with an opportunity to go through case studies with your peers and practice the application of the new rules.
More on that as soon as I have it available.
You have a great week.