Savers could lose out on 55 per cent of final salary pensions in transfer values

Pension savers attempting to cash in on their final salary schemes could lose out on up to 55 per cent of the market value of their pension due to low transfer value offers, according to Telegraph Money.

New City watchdog regulations state that savers wishing to cash in on their final salary schemes must be shown both the cost of the pension, if it was sold on the open market, and the value of the transfer offered.

Telegraph Money found that there have been instances where the transfer value is worth less than half of the market value of the scheme.

In one case, some members of a large hotel group’s pension scheme were offered just 45 per cent of the market value of their pensions.

An individual with a pension valued at £3.7m was only offered £1.7m, potentially losing out on £2m.

Tideway Investment Partners partner, James Baxter, believes that companies insuring themselves against the cost of paying final salary pensions could be the reason why members were being offered lower values for their pensions.

He added: “I think the sponsors of these schemes are hoping some members decide to transfer, generating huge savings.

“There is no way for members to challenge transfer offers, and there are huge variations in the offers made for broadly similar benefits. This just doesn’t seem right to me.”

Transfer values, in general, have increased in recent years, leading to more than £34.2bn being withdrawn in 2017, up from £5.4bn in 2014.

Since the introduction of pension freedoms, savers have been transferring out of their schemes for high cash sums to access the new freedoms, in exchange for giving up on certain member pension rights.

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