Hi everyone, Aside from the disadvantage that pension income cannot be predicted with certainty if one transfers out of a defined benefit scheme, are there any other demerits of transferring to a personal pension scheme?
The transfer value will depend on the basis used to calculate it. If any of the assumptions underlying the basis are not borne out in practice (e.g. you live for longer than assumed when pricing it or the investment return that you receive through your personal scheme is less than assumed) then ultimately you may not receive the benefits which you would have under the terms of the Scheme. Aside from this, the other important note is that if the scheme is in deficit it may have set it's transfer value basis to include a transfer value adjustment. This means that if you're transfer value is, say, £100 then after the scaling you actually receive £50. You effectively get a percentage of the value of your benefits. This is to help safeguard the benefits of the other members of the pension scheme and reflect that you are removing your credit risk (i.e. you're getting cold hard cash instead of a promise from a scheme which might go bust in the future).
