Should you stick with your final-salary pension scheme?

Most financial advisers assume that members of final-salary pension schemes are better off sticking with them. But many people are switching to money purchase schemes. Should you do the same?

Most financial advisers assume that members of final-salary pension schemes are better off sticking with them. After all, these defined-benefit (DB) plans offer certainty about the pension you'll receive for the rest of your life. Defined-contribution (DC) pension funds leave you vulnerable to unpredictable markets.

Despite the advantages of DB schemes, Old Mutual Wealth has just revealed that the number of its advisers considering whether to suggest clients transfer their money from a DB to a DC scheme increased by 65% last year. That followed a 91% rise in the previous year. Why? First, the transfer values offered by DB pension schemes to people taking their money elsewhere have soared (see below). Second, advisers and savers have realised that DC schemes can have some advantages over DB plans.

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David Prosser
Business Columnist

David Prosser is a regular MoneyWeek columnist, writing on small business and entrepreneurship, as well as pensions and other forms of tax-efficient savings and investments. David has been a financial journalist for almost 30 years, specialising initially in personal finance, and then in broader business coverage. He has worked for national newspaper groups including The Financial Times, The Guardian and Observer, Express Newspapers and, most recently, The Independent, where he served for more than three years as business editor.