Those looking to transfer their final salary pensions into cash face drastic cuts from April 2016…
British Airways is desperately trying to protect pension assets by slashing the value of transfer funds for older retirement savers.
Hundreds of staff aged over 50 have received letters telling them that if they switch their guaranteed income pensions to cash, they will lose 15% of the value of the fund.
The warning applies to retirement savers who want to cash out their British Airways pension under flexible access rules introduced by the government in April 2015.
The government has already banned public workers and civil servants from cashing in their pensions under flexible access or switching funds to an offshore QROPS.
Run on assets
One of the problems with final salary pensions is some companies have offered employees enhanced cash values to move, while others have tried to block transfers or reduce benefits if a member leaves the scheme.
A British Airways spokesman said: “Transfer value assumptions and other financial factors are reviewed regularly. The review considers changes in markets and expected investment returns.
“Members have been told transfer values are likely to be lower for older members and higher for younger members.”
The spokesman confirmed the new transfer values will take effect from April 2016.
Transfer window set to close
That leaves British Airways pension savers only a few weeks to make alternative arrangements.
For expat staff, switching to a Qualifying Recognised Overseas Pension Scheme (QROPS) is one option.
For UK staff, a transfer to a SiPP or personal pension are other options.
But British Airways have left a small window of opportunity for members to transfer out. A recent report from the Financial Conduct Authority suggested the average pension transfer since April 2015 has taken 39 days.
The benefit of transferring would give the higher, pre-review transfer value to pension funds.
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