Scheme members who are not in the best of health – whether or not married – should be aware that in most cases a transfer to a personal pension will significantly increase the value of death benefits.

Following a transfer the promise of pension benefits to the member and surviving spouse is replaced by an investment fund.

This fund may then be passed to a person of the member’s choosing (known as a ‘beneficiary’) in the event of his death before starting to draw his benefits. There is no requirement for the selected beneficiary to be a spouse or dependent child; it could be anyone. Moreover, whereas a significant part of the value of the employer’s scheme’s promise is used to provide death benefits none of the value of the personal pension fund is used in this way.

Members of final salary pension schemes receive a promised level of benefits regardless of their state of health. Some will die soon after (or even before) starting to draw their benefits. Others will live many years longer than the average life expectancy. In short, those who live a long time (and therefore cost the scheme a lot of money) are subsidised by those who die at an early age (and therefore cost the scheme very little).

Thus, as regards death benefits, a transfer will in most cases give greater flexibility (in choice of beneficiary) and greater value. This additional benefit of a transfer is often a significant attraction to many people who have asked The Pensions Office for advice.

If you want to consider how a transfer could affect the value of death benefits for your personal circumstances and your desired beneficiaries……………..