Pros And Cons Of Final Salary pension’s Transfer

final salary pensions transfer is a financial benefit introduced to the members of the pension scheme in line with their final retirement. Under this system, the employees are allowed to shift part of their final salaries into an additional final allowance. The pensioner need not wait until he or she reaches the age of 65 in order to receive this additional money. Instead, the pensioner may continue to earn benefits while shifting his or her final salary into the additional fund.

Under the present system, pension funds are financed exclusively by the employers. This means that employees cannot access this type of monetary benefit unless they are members of an approved pension scheme. The employees, therefore, are deprived of such a source of income when joining a pension scheme. Therefore, the employers have to pay for this financial support.
Through final salary transfers, employees can access a larger portion of their pension than what they are entitled to receive under their original pension scheme. By increasing the final amount to be paid by up to ten percent, you will be able to improve your financial position in life. Once this additional sum is accumulated, you can use the funds to meet various expenses, including house rent or mortgage loan, travel expenses, and even buy new clothes. You will also be able to make investments, and thus gain additional wealth.
There are certain disadvantages associated with the pension transfer. While employers can usually enjoy a large cost advantage through this transfer, the employees have to share this burden with their former employer. As a result, most employees find it hard to secure a comparable final salary to that which they would get under their present pension scheme. Moreover, the employee has to obtain both consent and approval from his current employer before being allowed to shift his final salary.
Apart from the cost advantage, employers also face a major risk in allowing their employees to shift their final salaries. If the employee dies before a certain period specified in the final salary agreement, the employer stands to lose all the amounts the employee would have been able to draw from his pension fund. Moreover, the employee may not be able to access his pension in case he gets injured or ill while employed. Such a situation could lead to legal issues, and may even lead to the cancellation of the entire pension scheme.
Another problem related with this transfer is the possibility of employees manipulating the decision of their pension providers. If an employee manages to get his hands upon some part of the money, he may use this money to start up an illegal business, thereby circumventing the intention of the original pension plan. The only way to avoid such a scenario is to make sure that the employee gives a written assurance before starting up the business. While this may seem like a very tedious and time-consuming process, it is absolutely essential for every employee to understand that such an action will either help him or hurt him – and that is the whole point of the pension plan.