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What is the UK final salary pension transfer ban and does it apply to my pension?

On 6 April 2015 the UK Government introduced revolutionary changes to UK pensions’ legislation which provided increased flexibility in the ways people can now access their occupational and personal pensions from age 55. However, the UK Government was concerned that more people in public and private sector final salary schemes would want to transfer their pensions out of these schemes to gain access to their pension pots (through what is called a cash equivalent transfer value (CETV)) to take advantage of this increased flexibility. Final salary schemes, unlike other occupational pensions, provide a guaranteed income for life at retirement which is calculated based upon the number of years an employee worked and their final salary.

Given that the majority of public sector final salary schemes operate on an unfunded basis out of general UK taxation, if more people were to take their CETV, this could expose the UK Treasury to significantly higher annual costs. As a result, legislation was introduced which banned people from transferring their unfunded public sector pensions out to schemes like personal pensions. Examples of unfunded public sector schemes include the NHS, Teachers Pension and Civil Service Pensions.

In contrast, transfers of private sector final salary schemes to defined contribution/personal pensions (excluding pensions in payment) are still able to be undertaken in the UK.