From April 2012 the Government are considering making it impossible for people to transfer out of final salary pensions into defined contribution schemes.

 The DWP are working on a consultation settling out the draft legislation for the abolition of contracting out.  Some pre 1997 benefits called excess benefits will be exempt from the change as well as non-contracted out defined benefit schemes.

The consultation also says that “in addition to contracting out terms, references to transfers between contracted-out defined benefit and contracted out defined contributions schemes have been removed as this will no longer be possible post-abolition”.

The industry is not happy about these plans and views them as taking away consumer freedom and choice.

This mainly affects people whose spouse does not need a guaranteed pension on their death or a single person.  In these cases it is often possible to produce a higher income stream by giving up the spouses benefits on retirement.

Anyone in this position should seek advice as soon as possible.