Ask Money: I was in the dark on pension possibilities - what are my options now?

Former pensions minister Steve Webb, now of Royal London, answers a reader's question about missing out on a final salary transfer.

December 27, 2018

In October 2015, I took early retirement aged 51, and as I had a final salary pension I lost around 45% of it because of the reductions applied for my age. I didn’t particularly want to do this, but my partner had an accident in 2013 and in 2015 she was medically retired, so our joint income fell dramatically at that time. We concluded the only option was for me to take partial retirement and take as big a lump sum as I was allowed, to pay off as much debt as possible to allow us to live within our new earnings.

Two years later, I have found out that one of my colleagues was able to take his pension contributions from the civil service to invest in a private pension of his own. When I asked my union about this, they were unaware that it was allowed. I know that the civil service final salary scheme is excellent and should not be left lightly; however, I would have greatly benefited from transferring my pension to a private one, taking 25% to pay off debts and then leaving the rest until I was ready to either buy a pension or do whatever else I decided to do at that time.

Do I have any recourse against the civil service for not making me aware of what options I had when I asked about partial retirement? I didn’t take financial advice because I didn’t see the point, as I didn’t think there was anything else I could do other than partial retirement and a massive cut in my pension; but looking at it now and reading what your magazine has said about how much some workplaces are paying staff to take their final salary pension elsewhere, I feel that I could be in a better position if I had been given an alternative.
Name withheld

Steve Webb of Royal London replies:  It used to be possible for members of the civil service pension scheme to transfer out to a defined contribution (DC) arrangement; my impression is that there may have been limitations on the circumstances in which this could be done, but in any case because the civil service scheme was a very good scheme the volume was very low. When pension freedoms were introduced in April 2015, the government had to take a view about what to do about unfunded public sector schemes:  if huge numbers of teachers, nurses, civil servants etc were to transfer out, then it would need to find lots of cash up front. As a result it decided on a blanket ban on all transfers out. What seems to have happened here is that the reader wasn’t aware of the option to take a transfer at the time when it was possible.

My view is that occupational pension schemes are generally very poor at communicating with their members about the options they have.  In particular, schemes rarely volunteer the information that someone can transfer out altogether – the most they usually do is mention this in scheme booklets. Probably the best thing the reader can do is approach the Pensions Ombudsman, going first to the Pensions Advisory Service which tends to ‘triage’ cases and try to resolve disputes before they go to the Ombudsman.  But I suspect the scheme will simply say that the information was in a booklet which it once issued, and that it’s not its job to go further. 

If you need help with a tax, pension or financial planning problem, please email:

Subscribe to Money Observer Magazine

Be the first to receive expert investment news and analysis of shares, funds, regions and strategies we expect to deliver top returns, plus free access to the digital issues on your desktop or via the Money Observer App.

Subscribe now

Add new comment