Employers are offering staff up to a fifth more than a year ago to swap their final salary pension schemes for plans that give easier access to cash. Firms have been struggling with funding shortfalls for these generous “defined benefit” schemes, which pay a guaranteed, inflation-linked income for life.

Figures compiled for Telegraph Money by Old Mutual Wealth, a pension provider, show that the value of deals offered to staff in return for giving up their rights to these schemes has jumped by between 10pc and 20pc since the start of the year. Transfer values rise as interest rates fall, adding billions to pension schemes’ costs.

Those especially keen to reduce risk will offer even more generous deals to cut their future obligations. Typically a cash transfer value is calculated by multiplying a final salary annual income by 20 or 25. A final salary pension of £30,000 a year would therefore equate to a £750,000 lump sum.

This money will have to be transferred to a “defined contribution” pension first. Future withdrawals will be subject to income tax. Precise transfer values will differ between employers.

Fears over the security of pensions provided by the likes of BHS and the added flexibility of defined contribution schemes have fuelled transfers requests. Final salary transfers are controversial because they involve giving up a guarantee.



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