Why transfer a pension?
There are several good reasons for transferring your pension. Perhaps you need to start a new pension scheme when you begin working for a new employer, or you want to consolidate a number of existing pensions into one pot. It may be that the terms of your existing pension are changing, or you’ve found a scheme that’s more profitable for you.
Whatever the reason, it will allow you to move your pension from one provider to another.
How it works
It’s usually straightforward to carry out a pension transfer, but the implications for your income can be complex, so it’s good to get expert advice before you commit.
If you’re looking to combine all your pensions into one single scheme, you’ll need to check the terms of each separate pension, to see if there are any charges payable for moving your money. It’s also important to know if there are any benefits of existing pensions that might be when transferred, such as a guaranteed annuity rate.
In some cases, you will be required to show that you have sought independent financial advice before your transfer. By law, you must receive financial advice if you wish to transfer:
- A defined benefit pension (sometimes known as a final salary pension) worth £30,000 or more
- A defined contribution pension (sometimes known as a money purchase pension) worth £30,000 or more.
Beware of scams
If you are approached with an unsolicited offer to help transfer your pension elsewhere, be very wary: it could be a scam designed to part you from your money. If in doubt, get financial advice before committing your retirement funds.
Things to consider when transferring to a new pension scheme
When shopping around for a new pension, you’ll need to be aware of the following:
- The transfer value of your pension. You can find this out from your current provider. This is the amount of money that a new pension provider will get from the old provider, for taking on your pension.
- Are there any transfer fees or set-up fees? These are likely to apply if your transfer value is less than the overall value of your pension pot.
- Will the terms and conditions of your pension change when it is transferred? Find out if you will have to make guaranteed regular payments into the pot, and whether any special features you benefited from in the past will still apply.
- The types of investments (and level of risk) you are willing to take on with your new pension.