Transferring pensions
A pension transfer is the process of transferring or switching the fund you have built up in one pension scheme to another. You may wish to do this because you are changing jobs, for example, or simply because you are unhappy with the benefits, performance, fees or security of your current pension scheme.
If you have a number of pension schemes, you may also wish to transfer them all into a Self-invested personal pension (Sipp) to make them easier to manage. But always make sure you know what you're giving up before moving to a new pension scheme.
How does it work?
To transfer your pension you will need to write to your current pension scheme administrator requesting a transfer value analysis. Within 12 weeks of making the request you will be given a transfer value for your pension, which will be guaranteed for 3 months. The way the transfer value is calculated will depend on the type of pension involved.
If you are transferring from a final salary pension, for example, the transfer value will be based on an assessment of the amount of money you would need to contribute (at the time of the transfer) to provide you with your pension entitlement under the final salary scheme.
Take care before transferring a final salary pension as these often come with valuable guarantees. Before moving, make sure the new scheme offers better benefits and higher guarantees.
However, if you are transferring from a money purchase pension, the transfer value will be calculated based on the current value of your contributions. A transfer may be worth it if your new pension scheme is more generous than the old one and it allows you to use the fund to 'buy' more years of contributions and benefits in it.
As a general rule, it is only really worth transferring if the value of the fund is at least £10,000. You shouldn't transfer it if your current pension has guarantees which appear generous to you compared to the new pension.
Seek professional advice
Pension transfers can be a highly complex area as there are many issues, including what type of pension you are considering switching from and whether any transfer charges imposed will outweigh the benefits, to consider before deciding whether a transfer will benefit you. Consequently, it is a good idea to take professional advice before making a pension transfer.
Fill in our enquiry form now to discuss your options with an independent financial adviser who can assess your case by analysing the financial position of your present scheme and the risks of the alternative pension plan, as well the transfer value.
Transferring company pensions
When starting at a new company, you may be presented with the option of joining your new employer’s pension scheme. There are many different types of company pension schemes and depending on the type of pension scheme and its rules, it may be possible to transfer your previous employer's pension scheme into the into the new one.
This has the advantage of keeping the pensions in one place - however, there may be penalties incurred by transferring your old scheme, which would mean that it would be beneficial to leave it with the old employer.
At present, many pension schemes are unsure if they can accept a final salary transfer as there are legal issues, which prohibit the new plans accepting all the members' pension benefits. This can sometimes result in difficulties with the transfer and some schemes will not allow them.
When a scheme does permit a member to transfer an old pension into their scheme, they will sometimes stipulate that the transfer is processed within a set period of time, for example, within one year of joining the scheme.
If a scheme does allow transfers into their plan, it is advisable to fully compare the new plan against the old scheme as benefits vary widely between plans.
To talk to a financial adviser who will easily be able to make these comparisons for you and advise you on the effect of any transfer penalties, please complete the enquiry form and we will arrange for you to be contacted.
