Many people choose to transfer their pensions to a new provider if they are looking for pension consolidation, want more investment choice, or if their current pension fund is not offering the best value for money. Combining all your private pensions into a single pension fund could have several advantages, including being easier to manage and keep track. Modern pensions may also give you more choice of investments, which is potentially useful if you want more control (although remember that investment value can go down as well as up).
However, there are some key questions to ask your provider – not only for the personal pension you are leaving but for the new provider of the personal pension you hope to invest in. It is often a good idea to consult a Financial Conduct Authority (FCA) regulated Independent Financial Adviser to assist in this, particularly if you will be relying on your pension funds in retirement.
This can be a straightforward question – many providers will help you transfer your defined contribution pension but could depend on the pension value. You might also not be allowed to transfer a pension from which you have already started to take an income. Finally, some public sector pensions (e.g. Teachers’ Pensions and the NHS) cannot be transferred and if you have a final salary pension over £30,000 you must seek independent financial advice.
Some personal pensions come with benefits that you need to think about carefully before giving up. They might, for example, offer loyalty bonuses, and the right to a tax-free lump sum. Other benefits, depending on your pension plan, might include the right to access your pension early, or benefits such as a guaranteed annuity rate, or enhanced life insurance or death benefits. A defined benefit pension, for example, not only guarantees your pension income but may offer benefits to your spouse such as continued payments after you die. Always ask what benefits your old policy has before requesting a transfer.
Although there might be benefits to pension transfer, you need to check whether your current pension fund has exit penalties. You may also be charged fees for transferring. These costs can sometimes add up to thousands of pounds, which means that the overall value of the benefits you receive will be much lower. Pension transfer tax is also payable under some circumstances – if you are transferring to an overseas scheme or transferring your pension pot to anything other than a registered UK pension scheme.
It’s important to make sure that your new pension is offering you the best deal possible. Before making the commitment, you should check for any hidden fees and charges, and if you are getting the best interest rate. Again, an Independent Financial Adviser (IFA) should help you to carry out these checks; the IFA may also perform the calculations for your retirement planning.
Most pension transfers offer a 30-day cancellation period. However, you will need somewhere to reinvest your money – be aware that your old pension policy might not take your money back.
A pension transfer is a decision that needs thinking about carefully. An authorised and regulated by the FCA Independent Financial Adviser will help you to negotiate all the potential pitfalls of a pension transfer and work out if it is the best way forward for you.
To get free, impartial advice on pension transfers, contact us today on 0808 164 2664.
Or, to find out more about Pension Works, click here.
This can be found on your payslip, P60 document or letters about tax, pensions or social benefits.
If you have (or have had) a pension that is described below then we can potentially carry-out a Pension HealthCheck.
Defined Contribution Pensions
These are ‘Pot of Money’ pensions where the benefits provided take into account the value of the fund at retirement. They can be personal pensions or Occupational Pensions. There are no guarantees as to what pension will be provided. This will be a reflection of contributions made and investment growth.
Defined Benefit Pensions
These offer the promise of a guaranteed pension at retirement which reflects the length of service with an employer. It will be based on either the Final Salary or Average Career Salary of the employee. Providing the company is still in existence, there is no investment risk for the pension receiver. This type of pension is becoming less frequent.
This is a generic term for pensions that are not workplace schemes.
Group Personal Pensions
Employer-sponsored schemes – each member has a personal pension plan, and their contract is with the pension provider. The employer’s role solely is to select the scheme provider, decide if there should be any restrictions on fund choices and take contributions from the employee’s pay and forward them with employer contributions to the pension provider.
A private pension arrangement or personal pension is taken out by a sole-trader or self-employed worker.
State Earnings Related Pension (formerly Graduated Pension and subsequently State 2nd Pension or S2P) was an additional element of State Pension for employees. The amount of pension was linked to the employee’s salary. SERPS was abolished in 2016 when the flat rate State Pension was introduced.
Private pensions are contracts between the pension member and an insurance company or another pension provider.
These are personal pensions where the member has a much wider choice of investments, including commercial property and single company shares.
Personal Pensions with a set of rules that impose amongst other things a maximum annual management charge (AMC), low minimum contribution levels (£20 per month) and an appropriate Default fund.
Private pension linked to an employer’s Defined Benefit Scheme but separate from the Scheme’s internal Additional Voluntary Contribution (AVC) arrangement – largely defunct since the rules were eased several years ago, allowing people to contribute to both personal and employment schemes as they wish.
Money Purchase Pensions
This is another name for Defined Contribution Pensions.
Unfortunately, we are unable to help clients who currently work for or have a pension from one of the following:
If you are unsure about the type of pension(s) you hold, please contact us on 0800 756 1288 or email email@example.com