Pension Transfers

What is a Pension Transfer?

A pension transfer involves transferring the contributions you have made into your pension fund, from the current pension scheme to another pension scheme.

Why Bother with a Pension Transfer?

There are many things to consider when making the decision to transfer your pension, or not.  The situation is complicated by the fact that each individual’s circumstances are different, thus making it difficult to provide general guidance that will relate to everyone.

We recommend that you seek professional advice prior to committing to any pension transfer arrangement.

When is a Pension Transfer Worthwhile?

Generally, a pension transfer is worthwhile where:

• Your existing company pension scheme is being wound up
• You have a personal pension scheme incurring high costs
• You would like to combine your existing personal pension with your occupational pension scheme to benefit from lower fees and/or employer contributions

Regardless of whether your current situation fits the above example, you should still seek professional advice from an IFA prior to committing to a pension transfer arrangement.

What can an IFA do for You?

An IFA can analyse your current financial position, including your current pension arrangements.  An IFA can also work out whether a pension transfer will save you money, or increase your pension fund over time, and even provide an estimate of the amount of savings/increase in value of the fund.

An IFA can also suggest specific pension schemes, and pension scheme providers, to maximize your benefit.

How Do Pension Transfers Work?

1. Transferring from a Company Final Salary Pension

If you wish to make a transfer from a company final salary pension, then you should write to the pension scheme administrators stating that you wish to make a transfer, and request a Statement of Entitlement.

The pension scheme administrators then have 3 months to provide you with a transfer value for your current pension fund, which is guaranteed for 3 months.

In this circumstance, the transfer value of your pension fund is not based on the contributions you have made into the scheme, but on an assessment of the amount of money that would have to be invested now to provide you with your ‘preserved pension’.

If you then decide to go ahead with the pension transfer, then you pension scheme administrator is required to complete the transfer within 6 months.

2. Transferring From a Money Purchase/Personal Pension

As with transfers from company final salary pension schemes, if you want to make a pension transfer, then you will need to make a request to your pension administrator for a statement of transfer value.

Unlike transfers from company final salary pension schemes, the value of the transfer will depend on the value of contributions made into the scheme to date, adjusted for the performance of the pension fund since the contribution were made.

Also, unlike transfers from company final salary pension schemes, the transfer value may not be guaranteed for a period of time, since the money continues to be held in investments may go up or down in value.  The amount actually transferred will depend on the value of your fund at the time of the transfer.

If you choose to make the transfer, then you will need to make a written request to the administrators, who are required to make the transfer within 6 months (as with transfers from company final salary pension schemes).