Pension transfer

Just because you change jobs and move company, you do not have to transfer your pension. You are perfectly entitled to leave your pension fund where it is. This does not mean that you cannot, but there are a number of factors to consider before you do. Some people prefer to know that their pension funds are all in one place, whereas others are happy to leave their funds alone to perform as best they can.

It is important that you do not transfer your pension simply because others are doing it. Everyone’s situation is different, and it may make sense for them to transfer, whilst you may gain (or even lose less) by staying put.

When to perform a transfer of pension

There are some situations where you should move your pension to a new scheme, and these include;
Adding a personal pension to an occupational pension scheme to take advantage of lower fees and employer contributions.
If your existing scheme is being wound up.
You have a pension scheme with high fees and you find a low-fee personal pension plan
but in all of these circumstances, you should speak to an independent financial adviser to ensure you are making the best possible decision on your pensions transfer.

The do's of pension transfer

When you find an accredited financial adviser that you trust, ask for a transfer value analysis. This will show you what your pension will be worth if you leave it, and what it will earn if you transfer. It also shows how well your new pension will have to perform to make up any shortfalls from the change.

You should look at any new pension fund as if you were taking a pension for the first time, before your pension transfer. if the scheme you were in had a number of benefits that appealed to you, you don't want to transfer a pension to anything less. For example, if there was a good tax free lump sum with your old pension, you don't want a pension transfer to one with a smaller lump sum payment.

Check the performance of the scheme you are transferring from. If its performing well (say its in surplus) it may be better to stay where you are for now.

The don'ts of transferring pensions

In general you shouldn't switch from a company pension plan to a private pension, where you are still contributing. This is because your employer is also contributing, but would not make payments into a private scheme - so effectively you would be cutting payments to your fund. Only consider a pension transfer if you have moved employer, and only then after careful consideration.

Public Sector pension schemes, for teachers, nurses, local council employees etc, are guaranteed against inflation no matter how it changes in the future, and they allow you to link periods of employment together should you take a break for whatever reason. Because the fund is guaranteed against inflation it is unlikely that a private pension, or even a company pension, could match this benefit.

Personal pensions are subject to the rise and fall of the stock market, and so can be risky. If this would naturally cause you some concern, leave your pension where it is and don't transfer pensions to a personal plan.

Don't transfer before considering the cost implications. This can be around 5% of the total pension fund, so you are loosing out on your hard earned cash. If your fund is quite low, it may be well worth leaving it alone.

Pension Transfers - more information

Remember that pensions can ONLY be transferred to other pensions, which is done to prevent fraud. Because pensions attract pension tax relief pension funds cannot be transferred into cash.

Pension schemes are not duty bound to accept a pension transfer, so don't assume, after doing all your homework, that your chosen pension plan will accept the transfer of pension.

Final pension salary schemes are becoming increasingly costly to run, and for that reason, employers are closing them as fast as they possibly can. Therefore, you may be offered a cash lump sum to switch from your companies final pension salary scheme to a personal pension plan of your choice. This is perfectly legal, but is done to save the company money. Take advice from an independent financial adviser before you accept as the lump sum is taxable and you will incur costs to transfer the pension - meaning the lump-sum may not be as attractive as it first looked.

If you paid into a pension and have subsequently lost the details, you can trace it by using the Pension Tracing Service. Once you have traced it, consider all the options you have before transferring it to a new pension.

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