Pension Transfers

Occupational Pension Transfer

An occupational pension transfer means putting a monetary value on the pension benefits you have built up in one scheme and using this to buy benefits in another pension arrangement.

When you leave an employer’s pension scheme, you can usually choose to leave behind in that scheme the pension and other benefits you have built up. The scheme will pay them to you when you retire.

Alternatively, either when you leave or later on, you may be able to transfer the pension rights you have built up in that scheme to:

A pension scheme run by a new employer; or
A stakeholder personal pension; self invested pension plan (SIPP)
A ‘buy-out contract’ (also called a ‘section 32 contract’), which is similar to a personal pension except that it can be used to provide some guaranteed benefits.

Before the benefits you have built up in your former employer’s scheme can be moved, they must be converted into a cash lump sum, called a ‘transfer value’. The transfer value is either invested in the new scheme or plan, or used to buy benefits in it.

In most cases, it is your right to take a transfer value from your employer’s scheme if you wish to do so. It is always possible to invest it in a personal pension. However, if you want to transfer to a pension scheme run by a new employer or to a buy-out contract, you must check if this is possible since they do not have to agree to accept your transfer value.

Before you decide whether to transfer, you need to find out about the benefits provided by your former employer’s pension scheme. These will depend on what sort of scheme it is.

Personal Pension Transfer

Many people have invested into pension funds held in poorly performing funds with companies who are no longer open to new business.  In addition pension charging structures have changed dramatically over the past few years. Due to the influence of stakeholder pensions the cost of a new pension is now far lower than in the past. Many individuals now find themselves with outdated, overpriced pension contracts. In some cases you may even be able to switch contracts with the same provider to better your charging structure. However, there are still a number of factors that need to be considered. If you are considering transferring your pension away from your current provider, the main factors you have to consider, are the possible benefits of transferring your pension against the associated costs of moving, including any penalties you may incur by your existing provider.

The easiest way to make a charge comparison is to ask your provider for a Current Valuation and Transfer Value. This will enable you to see what the costs are in moving away from your current provider. In addition by asking your pension company to provide a pensions projection to your chosen retirement age, you can make a comparison with a newer charged pension contract. This will assist you in making a decision as to whether a transfer is the best thing to do.

The information summarised above highlights the main factors that could influence whether or not transferring to another provider is the right thing to do, there may be other reasons as to whether this is a suitable product to transfer into and if you are in any doubt you should seek independent financial advice

We have attempted to highlight the main factors that could influence whether or not transferring to another provider is the right thing to do, there may be other reasons as to whether this is a suitable product to transfer to and if you are in any doubt you should seek independent financial advice.