Many of us have worked for several employers and paid into a number of different pensions over the years, and keeping track of these accounts can be a headache.
To simplify things, you might want to consider transferring one or more of your pensions into a single plan. This can make the process of managing your retirement savings simpler, and you might be able to reduce the charges you pay too. It’ll also make it easier to see the total value of your pension savings, which can be used to give an idea of how much you might be able to receive as an income in retirement, alongside the State Pension and any other savings you have.
However, it’s not always the right decision to move your pension to another provider, and it’s important that you check that you’re not giving up valuable benefits by doing so. For example, transferring your final salary pension into a personal pension plan is rarely the right decision, as you’ll be giving up a guaranteed income in retirement. Find out more in our guide Should I transfer my final salary pension?
Here we explain the steps you need to take if you’re transferring a pension or pensions, and some of the things you need to consider during the process.
If you’re considering seeking professional financial advice on the options available to you, we’ve partnered with nationwide independent advice firm Fidelius to offer Rest Less members a free initial consultation with a qualified financial advisor. There’s no obligation, however if the adviser feels you’d benefit from paid financial advice, they’ll talk you through how that works and the charges involved.
Fidelius are rated 4.7 out of 5 from over 1,500 reviews on VouchedFor, the review site for financial advisors.
Contents
- Step one: Check what type of pension you have
- Step two: Decide which provider you want to transfer your pension to
- Step three: Get in touch with your current pension provider – and the one you want to move to
- Step four: Decide whether to stay in or out of the market during the transfer process
- Step five: Complete the paperwork
- Step six: Wait for the transfer to complete (and chase things up if there are delays)
- What are the advantages of transferring your pension?
- What are the disadvantages of transferring your pension?
- Where to go for more help
Step one: Check what type of pension you have
Your first step should be to check which kind of pension you’re looking to transfer. If you’re transferring a defined contribution pension, with these pensions, the amount you end up with at retirement depends on how much you (and your employer if it’s a workplace pension) have paid into your pension, as well as how the investments in your pension have performed. Learn more about defined contribution pensions in our guide What is a defined contribution pension?
Defined benefit, or final salary, pensions, provide a guaranteed income in retirement and are generally considered extremely valuable. It’s rarely considered the right option to transfer this type of pension into another plan, and you should get professional financial advice if you’re thinking of doing this. If your pension transfer value is worth more than £30,000, regulator the Financial Conduct Authority (FCA), has made it compulsory for you to see an independent financial adviser (IFA) before moving your pension. Find out more about this type of pension in our guide What is a defined benefit pension?
As mentioned, transferring pensions won’t be the right option for everyone, and it needs careful consideration. If you’re in doubt about whether it’s the right step for you, speak to a professional financial adviser. Find out more about getting advice on your pension in our guide How to get advice on your pension.
If you’re transferring several different pension plans, and you’ve lost their details, you can use the government’s free Pension Tracing Service to find contact details for your providers.
Step two: Decide which provider you want to transfer your pension to
There are several pension providers that make it easy to transfer your pensions, and they offer simple, ready-made portfolios for investors to choose from.
Step three: Get in touch with your current pension provider - and the one you want to move to
You’ll need to ask your current pension provider whether it’s possible to transfer your pension, and how much this might cost you in charges. You’ll then need to contact the provider you wish to move your pension across to, and check that you can transfer to them.
Step four: Decide whether to stay in or out of the market during the transfer process
You may be able to decide whether to sell your pension investments to transfer cash into your new plan, or make an ‘in-specie’ transfer of your holdings.
This means you can move them across without needing to sell and be out of the market. Beware that if your investments sit in cash for several weeks during the transfer process, you could lose out on stock market gains during that time (mentioned below in potential disadvantages). Conversely, if the market falls, you won’t suffer any losses. No-one knows which way markets will move next, so it’s down to you to decide whether you’re comfortable being out of the market for a while.
Bear in mind that an in-specie transfer can take a lot more time to complete as it’s more complex, and may take from six weeks to several months to complete, but if you’re using a professional financial adviser they will manage this process on your behalf.
Step five: Complete the paperwork
You’ll have to complete a bit of paperwork, but this isn’t usually too onerous. You’ll need your latest pension statement for each provider, and/or a recent valuation statement. This will give you your transfer value, which is the amount you have in your pension pot, although beware that this may change during the course of your transfer, as the value of your investments held in your pension can go up or down.
You’ll need to ask the provider that you want to transfer to for their forms, and some will have an online process, while others may ask to complete and send an application form, but make sure to ask them for help along the way if needed. The provider you’re moving to should usually contact your current provider to sort out the transfer. Again, if you’re using a financial adviser to make the transfer, they will do this on your behalf.
Step six: Wait for the transfer to complete (and chase things up if there are delays)
The transfer process should be relatively straightforward and typically takes around four to eight weeks to complete, if you’ve transferred by selling your investments to move your pension as cash. If you’re doing an in-specie transfer, then as mentioned, transferring your pension can take considerably longer. Either way, it’s worth chasing to see where things stand if you feel the transfer is taking longer than it should.
What are the advantages of transferring your pension?
Transferring your pension can have several benefits, although whether it’s right for you will very much depend on your individual circumstances. Potential advantages include:
You might save money: If you’ve got an older pension, you may be paying significantly more in charges, at 1% or more, than pensions currently available on the market. This can have a huge impact on the growth of your investments, over time. It often makes financial sense to transfer your pension to a plan with lower charges. Pensions often charge less than 0.5%, and you can find out more in our guide What pension charges am I paying?
Your pension may be easier to manage: After all, it can be difficult and time-consuming to keep track of lots of different pension pots. This involves plenty of paperwork, whereas if you have your retirement pot all in one place, you can keep track of your investments’ performance, make changes more easily, and monitor how much you’re paying in charges. Find out more in our article Should I consolidate my pensions?
You could benefit from more investment choice: Self-invested personal pensions typically offer the widest choice of investments. Find out more in our article Where is my pension invested? and Everything you need to know about Sipps.
What are the disadvantages of transferring your pension?
It’s vital to consider potential drawbacks before you transfer your pension, and you should seek professional financial advice if you’re not sure this is the right course of action for you. Possible disadvantages include:
You could lose important guarantees: As explained, some defined benefit, or final salary schemes, offer valuable guarantees that’ll be lost if you transfer your pension to another plan. For example, these may include taking out more than your 25% tax-free lump sum at retirement, or taking your pension at a particular age. Check for any existing benefits with your current provider, and take professional advice if you’re in any doubt about these.
You might be ‘out of the market’ during the transfer: As explained above, depending on the type of transfer you choose, you may lose some investment growth if you cash in your pension before moving it to another plan.
You may incur an exit penalty: Some providers charge an exit fee for transferring your pension to another plan, either as a flat fee, or a percentage of your pension’s value.
Where to go for more help
Transferring your pensions can be the sensible thing to do to streamline your retirement planning, but it definitely isn’t the right option for everyone. If you’re in any doubt about whether it’s the right course of action, speak to a professional financial adviser.
Bear in mind that if you’re 50 or over and have a defined contribution pension, you can get free guidance available on the options available to you from the Government’s Pension Wise service. However, you won’t receive personalised advice on your particular pension plan and whether to transfer, or not.
If you’re considering seeking professional financial advice on the options available to you, we’ve partnered with nationwide independent advice firm Fidelius to offer Rest Less members a free initial consultation with a qualified financial advisor. There’s no obligation, however if the adviser feels you’d benefit from paid financial advice, they’ll talk you through how that works and the charges involved.
Fidelius are rated 4.7 out of 5 from over 1,500 reviews on VouchedFor, the review site for financial advisors.
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