How to Transfer a Pension

How do I transfer my pension from one company to another?

1. Check what kind of pension you have

First, you should check what sort of pension you have and how much is in your pot before making a transfer.

Transferring your pension is relatively straightforward if you have a defined contribution pension. A defined contribution pension is more likely to be a modern workplace pension or a pot you’ve set up yourself.

Though, if you have a defined benefit pension – which is more likely a public sector scheme or an older workplace pension – you should first contact your financial adviser to discuss your situation before doing so.

Before transferring your pension, you should also take note of any charges and costs you may face. You can read more about this later in my guide.

2. Shop around and compare the different pension providers to find the scheme that best suits you

Before you transfer your funds, you should first shop around and compare the different providers on offer. When searching for a new scheme, you should keep an eye out for things such as:

• Set-up fees
• Administration charges
• Platform charges
• Investment charges
• Trading fees

If, after shopping around, you’re still unsure of which provider to choose, it may be worth seeking advice from an independent financial adviser.

3. Apply to the pension scheme you wish to transfer to and complete an application form

Next, when you’ve found a pension scheme that suits you, you should apply to that scheme.

You may find that some providers have an online application process, while others will ask you to fill in a physical application form.

Once you’ve submitted your application, your new provider will typically get in touch with your existing pension provider to prepare the transfer.

4. Complete any paperwork your old provider requires

Speaking of your old pension provider, it may be worth checking if they require any paperwork to be completed before the transfer is made.

By ensuring that any paperwork for your existing provider has been completed well before the transfer has been made, you could potentially avoid delays to your pension transfer.

5. Wait for the transfer to be made

Now you’re finally ready for your pension transfer.

Assuming all the necessary steps have been taken and your paperwork is complete, your pension provider will be required to move your pension pot to your new scheme within six months from the start of the process.

Defined contribution vs defined benefit transfers

Before finding out more about pension transfers, it’s first necessary to understand the difference between defined contribution (DC) pensions and defined benefit (DB) pensions.

In the past, most employer pensions were typically a defined benefit scheme, also known as a “final salary” pension. How much you receive from this type of pension depends on elements such as your salary and how long you worked for your employer.

Generally, it’s usually not recommended to transfer defined benefit pensions – in fact, the Financial Conduct Authority (FCA) states that “it is in the best interest of most consumers to stay in their DB pension.” If you still want to transfer a DB pension, make sure you speak to a financial adviser to discuss your situation first.

Meanwhile, most pots are now defined contribution pensions. These can be either workplace pensions organised by your employer, or a private pension set up by yourself.

With this type of pension, the value is defined by how much is contributed, whether that’s from you, your employer, or from tax relief. Your money is then invested by the pension provider, meaning your pot can rise, or indeed fall, in value.

As the majority of modern-day pensions are defined contribution schemes, everything in my guide to transferring pension funds will focus on this type of scheme.

When would I want to transfer a pension?

Now that you know how to make a pension transfer, you’re likely wondering why you’d even transfer your pension in the first place.

Continue reading my guide to discover the benefits of doing so.

You have multiple pension pots that you want to consolidate

Pension consolidation is when you merge any existing pensions you may have under one scheme.

One of the significant benefits of doing this is to make things easier to manage. Having all your pension investments under one roof makes it simple to stay up to date with how your investments are performing, and you’ll have a clearer understanding of exactly how much money you’ll have for retirement.

After all, managing multiple pension pots can often get tricky, and you could even forget how many pensions you own altogether. This is especially the case if you have worked for more than one employer, as you might have separate workplace schemes held with each of your past employers.

Consolidating your pots reduces your chances of forgetting about or losing one.

You want to invest in assets not available with your current scheme

You may find that some pension schemes have a limited choice of investments. So, one of the reasons you may want to transfer your pension is to gain exposure to specific investments that aren’t available under your current scheme.

For example, some pensions may offer a small number of investment options, while others may provide exposure to more specialist investment options, such as property.

You should keep in mind that having a pension with a wide variety of investment choices could potentially make the product more expensive.

Or, if you wish to take control of your pension pot, you could always transfer to a self-invested personal pension (SIPP), which puts the investing decisions into your hands.

Bear in mind that using a SIPP will make you entirely responsible for how your retirement funds are invested. Make sure you are comfortable and confident doing this before you choose this type of pension.

A scheme may have lower fees or more flexible options

It’s often easy to overlook your pension fees, as they are typically invisibly deducted from your pot or investments.

For example, with some defined contribution pensions, you may be charged:

• Platform charges for investing on a trading platform
• Fund management charges if your pension has been invested in a fund
• Transaction fees every time a trade is made
• Annual pension management fees.

As you can imagine, the fees that your current pension provider charges can quickly add up, so you may want to transfer to a pension with lower fees, allowing you to make the most of your savings.

Also, if you have multiple pension pots, you could save money on management fees by merging them into one pot.

You don’t like your current provider

Finally, if you don’t like your current pension provider, this is another excellent reason to make a transfer.

For instance, you may find that your current provider offers poor customer service, or you disagree with the way your money is being invested.

This essentially comes down to personal preference, but if you don’t like how your pension is being managed, this is as good a reason as any to transfer to a new scheme.

Is there a cost to transfer a pension?

One of the most important things to note before you transfer your pension savings are any pension transfer charges you may face.

For example, you may face an exit fee when you initially transfer out your pension. This is the cost your current pension provider will typically charge you to move your pension savings from one scheme to another.

These exit fees can be either a fixed fee or a percentage fee. If you have a particularly large pension pot, you should be wary of percentage exit charges, as you will pay more to make a transfer.

You should also consider any lost investment returns while your pension savings are being transferred. Your pension pot must be transferred within six months of your application, and while it may not take this long, you could miss out on potential returns during this time.

Also, while you can typically transfer your pension fund without financial advice, doing so can involve complex decisions to be made. So, you may want to consider consulting a financial adviser before you transfer your pension savings, which means you could face costs for your pension transfer advice.

How much do financial advisers charge for pension transfers?

As mentioned, transferring your pension fund is typically a complex decision, so you may want to speak to a financial advisor before doing so.

This means you’ll likely face charges for the financial advice, and these costs can vary between advisers.

These fees are typically based on the extent of advice you need, how long the transfer will take, and the size of your pot. Also, these fees come in varying forms, including:

• Fixed fees – in this case, your financial advisor will arrange a set price in advance for completing a specific service.
• A percentage of your total assets – rather than charging a set fee, some financial advisors may instead charge a percentage on the total size of your pension pot. This means that the larger your pension pot is, the more charges you will face.
• An hourly rate – meanwhile, some financial advisors may charge an hourly rate instead of a fixed or percentage fee. If your financial advisor charges you in this way, you should ideally ask your advisor roughly how long the transfer will take before taking advice.

While you may think there’s no need to spend money on a financial advisor, you should remember that a pension is your future. So, you may want to think of these charges for financial advice as a good investment.

Will I lose money if I transfer my pension?

As previously discussed, your pension transfer must be completed within six months from the start of the process.

While your pot is being transferred to a new pension scheme, you could potentially lose out on investment returns.

Also, your old pension may have an inbuilt guaranteed annuity rate, offer a guaranteed income, or come with other safeguarded benefits. These valuable benefits could be lost when you transfer to a new pension scheme. Factor elements such as these into your decision to transfer.

Is it easy to transfer a pension?

Transferring to a new pension scheme is relatively easy.

Potentially the trickiest part of transferring your pension is the process you will go through. As previously mentioned, you will likely be required to complete paperwork when you apply to your new pension provider, and your old provider may also ask for specific forms to be filled in.

Though, once you’ve completed this paperwork, your provider will do the rest, and is required to complete the transfer within six months.

How long does it take to transfer a pension to a SIPP?

If you wish to transfer your existing pension into a SIPP, the time this takes will vary.

For instance, if you’re transferring your pension as a cash payment, this typically takes between two to six weeks to complete.

Though, if you’d prefer to transfer your existing investments, then this could take between 8 to 12 weeks to complete. Of course, this time depends on the types of investments you hold.

Can I transfer my pension to my husband or wife?

Unfortunately, you typically can’t transfer your pension to your husband or wife while you’re still alive.

However, you can transfer your pension to your spouse when you pass away or if you get a divorce. And, since your pension isn’t considered part of your estate, it is typically exempt from Inheritance Tax.

Though you should keep in mind that there are some instances in which your beneficiaries will be required to pay Income Tax on the money they get from your pension, such as if you die after the age of 75 or if the value of your pension exceeds the Lifetime Allowance.