Questions about pension transfers
What happens to my pension when I leave my employer?
Once you leave your employer you cease to be an active member of the occupational pension scheme. Typically, if you have been in an occupational scheme for more than two years you will be left with a 'preserved' or 'frozen' pension that will be looked after by the occupational pensions department until your retirement age. Although the term 'frozen' is commonly used it is somewhat misleading as the pension will normally revalue, between the date you left and your retirement (this is known as the deferred or preserved period).
What type of situations may arise that could make it appropriate to consider transferring my pension/s to a new or different scheme?
These are a few of the common scenarios to consider:
- When your existing occupational pension scheme is being wound up
- You have a personal pension that charges high fees and you would like to transfer it to a lower-fee stakeholder personal pension
- When you have a number of small pensions, perhaps from a variety of employers, periods of self-employment and various Additional Voluntary Contributions plans and you would like to amalgamate them all perhaps in a SIPP (Self-Invested Personal Pension)
- You would like to add your existing personal pension to an occupational pension scheme to benefit from lower fees/employer contributions
Can I transfer my old pension into any new pension scheme?
Not necessarily. Pension schemes aren't required to accept inward transfers and some do not. Before you start a pension transfer, you should always receive professional financial advice about your choice of pension scheme and make sure your new pension will definitely accept your transfer.
My existing employer's final salary occupational pension scheme is in deficit. Should I transfer out of it?
There is no one correct answer to this question. You should always obtain professional financial advice that will enable you to fully assess your options. You need to consider why the company scheme in deficit; is it just a short-term situation or is the company in trouble? Also, if you transfer out at this point, you will be likely to receive a reduced transfer value, in proportion to the scheme's deficits. If you stay in and the fund gets back in the black again, you may get your full pension entitlement back, too. In April 2005, the government introduced a new scheme to protect people whose company pension schemes go bust. Transferring out could mean you lose your entitlement to this protection.
My employer has offered me a cash lump sum to switch from the company's final salary pension scheme to a personal pension. Is this a good idea?
Final salary schemes are increasingly expensive for companies to run, and many companies are closing them as fast as they can. It's perfectly legal for your employer to make you an offer like this but remember that they are only doing it to save money, not to help you.
If you are offered a cash incentive, also consider that you will have to pay income tax on this money which could reduce its value.
Will I incur fees for transferring my pension?
You may be charged fees when transferring a pension. Even if your new pension offers better benefits, you need to know if they will outweigh the fees you will pay. Fees are usually deducted from your transfer value at the time of the pension transfer.
I have some pensions which I've lost track of over the years. Can I find these and transfer them into my current scheme?
You will need to take professional advice over whether to transfer your lost pensions, but you can find them using the government's Pension Tracing Service.
I'm considering moving abroad, can I transfer my UK pension so that I benefit from this overseas?
If you intend to move abroad, or for existing expats you can transfer your UK pensions to a Qualifying Recognised Overseas Pension Plan (QROPS). This can give you considerable tax savings and greatly increase your retirement flexibility. You can also control how and when you take your retirement income which is paid to you gross, with no deduction for tax.
Independent pension transfer advice
For a no-obligation pension transfer consultation please speak to the independent pension advice team from one our partner firms today.
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