Pension transfers do exactly what they say on the tin. A pension transfer is the process of transferring an existing pension to a new provider. This can be for many reasons, including a change in job or a quest for a better performing pension fund.
Pension transfer is rarely as straightforward as it appears, so it’s worth speaking to an IFA (Independent Financial Adviser) for advice before making a move, and to also be aware that they will ultimately receive commission for moving your fund.
Not everyone will benefit from transferring a pension, but there are certain situations where it is unavoidable.
Someone who works for a company who have decided to wind up their existing scheme will have to move pensions. Others may have lots of smaller pensions accrued from working in a variety of different jobs throughout their lives which they want to group together into one, easier to keep track of pension.
Older pension funds had higher fees which are not found on low cost modern stakeholder pensions, and consumers often look to move their pensions to avoid paying these fees.
It’s worth noting you cannot transfer any of your state pension allowance, or your additional state pension allowance.
There are certain rules to be aware of when looking to transfer your pension. Not all pension providers will allow an inwards transfer, meaning you may not be able to bring other pensions into the one that you are currently saving into.
It is also worth trying to avoid a knee-jerk reaction when you hear your company’s pension scheme is in deficit. Many schemes fall in and out of deficit over time due to market conditions, and it’s worth noting that new government rules brought out in April 2005 will protect you should your company’s scheme go bust.