This page was last updated on 1 December 2020.
Pension Transfer Advice
This article guides you through retirement pension basics. It gives you advice on your pension freedoms, and will help you make decisions about whether transferring your pots makes sense for you and your loved ones.
At a glance, the focus of the article is:
- How to transfer the money from your pension scheme
- How transferring a defined benefit scheme works
- Whether or not you can transfer your pots to another person
- The cost of getting advice, and when it is a legal requirement
Read on for answers to some of the most commonly asked questions about transfer rules.
Topics that you will find covered on this page
How to transfer pensions
The first thing you should do if you are considering the option of transferring your pension is get in touch with your scheme provider.
When you call them and make your enquiry, you should ask the following pension question list:
Can I transfer?
The first question you should ask is whether or not you are able to transfer. Your provider may have restrictions in their paperwork about which type of pensions you can transfer, and in some cases you may not be allowed to transfer at all (see below).
How much will the transfer values of my pensions be?
Pay attention to the amount of money you would receive, because if there are no changes between the transfer value and the current total of your pension pot you will probably not have to pay an exit fee.
Will I have to pay any extra costs?
It is still a good idea for consumers to double check if there are any other hidden fees to pay.
Will I lose the right to withdraw my money after a certain age?
Keep in mind that in some employer pension schemes, there might be a protected pension age.
Will I lose my benefit entitlements or other features?
One of the cons of transferring pensions is that it may cause you to lose your entitlement to guaranteed annuity rates, as well as your ability to take a protected tax free lump sum.
Here is a useful video about transferring pensions.
What you need to ask your new pension provider about transfers
The next stage is for you to research the advantages of other pension providers and make a shortlist. You can get advice from an independent retirement finances specialist by asking them to show pensions providers to you. You can then make your decision based on their recommendation and feedback if you wish.
Once you have made a choice about which provider you would like to transfer your pension to, then you should telephone them and ask:
- Whether you would need to pay any set-up or arrangement fees at the start.
- Whether you should apply through them, or through your current pension pot company.
- If you will need to make contributions or payments regularly according to the rules of your membership.
- Which types of investment strategy they offer. Some people prefer certain kinds of investments or levels of risk. If you are not sure and would like some support with this part of the process, speak to a specialist adviser.
- How you can take your money out, and in which ways. Do you have the option of withdrawing a cash lump sum, or is the rule that can you only receive the money as income?
If you are transferring multiple pensions, you will probably need to complete several applications and fill in a separate form for each.
You can read the government run blog for more free and impartial advice about how to transfer pensions. If you still have questions, it would be in your best interest to speak to a money expert for advice about your options before making any final decision.
Can I transfer my pension myself?
Whether or not you can transfer your pension yourself depends on the firm types, the kinds of scheme you have (defined benefit or defined contribution), and where you are transferring your funds to. See below.
Get in touch with your current provider as well as independent advisers if you need help working out what is possible in your circumstances. They can help you with understanding the suitability of different alternatives.
Can I transfer my defined benefit pension?
A defined benefit pension transfer is not always possible. For example, you can’t transfer your pensions if you work in the public sector and have a final salary workplace pension from:
- The Civil Service defined benefit (DB) pension scheme
- The NHS final salary pension schemes
- The Teachers DB scheme
However, other defined benefit pension providers may allow transfers. You should message your scheme administrators to check what is possible under their terms.
It is important to remember that when you transfer a pension from a defined benefit scheme, you will lose the valuable pension features included in the scheme. For example, you may no longer be entitled to a guaranteed income for life in retirement that rises in line with inflation.
You need to take the fact that you will lose benefit entitlements into account before transferring your final salary pension schemes. This is because your quality of life in retirement may be reduced if you aren’t careful.
If you are unsure about any aspect of losing access to features from your pension benefit schemes, you should seek financial advice from DB schemes specialists.
There are some other cases where it is not possible to transfer proceeds from a defined benefit scheme, such as when you are already receiving income from your final salary.
What happens if I transfer my defined benefit pension?
If you transfer your defined benefit pension scheme, the pension scheme trustee will convert your pension benefits into a Cash Equivalent Transfer Value (CETV).
Your cash transfer value will be moved into a defined contribution scheme. However, due to the rules of the regulator – the Financial Conduct Authority (FCA) – this can only happen after you have received professional defined benefit pension transfer advice.
An advisor must give you the go ahead in the form of written advice. Getting advice is part of the law if your final salary pension is valued at more than £30,000. Regardless of the outcome, you will have to pay the fee for transfer pensions advice.
How much will I get if I transfer my defined benefit pension scheme?
Transferring your pot will grant you a Cash Equivalent Transfer Value. The amount you receive as a transfer value depends on the benefits you have accumulated with your guaranteed income workplace scheme.
The transfer value is usually calculated at 20-40 times your annual income owed upon retirement. The CETV amount is worked out based on the amount of money that your employer’s pension firm would need in today’s economy to provide the final salary pensions benefits you were promised in the future.
The cash equivalent transfer value that you get then acts as investment funds. You can put the money into a defined contribution pension plan with other employers, or you can invest it yourself into a stakeholder pension or personal pension.
Can I transfer my pension to another person?
No. It is not normally possible to transfer your pension pot to another person.
There are only two exceptions to this rule:
- If you are getting a divorce from your spouse, or having a separation from a civil partnership, then you can transfer a proportion of your pot.
- After your death, your family or nominated trustees can inherit your money.
Can I transfer my pension to my wife?
While you cannot normally transfer your pension to another person, you can select someone to inherit your pot in case of death.
It is very common for a personal pension scheme to allow you to select a member of your family to inherit your interests when you pass away. You just need to contact your provider to give them the most up to date details and names of your beneficiaries.
Remember, they may have to pay income tax as a result. This will depend on the age at which you pass away.
So, if you would like to guarantee that your wife, husband or civil partner receives money, simply call your providing organisations.
How much does pension transfer advice cost?
To receive quality advice on transferring pension pots, you will likely need to pay a financial adviser, as getting free and impartial financial advice is not always possible.
The amount that this financial adviser will charge depends on the type of pension scheme you have, as well as the number of pensions that you want to transfer.
Advice on pension transfers for defined contribution schemes is usually charged at a maximum of 5% of cash value of your pension fund.
You may also need to pay an extra 1% on an ongoing basis for reviews in the future. This way, you can rest assured that your pension finances are being looked after in the long term.
You should also be able to pay the charge using the cash from your pension funds, and not need to take money out of your own pocket.
How can I find a pension transfer specialist?
All qualified advisers are authorised and regulated by the Financial Conduct Authority, the trade body and watchdog for the industry.
You should be able to find details about advice firms online on the FCA’s approved financial adviser register.
Should I get financial advice from pension transfer specialists?
If you want to transfer pension pots you own, it’s a good idea to seek pension transfers advice. Getting the right financial advice from a money advice service can make a big difference to your retirement income.
In some circumstances, you are also legally required to go through the advice process:
- If you would like to transfer defined benefit pension savings valued at £30,000 or more, the Financial Conduct Authority requires you to speak to a pension specialist for financial advice.
- You must also seek advice if you are moving funds from a defined contribution (DC) scheme worth at least £30,000, if you have a guaranteed annuity rate.
So, before you decide on transferring your pension schemes, make sure you contact a financial adviser. The pensions advisory service you choose will guide you through the pension transfer rules from your pension provider, make recommendations, and use their specialist knowledge to outline any risks.
How to spot pension transfer scams?
There are many warnings about fraudsters operating in the market as fake pension advice companies.
If you receive any kind unsolicited emails or phone calls from someone saying that they can help you transfer your money, it is likely to be a scam and you should report it.
There can be severe implications to working with scammers and you can incur a large financial loss. Many will try to get you to abuse the systems and break UK law. So, there can be big tax consequences and fines that will leave you less to live on in retirement.
For these reasons, you should always check for proof that the person you are speaking to is partners with and approved by the FCA. This trade body is designed to put protection in place for pension holders.
What is contingent charging?
Contingent charging is a pricing model where you pay for the advice you receive only after you have transferred the funds from your old scheme. The FCA has recently issued a ban on contingent models of charging.
The reason for the ban is that they found there was a conflict of interest for advisers if they only got paid compensation for their advice after moving funds. In their experience, they found that there was an increase in recommendations for transferring pots that wasn’t in line with the level they expected for DB schemes.
The new pensions guidance is designed to control the situation and make sure that you are getting the best possible, objective advice. You cannot undo a transaction of this kind, so it is very important to get high quality retirement financial advice before moving money out of your scheme.
I am the primary writer and author for Help and Advice, having originally helped start the site because I recognised that there was a need for easy to read, free and comprehensive information on the web. I have been able to use my background in finance to produce a number of articles for the site, as well as develop the financial fitness score tool. This is a tool that provides you with practical advice on improving your personal financial health.
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