It's generally possible to transfer your pension to another provider and this could be a great way to save more money and get the most out of your pot. In this guide, we'll look at how you can transfer your pension, your eligibility to do so, and any other factors to consider before taking the plunge.
Transferring your pension to another provider can offer benefits such as greater investment control, better returns, reduced costs, and the ability to access funds from old or closed-down pension plans.
It is crucial to assess whether it is the right decision for your retirement goals before making a transfer, considering factors like exit costs, potential loss of bonuses, and guaranteed annuity rates.
Keeping your pension with the current provider may have advantages, such as eligibility for monetary and non-monetary rewards in case of provider closure.
Transfers involve accepting more responsibility for managing investments, which increases the risk of making poor decisions, so consulting a financial advisor is recommended.
The transfer process and rules vary depending on the type of pension, including state pensions, workplace pensions, personal pensions, and SIPPs, and it is important to be familiar with these requirements before initiating a transfer.
Is Transferring Your Pension the Right Decision?
When it comes to pension transfers, the most important question is whether it's the right decision for you. The answer depends on a variety of factors, such as your retirement goals, any restrictions or fees imposed by your current provider, etc.
Generally speaking, there are four main reasons why people decide to transfer their pensions:
To Gain Control Over Investments: Moving your pension to another provider can give you greater control over how and where your money is invested. This can be beneficial if you want more freedom in deciding where your money goes.
To Get Better Returns: Many pension providers offer different levels of returns, so transferring your pension can be a great way to get higher returns than you could with your current provider.
To Reduce Costs: Some providers charge fees for certain services, such as investment and administration fees. Transferring your pension can help you save money in the long run and make sure that more of your money is going towards your retirement savings.
To Replace a Closing Pension Plan: If you have an old or closed-down pension plan, you may need to transfer it to another provider before you can access your funds.
While there are some compelling reasons to transfer your pension, there are also some benefits to keeping it with its current provider. For example, you may be eligible to receive monetary and non-monetary rewards such as guaranteed annuity rates or death benefits if the provider goes out of business.
Ultimately, the decision to transfer your pension is yours alone. It's important to consider all of the factors and make an informed decision before taking any action. Let's take a look at these factors.
Points to Consider Before Transferring Your Pension
With any pension, there are potential risks to consider. Here are a few of the most important points to think about before making a move:
Depending on your current provider, you may be charged an exit fee when you transfer your pension and this can range from a few hundred pounds up to thousands. This fee is levied to cover the cost of setting up and administering a new pension scheme.
Pension providers often prefer long-term customers, so they may charge higher exit fees for those who leave earlier. On the bright side, young savers may be able to recoup the majority of these fees in the form of tax relief, but older savers may face a significant financial loss.
It's important to contact your current provider to find out if they charge an exit fee and how much before making any decisions. While doing so, bear in mind that the FCA has capped the exit fees at 1% of the existing value of your pension.
Transfer Rules per Pension Plan
When transferring a pension, there are certain legal and regulatory requirements to consider. Depending on the scheme, transfers may be subject to specific rules or restrictions such as maximum age limits or minimum investment amounts.
Let's take a look at some of the rules you should know:
State Pension Transfers
It's possible to transfer your state pension if you've lived abroad or worked in more than one country.
If you'd like to move your UK pension savings to an overseas pension scheme, then it is essential to check that the scheme you are transferring to is recognised as a legitimate overseas pension scheme.
You can check this with your UK pension provider, or a financial adviser.
Before transferring your pension abroad, you must fill in and submit Form APSS 263 to HMRC. This form will provide all the necessary information needed before the transfer can be made.
If you are under the age of 75 when making the transfer, then your UK pension scheme administrator will perform calculations to compute how much of your lifetime allowance is used by the transfer.
They will also tell you if the amount you're transferring is more than your allowance and if you will be taxed on any excess.
You can claim the UK State Pension, if you live abroad and have made enough contributions to UK National Insurance. To make a claim, you must be within 4 months of your State Pension age and can either contact the International Pension Centre or send in an international claim form.
If you live part of the year abroad, you must decide which country you want your pension to be paid in. This is important because you cannot be paid in one country for part of the year and another for the rest of the year. Your pension can be paid into a bank in the country you’re living in, or a bank or building society in the UK.
When it comes to “when you'll receive your State Pension”, you can choose to be paid every 4 or 13 weeks. If your State Pension is less than £5 per week, then it will be paid once a year during December. However, the amount of money you get may vary due to currency exchange rates.
Workplace Pension Transfers
Transferring a workplace pension involves switching your current pension provider to another, such as a SIPP.
The general process for transferring your workplace pension is quite straightforward. You need to contact your current pension provider to obtain an up-to-date valuation of your pension pot and fill out any relevant paperwork they require.
After that, you need to find a new provider that meets your expectations and complete their application forms. Once this is done, the two companies will arrange the transfer between them which can take anywhere from a few weeks to several months to complete.
However, it’s important to be aware that if you do this with your current workplace pension then your employer will stop contributing.
Personal Pension Transfers
Transferring a personal pension to a new provider can be a great way to get better returns on investments or consolidate multiple pensions into one.
To kick off, you'll need to find out your transfer value — the amount currently held in your pension pot — by asking your current scheme administrator or provider. They will provide you with a document outlining this information, as well as any extra benefits accrued and any exit fees that may apply.
Your new provider may require additional paperwork from you in order to complete the transfer so it's best to double-check what is needed before starting. It's also important to note that transfer values often fluctuate due to changes in investment values and market conditions so bear this in mind when making your decision.
Once you have all of the necessary details, contact the new scheme provider and fill out their application form (many now offer online transfers). The provider will then contact your existing scheme administrator or provider to arrange for the actual transfer — although in some cases they may request additional forms from your first provider.
SIPP Transfers
If you have a self-invested personal pension (SIPP) and you want to transfer it to another UK-registered pension scheme or a qualifying recognised overseas pension scheme (QROPS), you can do so.
Any part of the SIPP that has already been accessed must be transferred in full, while the part which is not accessed can be transferred partially or in its entirety, depending on your preferences.
When it comes to transferring your SIPP, you have several options available. SIPP providers allow you to transfer your pension pot as cash, by selling investments, or by transferring investments as they are.
If you are transferring a QROPS, it must be checked against your remaining lifetime allowance in case a tax charge applies.
The Bottom Line
Transferring a pension can be an effective way to get better returns on investments or consolidate multiple pensions into one. Be sure to research all the options available, including any fees associated with transferring and the implications of changing scheme providers. While the process may involve some extra paperwork and fees, it can be worthwhile in the long run.
