Pension Transfer

If you wish to leave your current pension savings scheme (see Leaving a Pension Scheme Early), but you want to continue to save money for your retirement, you may consider transferring your pension fund to a different pension scheme. It is important that you consider all the advantages and disadvantages of moving your pension fund, before you make the final decision. You may be leaving your current job, and think that you have to leave your current employer's pension scheme at the same time; in fact, many occupational pension schemes offer their members the chance to leave their pension fund in the occupational scheme even when they are no longer company employees. Think carefully before leaving your current pension scheme: remember the benefits that convinced you to become a member in the first place and consider that you may not be offered the same favourable conditions by another scheme provider. Once you have transferred out of a pension scheme it is generally impossible to transfer back in, so be sure you are making the right financial choice and do not act on impulse. If your current pension scheme provider offers you the chance to leave your pension fund in the scheme, weigh up your options carefully and seek independent financial advice on your particular situation. For more information see Freezing your pension fund.

If you have decided to transfer your pension fund you will need to inform your current pension scheme administrator and the administrator of the scheme you wish to join. It may be possible for your fund to be transferred with minimal personal inconvenience, except for signing the relevant forms to confirm your decision to move your savings. Other schemes may ask you to complete more detailed paperwork yourself, or ask you to fill out questionnaire forms detailing why you have decided to leave the scheme. Similarly, some pension schemes will arrange for you to meet with one of the scheme administrators to discuss your decision when you request a pension fund transfer. Take these opportunities to discuss your concerns and any dissatisfaction with the pension scheme, and to ensure that you are happy with the decision you have made and have not overlooked any potential scheme benefits. Remember that your current pension scheme may encourage your decision if they believe that you will cost them a lot of money, for example, if you plan to retire early and are fit and healthy you may draw a pension for a very long time, and a defined benefit scheme would have to honour their agreement for the duration of your retirement. Be sure that you are making the right decision for you and not for your pension scheme.

You can transfer your pension fund to another pension scheme at any time, as long as you are not retiring within the year. You will not always be able to transfer your pension fund to the scheme of your choice; not all pension schemes accept pension fund transfers. Some schemes will only allow a transfer for a short window of time; an occupational scheme may allow a transfer within six months of joining the company. If you are already drawing your pension, or you have signed an agreement to draw your pension with a particular insurance company, you will not be able to transfer your pension fund to another scheme or insurance company. The only time you might be allowed to transfer your pension to another company when you are already drawing your pension would be in exceptional circumstances, for example, the insurance company is going out of business and will not be able to pay your pension. However, you will not be able to transfer out of your occupational scheme if your employer is going out of business and is currently in the process of being assessed by the government's pension regulation department.

The consequences and risks of transferring your pension fund to another scheme will differ depending on the type of pension scheme you are leaving and the type of pension scheme you are planning to join. As a result there may be times when the decision to change your pension scheme provider is a logical one, because you stand to benefit from the change. Similarly, there are situations when transferring your pension fund to another scheme is illogical or risky, because in all likelihood you will lose some or all of the benefits offered by your current scheme. If you choose to transfer your pension fund from one money purchase scheme to another money purchase scheme, or from a defined benefit scheme to another defined benefit scheme, it may be easier to weigh up the pros and cons of the transfer. For more information see Occupational defined contribution schemes and Occupational defined benefit schemes. Since you are transferring between two schemes which fundamentally operate in the same way, you will have the opportunity to compare the benefits of one against the benefits of the other with relative ease. You may be offered a defined contribution scheme with a higher rate of interest and lower administration charges, or a defined benefit scheme which offers you an accrual rate of 1/60 instead of 1/80, resulting in a higher pension. Making an educated choice in situations like these is comparatively simple. If you are swapping one type of pension scheme for another, there will be more to consider; for more information see Defined contribution to defined benefit transfers and Defined benefit to defined contribution transfers.

Before you make the decision to transfer your pension fund to another pension scheme, consider the scheme benefits you will give up as well as any you stand to gain. Be sure to ask your new scheme provider about the scheme policy on every important issue: not only how much interest you will receive but also whether you are able to retire early without penalties, what would happen if you were to fall seriously ill or become disabled, and whether your family would be entitled to receive your pension, or a part of it, in the event of your death. If you receive satisfactory answers to your questions, you can proceed with more reassurance.