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Transferring your pension

Pension transfers can be complicated and there are many things to think about before going ahead.

If you are thinking about transferring your current pension(s) into a new personal pension plan or self-invested personal pension (SIPP) we've set out seven key questions for you to consider. But remember, whether a transfer is suitable or not will very much depend upon your individual circumstances and objectives. This information cannot cover everything you will need to think about but they can help you to start.

If the scheme you are thinking about transferring out of is an occupational salary-related pension scheme there are some specific risks involved which you should be aware of. Our Pension transfers printed guide has more detailed information – you can download or order it online at Free printed guides.

Getting help

It can be difficult to make suitable decisions without advice, even when you have all the information you need. So unless you are absolutely sure, you should seek professional financial advice.

If you decide to get advice use this information to make sure that your adviser has given you full answers to each of these questions.

It may be helpful to print it out and take it with you to any meetings with an adviser and use it as a checklist to refer to when reading any of their written recommendations. If you decide not to get advice make sure you fully understand the risks and benefits of transferring your pension.

Seven key questions to consider

  1. Will the new pension be more expensive than my existing one(s)?
    • If the new pension costs more make sure you are satisfied that any additional costs are for good reason. For example, if the new pension is offering you access to more funds than your current pension(s), ask yourself whether you need them. You wouldn't take out a more expensive mortgage or insurance policy without good reason, so why do so with your pension?
    • You will get information about the costs of the new pension in the Key Features Illustration (KFI) that the pension provider or your adviser should give you.
      Make sure the Key Features Illusteration refers to the actual funds and investments that you will be using in your new pension. You need to read the documents you are given so you can clarify any issues you are unsure about.
  2. Would a stakeholder pension meet my needs and objectives?
    • Stakeholder pensions are often the cheapest pensions available and it is important that the adviser considers a stakeholder as an option and discusses it with you. If you or your adviser doesn't think a stakeholder would be suitable for you make sure that you understand why this is.
    • If you or your adviser think a pension with more features (for example, more funds) would be better than a stakeholder pension be confident that you need them.
    • Some stakeholder pensions now provide access to quite a wide range of funds. So even if you are looking for some flexibility in your investment choices there may well be a stakeholder pension to suit you.
  3. Is it a good idea to transfer all of my pensions into a single new pension?
    • If you currently have several pensions and are looking to put them into one new pension, make sure you are aware of any costs. If you are taking advice your adviser should be able to explain them to you.
    • You may not necessarily need a new pension to put all your pensions together. If one of your existing pensions already meets your needs and objectives it might be possible to transfer all of your other existing pensions into that one.
  4. Will I lose any benefits?
    • It is possible that your current pension may have valuable benefits that you would lose if you were to transfer out of it, such as death benefits or a Guaranteed Annuity Rate (GAR) option. A GAR option is where the insurance company will pay your pension at a particular rate, which may be much higher than the rates available in the market when you retire.
  5. Are there any penalties if I transfer?
    • Some pensions may apply a penalty when you transfer out. These can be significant – sometimes several thousand pounds (depending on the size of your fund) – so it is important to check if one may apply in your case.
  6. Will the investments in the new pension be right for the amount of risk I am prepared to take?
    • You may want to decide for yourself how to invest your money, or if you are getting advice your adviser may make recommendations for you. Either way it is important the investments chosen are appropriate for the amount of risk you are currently prepared to take with your money – remember, investments can go up or down.
    • An adviser can help you decide how much risk you are prepared to take if you are unsure and can explain the risks and potential benefits of different funds and investments to you.
  7. Will I need ongoing advice?
    • Depending on the new pension you choose it may be important for you to have ongoing reviews. Some fund selections may need to be reviewed from time to time to maintain the balance of your portfolio.
    • It is also possible that the amount of risk you are prepared to take could change over time – for example, if your financial situation changes, or as you get nearer to retirement.
    • Your adviser should explain this, and whether it applies to the pension they recommend. If so they may be able to offer you an ongoing service.
    • Remember that you may have to pay additional charges to your adviser for this which, if paid for through the pension, will increase the cost of the new scheme.