Pension Transfers
Your basic information guide to UK pension
Transfers
What is a Pension Transfer?
Why Transfer Your Pension?
How Do Pension Transfers
Work?
Transferring From
a Final Salary Pension
Transferring From
a Money Purchase/Personal Pension
Can I Transfer Any
Pension?
Pension Transfers:
Common Questions
What is a Pension Transfer?
A pension transfer is the process of transferring -
ie switching or changing - the value of your
contributions that are in one pension scheme to another
pension scheme.
For example if you have £50,000 sitting in one
pension scheme and you want to transfer it to another pension
scheme...|
Doing this ends your membership of the original
pension scheme.
Understanding whether you will benefit from a pension transfer
can be complicated and you should always take advice
from an independent financial adviser before arranging
a pension transfer.
In this section, we'll explain how pension transfers work,
what the main rules are and what you need to think about
if you're considering transferring one pension to another.
We'll also look at some common questions about pension transfers.
Why Transfer Your Pension?
Everyone's situation is different, so you won't necessarily
benefit from a pension transfer just because other people
you know are transferring their pensions to new schemes.
However, there are situations where it does make financial
sense to transfer your pension to a new or different scheme
- here are a few possible examples:
• Your existing company scheme is being wound
up
• You have a personal pension that has high
fees and you would like to transfer it to one of
the new breed of low-fee personal pensions.
• You would like to add your existing personal
pension to an occupational pension scheme to benefit
from lower fees/employer contributions.
Whatever your situation, there is one golden rule of pension
transfers that you must not ignore:
Take professional
advice from an Independent Financial Adviser (IFA)
IFAs are regulated by the Financial
Services Authority (the UK government regulator) and
are required to give you impartial advice
based on the facts and on your individual circumstances.
They will be able to understand your current and new pension
schemes and will work out whether you will actually benefit
from transferring your pension or whether you may end up
losing out.
An IFA will also be able to suggest a suitable pension
product for you to transfer your old pension into, if you
need this (although there won't be any obligation).
How Do Pension Transfers Work?
There are strict legal rules about pension transfers. You
don't need to understand them all, but you should know at
least the basics if you are considering transferring your
pension.
The first thing you need to know is what type of pension
you want to transfer from.
There are two basic types of pension.
It's important to understand these because the transfer
value of your pension is calculated differently for each
type.
1. Final Salary Pension Schemes
Final salary pensions guarantee you a pension that is a
fixed percentage of your final salary - i.e. the salary
you had when you retired or left the company.
Final salary schemes are also known as Defined
Benefit pensions because the benefit (pension)
you will receive is fixed in advance - regardless of how
much your contributions are worth.
2. Money Purchase Pension Schemes
Your contributions to the pension scheme are invested and
added together.
When you retire, the total value of your contributions is
calculated. This money is then used to purchase
an annuity, which gives you a guaranteed income for
the rest of your life.
Money purchase pensions are also known as Defined
Contribution pensions - because your contributions
are fixed but the benefit (pension) you will get when you
retire is not.
Read On
Transferring From
a Final Salary Pension
Transferring From
a Money Purchase/Personal Pension
Can I Transfer Any
Pension?
Pension Transfer:
Common Questions
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