How to transfer your pension

If you’re thinking about moving your pension to a new provider, it's important to understand the risks, benefits and everything you need to get started. This can also speed up the overall process, and help you decide if transferring is the right choice.

There are two categories when it comes to pensions:

• Defined benefit (DB)
• Defined contribution (DC)

When you have a defined benefit pension, the amount you receive upon retirement will generally be based on your earnings and the number of years you’ve been working for a company. You’ll be paid a guaranteed income for life, which should increase yearly in line with inflation. However, these types of pensions aren’t as common anymore. Usually, you’ll only have one if you’ve worked for a large employer or in the public sector. You might have heard these referred to as a ‘final salary pension’ or a ‘career average pension’.

Defined contribution pensions can be workplace pensions from your employer or private ones you set up. This includes self-invested personal pensions (SIPPs). Generally, you’ll contribute to the policy, and your money will then be put into investments, with the aim that it will grow over time and leave you with a pot of money for your retirement. You will then be given a list of options to take your pension. 

Knowing what type of pension you have is crucial if you’re considering a transfer, as it can affect the process. If you’re unsure your provider should be able to tell you which type you have. For example, if you have a defined benefit pension and the total of your guaranteed benefits is worth more than £30,000, you’ll be required to get financial advice before you can transfer. This is because it’s not usually in your best interest to transfer a defined benefit pension.

There are a few reasons why you may want to consider transferring your pension:

• To keep all your pensions in one place. 
• Your current pension product has too many restrictions, such as not having access to all retirement options or having limited investment options.
• Your current pension only allows you to keep your pension invested until a certain age.
• You want more control over your investments. 
• The charges are too high.
• Your current pension scheme is being closed.

For each of these it’s important to do your research to ensure you’re doing what’s right for you. 

It’s also important to remember that the value of your investments can go down as well as up, so you might get back less than you’ve paid in. 

Like most things, there are pros and cons to transferring and understanding the risks is key. Unfortunately, things like pension scams still happen, so being vigilant is essential to keeping your hard-earned money safe. For example, pension providers or advisors aren’t allowed to cold call you about transferring your pension. 

There are also things you’ll need to consider when it comes to the actual transfer itself, as things like exit fees or loss of benefits might not be apparent until you’ve started the transfer process. 

You're also not guaranteed to be better off. Although bringing all your pensions together can have many benefits, there's no guarantee that you'll be better off in retirement. 

If your employer pays into one of the pensions you're considering transferring to us, you'll need to talk to them before transferring, as a transfer may mean they stop paying into it. 

Make sure you’re clear on these details before you begin any transfer. If you change your mind, your original provider may not accept your pension back. Getting financial advice can help you understand any risks in transferring your pension. They’ll be able to do all the leg work for you and make sure that your money is working the way you want it to. 

Before we go into the steps of how to transfer your pension, you’ll need to make sure you have a few things before you get started.

• An up-to-date valuation of your current pension (CETV).
• Details of any benefits you’ve built up under your scheme. 
• If you’re transferring your pension overseas, you’ll need to make sure the receiving scheme is on HMRC's current list of qualifying recognised overseas pension schemes (QROPS). ^{Footnote [1]}  
• If it’s a defined benefit pension, your scheme administrator or pension provider may need proof you’ve taken regulated financial advice.

The timeline for transfers can differ as it may depend on factors like the type of transfer you’re doing, provider responsiveness, and whether it’s being done electronically or manually. In some cases, you may also have to attend a MoneyHelper safeguarded appointment, which could mean delays. As you can imagine, transferring a pension overseas could make your transfer even longer. 

But as a rough idea, in 2024, our online transfers to other providers took an average of 8.8 days to be completed. ^{Footnote [2]}  

So, let’s get into the steps on how you can transfer your pension:

1. Speak to a financial adviser to understand whether transferring is the right option. Remember, the Financial Conduct Authority (FCA) requires you to get regulated advice if your defined benefit pension has any safeguarded benefits and has a total value of more than £30,000.
2. Check whether you can transfer online, whether it be on the app or website.
3. If not, contact the provider who will be receiving the transfer. 
4. Inform your new provider how you want your money to be invested when received.
5. Fill out all necessary forms and get them posted.
6. Wait for the transfer to take place.

As for choosing a new pension provider, you might want to consider a few things:

• Check the charges associated with the policy and funds you’re considering investing in.
• Check the range of investment options available to you.
• Review their levels of customer service, through checking reviews.
• Check restrictions like minimum contributions, and retirement options.
• Ensure things aren’t too good to be true (it could be a scam).

If you’re still unsure whether financial advice is worth it, think about the possible benefits:

• Tailored support – Each plan will be personalised to you and your goals, making sure that your portfolio meets your risk levels.
• Your choice – You can get advice for as long or as short as you need, from ongoing advice to one-off sessions. You’re able to stop and start whenever you need. 
• Expert knowledge – You’ll be speaking with an industry professional who will support you with your long-term financial goals. 
• Time – Managing financial plans can almost feel like a full-time job, so having someone look after it for you means that’s one less thing to worry about.

Financial advice does come at a price, but usually, that won’t start until you take out a product or service. Meaning you can work out whether it’s beneficial to you or not. 

Did you know we offer financial advice on pensions and defined benefit pensions? Check to see if you’re eligible and get in touch. If not, have a look at MoneyHelpers articles about advice, and choosing an adviser.