There may be many reasons why you may decide to transfer your pension, but how easy is the process? And what should you consider before changing the way you save for your retirement? This guide aims to provide the hows and whys associated with pension transfers, helping to shine a light on what may be a really rewarding process.
Whether you’re unhappy with your current pension provider or are simply looking to combine all your different pensions into one pot, you’ll need a pension transfer. But what exactly does that mean?
What is a Pension Transfer?
When you move your pension from one provider to another, this is known as a pension transfer. Sometimes, it can also be referred to as a pension fund transfer.
While this process can sometimes be convoluted, evolving technology has meant that it’s becoming far more straightforward to transfer pensions between providers or consolidate many different pensions into one pension pot.
Although pension transfers are becoming more simple for you to undertake, there are a few rules to keep in mind.
When you transfer your pension, you’re actively selling the investments in your fund and converting them into cash. The money is then transferred to your new pension provider before being reinvested into your new plan.
If this part of your pension transfer seems a little daunting, don’t worry. Most modern pension providers will automatically undertake this process on your behalf.
If your current pension provider offers different pension plans, it’s also possible to make changes to alter how your savings are looked after. However, because you aren’t changing your provider, this process isn’t classed as a pension transfer.
Why do People Make Pension Transfers?
So, what’s the point of transferring your pension? There are many reasons why people make pension transfers. You may be interested in moving some, or all, of your pension fund for the following reasons:
- You’re planning to change to a more suitable pension scheme
- You’re interested in the benefits of a different pension scheme
- You have a new employer
- Your current pension scheme is being closed or wound up
- You’re seeking to consolidate your pensions from different employers into one pot
- You’re moving overseas and want to find a suitable local provider
If one or more of these reasons applies to you, it could be worth transferring your pension. With various pension schemes equipped with competitive management fees, associated charges, and benefits, you may simply be looking to undertake a pension transfer to build the best possible nest egg before retirement.
But how does the process work? Let’s take a deeper look at how you can transfer your pension:
What Does the Transfer Process Involve?
While transferring your pension is a relatively simple process, these high-value nest eggs have become increasingly targeted by fraudsters in recent years attempting to impersonate you to access your account.
With 559 reports of pension fraud in 2023 and an average of £46,959 lost per person, the Pensions Regulator has advised added measures to improve financial security when moving pension funds.
To begin the transfer process, you must either contact your current pension provider or your new one. The process is comprised of three key actions:
Informing Your Old Provider
Your existing pension provider will remain in charge of transferring to new pension schemes and ensuring the new provider is legitimate. With this in mind, your provider will request information like your name, address, date of birth, and National Insurance Number to verify your identity.
Additionally, your provider will require your new provider’s information, such as their name and address, HM Revenue and Customs (HMRC) registration number, payment details, scheme information, and the identity of the scheme administrator.
Your old provider will also seek your financial advisor’s details as well as confirm permission to carry out the pension transfer on your behalf.
Due Diligence
Even though you’re seeking to leave your old pension provider, they still have a duty of care to ensure that your transfer is compliant.
This will involve checking the new pension scheme to ensure that it’s on the Pension Regulator’s pre-approved list. If your new provider is either a public service pension scheme, an authorised master trust, or a collectively defined contribution scheme with sufficient authorisation, your old provider will be able to automatically transfer the funds.
Another check will involve the type of scheme you’re transferring to. Is it a workplace scheme? Is the customer living overseas? Does anything fail to add up?
If your existing provider isn’t sure that your funds are safe with the new provider, additional checks may be made, and you could be referred to the government’s MoneyHelper website for additional guidance.
Final Decision
Upon the completion of additional checks, your existing provider will decide whether to accept or refuse the request.
Most transfer requests are legitimate and are usually a formality before your provider clears your exchange of funds. If your provider believes that you’re transferring to an illegitimate new provider, it will communicate its decision to you, and you’ll have grounds to make an appeal.
However, if your old provider believes something’s wrong with the scheme you wish to transfer to, it may be worth listening to the advice and carrying out further research.
Help is at Hand
If you’re interested in undertaking a pension transfer but don’t know how to take your next steps, the aforementioned MoneyHelper website is an excellent resource for impartial advice regarding your options.
You can also get advice from independent financial advisers, although it’s likely that you’ll have to pay for the privilege.
Additionally, if you’ve seen a pension scheme that appears too good to be true or suspicious in any way, it may be worth contacting Action Fraud on 0300 123 2040 to share your concerns.
Taking Your Next Steps
Today, it’s easier than ever to successfully transfer your pension and begin saving through a scheme that more accurately reflects your goals or to consolidate your various pensions into one manageable pot.
With plenty of useful resources on hand to help should you become stuck or wary of new providers, it’s worth taking a measured look at your options to discover a new provider that suits your ambitions.
However, pensions are typically high-value money-saving strategies and with this in mind, it’s important to remember that there will always be nefarious individuals intent on stealing your wealth. It’s for this reason that you should always research your providers thoroughly before attempting a transfer to ensure that your money is always safe and secure.
