Unless you spend your entire working life with one employer, the likelihood is that you’ll have several pension funds by the time you’re nearing retirement.
While there are no rules against having multiple pension pots – in fact, there’s no limit to how many you can have –transferring and consolidating all your funds into one larger fund can have several benefits.
One core reason for combining your pensions is lost pots. Currently, the value of lost and unclaimed pensions stands at £26.6 billion (Mercia Group, 2023); one in four of us have lost track of at least one of our pensions.
Even for those who know exactly where all their pensions are, having fewer pension pots may also mean lower administration fees, more investment potential, greater flexibility, and less mental load for you.
Consolidation may not be the only reason for a pension transfer. You could be moving abroad, choosing to move your pension from a UK account to an overseas account.
Whatever your reason for moving your pension funds around, starting the pension transfer process isn’t always the most straight-forward task, especially as there are many rules and regulations that might come alongside an abroad or UK pension transfer. To help you get started, here are a few pension transfer basics that are helpful to know when it comes to starting a pension transfer.
Pension transfer rules
Most of the time, pension transfer rules allow fund holders to move their pension from one provider to another. However, there are certain caveats to be aware of – the key one being exit fees and charges. Make sure you check the fine print of your pension carefully before you choose to transfer to another provider so that you’re not losing any of your hard-earned money unnecessarily.
Pension transfer regulations may also stipulate that you lose certain benefits if you exit from your current provider. This could be perks such as enhanced protection, the right to take a tax-free lump sum of more than 25%, or the right to withdraw your pension at a certain age.
If you’re unsure of your pension transfer eligibility, check with your pension provider in the first instance. They’ll be able to tell you in detail everything you need to be aware of when it comes to pension transfer rules. You can also work with a specialist Financial Consultant who will be able to reach out to your pension provider on your behalf if you prefer.
How to transfer your pension fund
In 10 simple steps, you can work through the pension fund transfer process seamlessly.
- Do your research: Deep dive into your current pension fund and understand exactly what it offers. Then, look elsewhere and see if there’s another provider that can improve on your current pension’s terms.
- Seek advice: You don’t have to go through the pension transfer process alone. Speak to an expert financial adviser who can take you through a step-by-step pension transfer, armed with a wealth of knowledge.
- Choose where you’d like to invest: Decide which pension scheme you’d like to invest with, ensuring it aligns with your financial goals for later life.
- Contact the pension providers: Contact both your current provider and the new provider and let them know you’d like to start the process of transferring funds. They’ll let you know exactly how you need to proceed and send you any relevant forms.
- Do the admin: While not the most fun job, it’s important you fill out all the paperwork accurately, providing all the information needed to make ensure the transfer as easy as possible.
- Review terms: Before you sign on the dotted line, be sure that you’re happy with all the terms and conditions of your new pension provider.
- Await confirmation: Sit back, relax, and wait for further information and/or confirmation from both providers that the transfer can go ahead.
- Monitor progress: It’s important that you or your financial adviser keep on top of the transfer process. Don’t be afraid to follow up with your providers for updates.
- Finalise: Once the transfer is complete, be sure to receive receipt of transfer.
- Keep reviewing your pension: Work closely with a financial adviser to ensure your money is working as hard as it can for you.
Transferring to an overseas pension
If you’re moving abroad, you might choose to undertake an international pension transfer, so your pension is in the same country as you. To do so, you’ll first need to check that your new pension provider is a ‘qualifying recognised overseas pension scheme’ (QROPS). Check this initially with the overseas scheme and your current UK provider. If it’s not a QROPS, your request may be denied, or you may have to pay 40% tax on the transfer.
It’s your responsibility to find out if you need to pay tax on your overseas pension scheme transfer, as it’ll depend on where your QROPS is being transferred to. Check this with your new and current providers or ask your financial adviser to support you.
If you’re ready to go ahead with transfer, you’ll need to download and fill in an APSS 263 form. Once you’ve done that, give it to your UK pension scheme administrator to get the process underway. Be aware, your transfer will be taxed a 25% if you don’t provide all the information the form asks for within 60 days of requesting the transfer.
Pros and cons of transferring your pension
As with any financial decision, it’s important to weigh up the positives and negatives of transferring your pension.
In all cases, there are advantages of pension transfer and risks of pension transfer.
Pros:
- Gaining new benefits not currently offered with your current provider such as flexible drawdown not offered by some schemes
- Easy to keep track of all pensions if consolidating into one pot
- One investment approach and an appropriate risk profile which can impact the future returns on your pension
- Access to ongoing advice that was not available previously
Cons:
- Loss of benefits currently offered with your current provider
- Exit fees and charges
Whether you’re consolidating your pension pots, moving abroad, want to gain better benefits, or reduce your annual fees, there are many reasons why you might consider moving one or more pension pots to another provider. However, with many rules and regulations to consider, as well as quite a lot of personal admin, it’s important to seek financial advice before making any pension fund transfer decisions.
At Cooper Associates, we understand the intricacies of pension fund transfers and the impact they have on your retirement plans. Our experts are dedicated to guiding you through every step, ensuring your pension transfer aligns with your long-term financial goals. Discover how our personal pension services can simplify this complex process, providing you with clarity and confidence. Visit our Personal Pension page today to learn more and start shaping a secure, tax-efficient retirement.
The value of an investment with St. James’s Place may fall as well as rise. You may get back less than the amount invested.
The levels and bases of taxation and reliefs from taxation can change at any time and are dependent on individual circumstances.
