Introduction to personal pensions Transferring your personal pension
Transferring your pension could be a good idea if you have a lot of pension pots and want them all in one place, or if you'd like more investment choice than your current provider offers.
However, it can be complicated, so it’s usually a good idea to seek financial advice. Our guide, Financial advice explained, has more information on this.
Should I transfer my pension?
You might want to think about transferring your pension if:
- Your pension scheme is being closed
- You want to move to a scheme that is cheaper
- You want more investment choice from your pension, so want to move into a Sipp
- You have a number of pensions and want to consolidate them in one place. Many providers offer lower charges for people with larger pots
You can transfer your pension to another registered pension scheme, a pension scheme abroad (as long as it’s a qualifying recognised scheme) or the Pension Protection Fund (PPF).
Risks to consider when transferring
Switching without taking independent, specialist advice could mean you lose out:
Exit penalties: If there are any exit penalties on your existing policy, they could cancel out the benefit of transferring to a new provider. Exit penalties can be thousands of pounds, so it’s worth checking if they apply.
Loss of guaranteed annuity rates (GARs): Your existing pension fund may include valuable benefits such as guaranteed annuity rates, which could mean a higher annuity rate when you retire. Ask your provider if it offers a GAR.
Should I go for stakeholder? Stakeholder pensions are usually cheaper than standard personal pensions, and many offer a good range of investments. Read more about Stakeholder pensions
Transfer of risk: If you’re thinking of transferring from a final-salary scheme to a personal pension, the investment risk switches from your employer to you, as could the scheme charges.
Reduced transfer value: If you're in a defined benefit pension scheme that's under-funded (it doesn’t have enough money to support the pension), the transfer value you are offered may be reduced.
Changing your mind: Pension transfers usually offer a 30-day cancellation period. However, if you're thinking of cancelling, make sure your old pension scheme will take your money back – many won't.
Lost bonuses: Some providers offer bonuses to investors who stay with them (and make regular contributions). A new provider may not be able to match these offers, so be sure to check if they apply to your pension scheme.
Ongoing advice. You may need to have ongoing reviews of your investments in order to keep a balanced portfolio. You should consider the cost of ongoing financial advice when transferring.
Tax-free lump sums: You’ll lose any right you had to take a tax-free lump sum of more than 25% of your pension value under pre-2006 rules.
SIPPs can be an attractive home for existing pension pots currently tied up in other schemes. They offer a wider range of investments, including personal property, so are suitable for more experienced investors.
Sipps can be managed online, meaning that people with smaller pots can use them. Sipp websites look a bit like online banking portals. You can see how much money’s in your pension and where it’s invested. Our guide, Sipps explained, has more information on the pros and cons of Sipps.
When shouldn’t I transfer my pension?
If you’re in a company defined benefit (DB) pension, it will almost certainly not be worth transferring your pension into a personal scheme. As well as a guaranteed income, DB schemes also offer generous benefits to your spouse or partner once you die. Read more about DB schemes in our guide.
It’s normally not worth moving if you are a current member of an employer’s defined contribution (DC) scheme either, as you would lose your employer’s contribution.
Also, if you’re nearing retirement, transferring your pension could expose you to market shocks, which you would have less time to recover from if you were further away from retirement.
- How to invest - Learn about portfolios and asset allocation
- How much money will I have in retirement? - How your different pension pots and benefits will add up
- The Which? Money Helpline - Get expert advice on your pension investments
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