No, you can usually transfer your pension pot to another pension scheme at any time.
The majority of schemes in the UK will enable you to make a transfer of your pension pot to another scheme entirely, such as a new personal pension scheme, a stakeholder pension (SHP) scheme or an employer’s workplace pension scheme.
Typically, you can make a pension transfer at any time, with the cutoff date usually being the year before you would expect to start drawing benefits from your pension. However, in some cases you could make a pension transfer to a brand new pension provider even after you have started to draw from your pension.
Why Would You Transfer Your Pension?
People may decide that they want to transfer their current pensions to another provider for a number of different reasons, including:
- You would like more flexibility when it comes to your pension
- You would like to put multiple pensions into one pension pot
- The current pension scheme you have is going to close
- You have found a better or a less expensive pension scheme elsewhere
- You are changing jobs
Making a Pension Transfer to Another UK Pension Scheme
In the majority of cases, you will have the option to transfer pension benefits to a brand new scheme (usually one year beforehand).
In order for this pension transfer to be carried out, you will first need to know your cash equivalent transfer value (the CETV), which is also known as the pension transfer value. Finding out the CETV is a simple process and usually requires you to contact the pension provider or scheme administrator in writing.
At this point you will receive a Statement of Entitlement, which will set out the details of your pension transfer value, which can be given to your new scheme provider.
How Long Does This Transfer Value Last For?
A pension transfer value from a defined benefit pension scheme will be guaranteed for three months after it has been issued.
Will I Lose Retirement Benefits If I Transfer?
This will entirely depend on the kind of pension transfer you are carrying out. For example, if you decide to transfer from a defined benefits to a defined contribution pension scheme, it is likely you will be giving up guaranteed retirement benefits in the process.
What Are the Costs for Transferring My Pension?
Whilst not always, there is a possibility that you may have to pay penalties for transferring and in some cases, this could be as high as 30% of the pot value. This is why it is recommended that you seek regulated financial advice before making a transfer, in order to determine that it is in your best interests.
Things to Do Before a Pension Transfer
You should always ensure that you are fully aware of any potential benefits or guarantees you could lose if you decide to transfer away from your existing pension scheme.
Certain pension scheme could provide you with additional death benefits, a guaranteed income or the right to take out your cash at a certain age.
Other benefits at stake include being able to take out a tax-free lump sum of more than 25% from your pension fund value, or lose the guarantee of a fixed or enhanced protection that would increase your lifetime allowance.
For more information on pensions and transfers, please visit our blog.