Transferring your pension

5 minutes

Transferring your defined benefit or defined contribution pension

Transferring your pension allows to you move the pension savings you’ve built in your defined contribution pension pot into another. Your pension provider will be able to give you a transfer value for the savings you’ve built up. Find out more about consolidating your pensions.

Pension transfer also allows you to move your defined benefit pension in to a defined contribution pension. To do this you will need to request a cash equivalent transfer value from your provider.

Moving your savings from one provider to another may mean you lose any additional benefits, so it’s important to get guidance or advice before making a decision.

If you're able to transfer out of your defined benefit scheme and this involves a cash equivalent transfer value of £30,000 or over, you'll be required to get regulated financial advice first.

Why should I transfer my pension pot?

Most companies will allow you to transfer out your pension savings, but there are associated advantages and disadvantages to this approach.

Advantages of transferring your pension pot

  • Reduce paperwork by only dealing with one pension provider
  • Get potentially better investment performance and improved rates which can boost your retirement income
  • Know exactly how much money you have saved in total into your pension pot
  • Easily monitor performance of you pension fund, if it’s linked to investments

Disadvantages of transferring your pension pots

  • You could be charged for transferring from one provider to another
  • Some companies offer ‘Guaranteed Annuity Rates’ which could be lost if you consolidate your pensions
  • If your pension includes a minimum pension guarantee, death benefits or annual income increases, you would lose these benefits
  • Any invested funds are linked to stock market performance meaning your fund value could go down as well as up.

Transferring your defined benefit pension

Transferring your defined benefit pension to a defined contribution plan could enable you to take advantage of pension freedoms, giving you more choice with your pension savings. However, defined benefit pension have a number of additional benefits which could mean transferring isn't in your best interest.

Things to consider before you transfer your defined benefit pension:

  • You as the scheme administrator would take on the investment risk
  • You will sacrifice any death benefits
  • Transfer would mean you give up annual income increases, meaning the buying power of your pension will not keep pace with inflation and will buy less in the future
  • Depending on the options you choose, you may give up a guaranteed income for life which means you may potentially run out of money if you live longer than expected.

Seeking pension advice

 We recommend you seek pension advice if you’re considering transferring your defined benefit pension. A pension specialist will:

  • Review your defined benefit pensions 
  • Ask a few questions about you current circumstances, retirement goals and attitude towards risk
  • Check what benefits you could lose if you transfer your pension
  • Make recommendations based on what’s the best option for you
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