pensions and retirement

How much will it cost to transfer my pension funds?



Posted on: 23rd January 2019

If you have had multiple jobs over the years, it is likely you have more than one pension under your name. The longer you have left in your career, the more workplace pensions you will earn. This is all thanks to Auto Enrolment.

How and why should I transfer my pension funds?

Over time, managing multiple pensions can be quite a messy process. This can make it far too easy for you to lose track of your savings. Maintaining many pension pots could also become quite costly if you are paying several high fees. So, if you are thinking about transferring your old workplace and personal pensions into one plan, then there are some things to consider. Here is a breakdown of the things you should think about and what you can do to avoid paying for a pension transfer.

Common reasons to transfer a pension

Depending on how many pensions you have, as well as how they are performing and how much you are paying in fees, it may be wise to consolidate your pensions into one. In fact, there are a few circumstances that may encourage you to think about transferring your pension. This includes:

  • Your current pension provider’s no longer providing the type of pension option you want to use to access your savings in retirement.
  • Your current pension isn’t being invested in line with your expectations and you wish to change your risks for a higher income.
  • You’d like to take your pension with you abroad.
  • You would like to keep all your pensions under one roof.
  • You’d like to pay a single fee, which will hopefully cost less than what you’re currently paying.

When to transfer a pension

Transferring your pension is an option that anyone can consider, and you don’t necessarily need a “good” reason to do so. Just be sure that you have done your research and you feel confident that you will be better off financially by turning to a new provider. You can transfer your pension at any point, no matter how close you are to retirement. However, if you are nearing retirement, you will need to make sure that your savings are invested in a plan with less risk.

Most new workplace and personal pensions are defined contribution pensions. These have a value based on how much you have contributed and how your investments have performed. If you have one of these pensions, it should be relatively easy to transfer.

However, if you have defined benefit pension, you should approach any potential transfer with caution until you have done a thorough assessment of the benefits you could lose by leaving your current scheme. You can find out the type of pension you have, and its benefits by checking the paperwork of your pension. This could be an annual pension statement or by directly contacting your provider.

If you are part of an older pension scheme, known as defined benefit or ‘final salary’ pension, then a transfer may not always be the smart choice. Defined benefit pensions have a value based on your salary and how many years you have worked for your employer. What’s more, your current scheme could come with special benefits that you could lose if you choose to leave.

These special benefits could include a guaranteed annuity rate upon retirement, regardless of the market at the time. It could also mean other perks that you may not want to wave goodbye to. To ensure you weigh up your options carefully, it is a legal requirement for savers with defined benefit pension ports above £30,000 to speak to an independent financial advisor before moving their pensions. If you have a public sector pension, you probably won’t be able to transfer it. However, you can stop paying into it and start a new one separately.

Pension transfer charges

The amount you are charged for transferring your pension can vary based on your provider or scheme. Therefore, it is important to find out how much you will be charged and to understand the impact this will have on the size of your pension.

Pension transfer charges often come in the form of an exit fee. This is where your current provider will issue you with a fee so you can release your money. It is usually deducted from the balance of your pension. Exit fees can be charged as either flat fee or as a percentage of your savings, meaning the larger your pension, the more you must pay. Where a percentage is charged, it can be as much as 10 per cent.

Get the right advice with Haven IFA

Transferring your pension pots into one place is something that requires serious thought. This can be somewhat stressful, so having the right support to help you make the right decision can be extremely beneficial. At Haven IFA, we are here to assist with all your financial needs, ensuring you get what is best for your pension and retirement savings. To find out more