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        Updated: April 23, 2024

        Transferring Defined Contribution Pensions

        Transferring a defined contrubution pension is possible, but how do you do this the right way? Find out in our guide

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        We can help! We know everyone's circumstances are different, that's why we work with brokers who are experts in pensions. Ask us a question and we'll get the best expert to help.

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        Often when an employee leaves a job, they are given the option to continue contributing to their current scheme. However, some people like to explore their options and transfer their defined contribution plan into a new scheme which provides them with more options.

        Employees approaching retirement may also consider transferring their pension, often because their current scheme has too many fees and doesn’t provide a high enough income, or they wish to avoid taking out an annuity in favour of flexible access to their pension pot.

        Transferring your pension can have a lasting financial impact for your retirement, so it’s important to carefully consider your options and seek professional guidance.

        Fortunately, the specialist pension advisors we work with are experts when it comes to transferring your defined contribution pension and are on-hand to help you get the best possible financial outcome.

        In this guide, we’ve included the information you need to know about transferring your defined contribution pension as well as where you can turn to for advice.

        Can I transfer my defined contribution pension?

        Depending on the terms of your pension scheme, you can usually transfer your defined contribution pension to a new scheme at any time.

        Most pension schemes state that if you are going to transfer, you need to do it up to a year before you’re expected to start drawing retirement benefits.

        Speak to an expert today

        Will I lose my benefits if I’m transferring out of a defined contribution pension plan?

        Transferring your defined contribution pension into a new scheme could mean that you lose any benefits associated with the original scheme such as guaranteed income or death benefits. In return, you may receive a cash value.

        For some pension holders, losing these benefits could outweigh the financial gains to be potentially made in a new scheme.

        Because of this, it’s important that you speak to a pensions advisor who can calculate the best option for you.

        Where can I transfer to?

        There are many potential schemes that may be suitable for you, depending on your circumstances.

        Options may include:

        The specialist advisors we work with can help to find a scheme that’s best suited for you. Make an enquiry to get started.

        Should I transfer my defined contribution pension to a SIPP?

        The answer to this question depends on your retirement needs and circumstances.

        Some pension holders decide that the potential profit exceeds the risk and so they transfer their defined contribution pension to a SIPP.

        However, others nearing their retirement choose to move their pension from a SIPP into a scheme that offers more steady security and less risk.

        Make an enquiry and we’ll introduce you to an expert who can help you determine whether a SIPP is the right option for you.

        Should I transfer my defined contribution pension?

        Whether transferring your pension plan is a good idea, is largely based on your own circumstances as well as the terms of your current and future pension scheme.

        Before you decide to switch, ask your current pension provider the following questions:

        • Are there restrictions on which pensions you can transfer?
        • What is the ‘transfer value’ of my pension?
        • Are there any fees for transferring my pension and if so, how much?
        • Will I lose the right to take out my money at a certain age?
        • Will I lose any benefits eg a guaranteed annuity rate?
        • Will I lose the right to take a tax-free lump sum of more than 25% of my pension?

        It may also be the case that you are happy to receive a cash incentive to leave you pension scheme early.

        However, transferring your pension to another scheme could result in you losing money. This is what’s known as a transfer incentive.

        For more information and to discuss the potential risks involved with a pension transfer, speak with an expert. They can provide bespoke advice for free, and there’s no obligation to act on the advice you receive.

        Should I transfer my pension if I’m offered an incentive?

        A transfer incentive is usually a cash bonus offered to you by your employer, on agreement that you leave your pension scheme.

        It may also be offered to you as an enhancement to the calculated transfer value of your benefits in the scheme.

        The amount you receive as a cash incentive, could be based on:

        • How long you’ve worked for the company
        • Your age
        • Your position within the company.

        It’s important to remember that if you leave your pension and take the transfer incentive, you may have to pay income tax and national insurance on it.

        You also need to consider that you’ll get less pension than if you had accepted the incentive as part of the transfer value.

        Calculate my defined contribution pension transfer value

        Your transfer value, also known as a ‘cash-equivalent transfer value’ or ‘CETV’ (defined benefit schemes only), is the amount your pension pot would be worth if you moved it to a different provider.

        This is why it’s advisable to compare your pension pot value to your transfer value. If the transfer value is less, your pension provider may be charging you an exit fee.

        To calculate your pension transfer value, speak to an expert.

        They can look through your pensions statements and determine how much you will be charged in fees versus your investment return if you stay with your current pension scheme provider.

        They can also provide you with a summary of the advantages and disadvantages of each recommendation.

        How to transfer a defined contribution pension plan

        After calculating your pension transfer value and seeking professional guidance, you may decide that you want to transfer your pension.

        Firstly, you will need to decide where you would like to transfer your pension to. Speaking with a financial expert as well as a pensions professional can help you come to the conclusion of where you would like to move your pension.

        Once you have compared your options and been made aware of any fees or financial implications that could occur after transferring, you can proceed to switch.

        Make an enquiry and we’ll match you with one of the pension advisors we work with. They can help you through this process, checking your contract and managing the paperwork on your behalf.

        What are the costs of transferring a defined contribution pension to a defined benefit?

        There may be fees involved if you’re thinking of transferring your defined contribution pension to a defined benefit scheme instead.

        These could be:

        • Potential exit fees: This may also be referred to as market value reduction, early surrender charge or transfer out fee
        • An exit fee can be charged as a flat fee or as a percentage of your savings. Therefore, the larger your pension, the more you’ll pay
        • Management fee
        • Financial advice: This is mandatory if your pension fund is worth over £30,000 (defined benefit schemes only. This only applies to defined contribution pensions when there is a guarantee about what you’ll be paid when you retire)

        If you’re unsure about any fees associated with your pension and when they might occur, you can speak to your pension provider and ask them to provide you with a list of all charges. Alternatively, get in touch and one of the specialist advisors we work with can assist you.

        Speak to an expert about defined contribution pension transfer

        There are many factors that can affect your decision as to whether or not you should transfer your defined contribution pension plan.

        Speaking with an independent expert can provide you with the information and clarity you need to make a well-informed decision about your pension, and their whole-of-market access means that they can find you the best pension providers to transfer your pension to.

        Call us on 0808 189 0463 or make an enquiry to get started.

        Ask a quick question

        We can help! We know everyone's circumstances are different, that's why we work with brokers who are experts in pensions. Ask us a question and we'll get the best expert to help.

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        Tony Stevens

        Tony Stevens

        Finance Expert

        About the author

        Tony has worked in a vastly diverse array of areas in the pensions industry for over 20 years. Tony regularly writes for trade press, usually on topical and pensions pieces as well as acting as a judge at prestigious national events.

        Tony is also a highly qualified Independent Financial Adviser in his own right. His mantra has always been “Hope for the best, but plan for the worst”, and believes that the biggest impact that an adviser can have on a client’s life journey is to take them on a journey from generally having little or no real idea of what their retirement will look like, to giving them the understanding of what their retirement looks like now, then helping them navigate a path to what they want their retirement to be.

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        FCA Disclaimer

        *Based on our research, the content contained in this article is accurate as of the most recent time of writing. Lender criteria and policies change regularly so speak to one of the advisors we work with to confirm the most accurate up to date information. The information on the site is not tailored advice to each individual reader, and as such does not constitute financial advice. All advisors working with us as well as any of our own are fully qualified to provide mortgage advice and work only for firms who are authorised and regulated by the Financial Conduct Authority. They will offer any advice specific to you and your needs.

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