Updated: June 06, 2019

Occupational pension transfers

People often transfer their occupational pensions to increase their growth. Read our guide to find out if this is an option for you

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Tony Stevens

Author: Tony Stevens - Finance Expert

Updated: June 06, 2019

If you’re looking to unlock cash from your pension either to spend or reinvest, an occupational pension transfer could be the answer.

Whether you transfer your occupational pension now or simply need expert advice about these products, our guide to occupational pension transfers has you covered.

What is an Occupational Pension Transfer?

An occupational pension transfer is where you give up your pension in return for a lump sum and reinvest it in another scheme or use the cash sum yourself.

Since the advent of the Financial Freedom Act 2015, more people are taking advantage of a pension transfer from a salary-related pension scheme, but this means giving up your benefits in the deal, such as fixed monthly pension, in return for the cash value.

This cash asset can be invested in either another pension scheme for your retirement, used to pay off a mortgage early, escape financial difficulties or help your children get on the property ladder, to cite but a few examples. The lump sum can also be passed down through the generations without inheritance tax.

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Can I transfer my occupational pension?

Yes, and there are many reasons that you might be considering transferring an occupational pension. The following are the most common:

  • If your pension scheme is being wrapped up
  • You want to move to another scheme that offers more income/benefits
  • More investment choice is needed from your pension
  • You want to move into a self-invested personal pension (SIPP) or another type of scheme
  • You want to consolidate your pensions in one pot

Indeed, with pension transfer values so high at present, a good deal of the investment risk associated with transfers can be eliminated. Some transfer values may provide the same level of pension, with the potential for remaining value to be passed on down the generations. Before you go ahead, you should seek advice from a regulated financial adviser, like the ones we work with. You could be worse off if you transfer in some cases, but if you make an enquiry here, the experts we work with will offer the right advice.

How does an occupational pension transfer work?

Usually you can transfer your occupational pension at any time, taking the cash as early as 55, or deferring the taxed pension until it’s needed. You will not lose the value you have built up if you transfer but could lose additional benefits such as a guaranteed income or death benefits. Your lump sum will take away the gamble implicit in a lifetime income, irrespective of health issues. You might want out if you are in a pension that dies with you and does not pay any outstanding investment to your beneficiaries

When you decide to transfer out of your pension, the trustees who run the scheme convert the benefits you’ve built up into a cash sum.

This is called a ‘transfer value’ (also known as a ‘cash-equivalent transfer value’ or ‘CETV’ which is the cash value of the policy that is the amount available to transfer to an alternative plan in exchange for giving up your rights under the scheme.

You could then invest this in either a: personal or stakeholder pension (SHP), new employer’s workplace pension scheme, a pension scheme with another employer or a self-invested personal pension (SIPPs).

How to transfer an occupational pension to a SIPP

Not all employer pension schemes, personal pensions or SIPPs accept transfers, so you’ll need to check first.

If you want to transfer an occupational pension to a SIPP, where you can make your own investments based upon the full range of options provided by HMRC, then you should get a statement of entitlement that sets out details of the transfer value and provides the new scheme with the details it needs to facilitate the transfer.

It’s worth knowing that a transfer value from a defined contribution scheme is guaranteed for a few months. This will fluctuate based on increases and decreases on the value of the underlying investments.

Finally, be sure to seek specialist advice before you transfer. Make an enquiry here to speak to an independent pensions expert.

Why leave my occupational pension plan?

You might want to leave your present pension plan if your current provider doesn’t offer the pensions options you want or need or does not have access to Pension Freedoms. In April 2015, the tax rules were changed to give people greater access to their pensions.

Now your pension income is taxed at marginal income tax rates rather than the previous rate of 55 per for full withdrawals. Now anyone aged 55 and over can take the whole amount as a lump sum, paying no tax on the first 25 per cent and the rest taxed as if it were a salary at their income tax rate.

If you want to combine pots to simplify your pension you will also want to pay less in costs and fees. Combining pots can make pensions easier to manage and help you save on fees, but you may need to check if you will lose any special features, such as guaranteed annuity rate.

Another reason could be that you want a higher income from your pension – perhaps you’re taking more risk than you are comfortable with or the performance has been poor.

If you move abroad and want to transfer your pension to an overseas scheme, it will function no differently to a UK-to-UK transfer, unless it includes contracted-out benefits, in which case the UK scheme will need to go through extra steps. You can transfer a pension abroad only if the new scheme is a qualifying recognised overseas pension scheme. (QROPS).

Are there any pension types that cannot be transferred?

You can’t transfer out of an unfunded public sector pension scheme such as NHS and teacher’s pensions. You can transfer if you’re in a private sector defined benefit scheme. Funded public sector pension schemes include the local government pensions.

Employers may offer incentives that may include a cash payment on top of the transfer value or an enhancement to the calculated transfer value of your benefits in the scheme (enhanced transfer value).

Less common incentives include being asked to give up increases above the statutory minimum after you retire in return for a higher flat rate.

Some employers sponsoring such schemes have gone bust and failed to set aside enough money to pay the pensions promised, the Pension Protection Fund might be able to provide compensation, but this might not be the full amount of the pension you’ve accumulated. However, you might be worse off if your employer provides an incentive to exit, so always seek the right advice.

Last, but not least, you might wish to switch if your current pension will only allow you to take an annuity at retirement you might want to consider a pension transfer.

Where can I find an occupational pension transfer specialist?

Online Money Advisor has access to a range of occupational pension transfer specialists who can help you transfer your occupational pension across and get the right result based on your unique circumstances. Make an enquiry or call 0808 189 0463 and we’ll connect you to an independent pensions advisor for a no-obligation chat.

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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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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 are fully qualified to provide mortgage advice and work only for firms that are authorised and regulated by the Financial Conduct Authority. They will offer any advice specific to you and your needs.

Some types of buy to let mortgages are not regulated by the FCA. Think carefully before securing other debts against your home. As a mortgage is secured against your home, it may be repossessed if you do not keep up with repayments on your mortgage. Equity released from your home will also be secured against it.

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