Updated: November 18, 2019

Pension Transfer Rules

Want to know all the rules and regulations surrounding personal pensions? Read our guide to find out everything you'll need to know.

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Tony Stevens

Author: Tony Stevens - Finance Expert

Updated: November 18, 2019

If you’re saving for your retirement with a pension, it’s likely that you’ll switch providers at least once during your working life, and perhaps even once you’ve retired. That’s why it’s important to be aware of pension transfer rules.

Although there are individual regulations in the contract of your own pension scheme, there are also legal rules, set by The Financial Conduct Authority (FCA) that it’s important to know about.

With so many different elements to consider, it can be quite a challenge to work out exactly what this means for you. This is why we recommend talking to one of the pensions advisors we work with: they’re experts when it comes to pension transfer rules and can offer advice that’s tailored to your circumstances.

To give you an overview of the topic, we’ve put together this handy article on the key things you need to know about transfer pension rules.

What are pension transfer rules in the UK?

People may choose to transfer their pensions for a wide range of reasons, but common ones include moving jobs, their pension scheme is ending, they want several pensions with different providers, they’re moving overseas or they’ve found a better deal.

The details of the transfer process itself will depend on the type of pension you have and the contract that comes with it, so it’s important to understand what they are and whether there will be any implications.

There will be rules to consider whatever type of pension you’re transferring, whether that’s an occupational pension schemedefined benefit schemestakeholder scheme or personal pension scheme.

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What pension transfer rules apply in the UK?

Every pension provider will have specific rules in their scheme, usually based on the following:

Transfer amount

Depending on how much you want to transfer, there may be different rules. For example, if you have a defined benefit pension or defined contribution pension worth more than £30,000, then legally you must get professional financial advice before you make a transfer.

We can help you with this. Get in touch and we’ll put you in touch with the independent pension transfer experts that we work with.

Length

Though schemes vary on this point, there are some providers that state that you can only make a transfer up to a year before you’re expected to start drawing your pension out.

Fees

Some pension plans will have an ‘early exit fee.’

There are some scenarios, such as a transfer from a defined benefit scheme to a defined contribution scheme, that may incur charges: check what they are before you transfer.

There are also some pension providers that may offer loyalty benefits such as bonuses or reduced charges in return for staying with them for a long period.

Benefits

While you should be able to transfer the main benefits of your pension over, there are some additional benefits or special features like a guaranteed annuity rate or death benefits that may not be transferable.

Transfer time

Though not strictly a ‘rule’, every provider will have a reasonable estimate for how long a transfer will take. It’s worth noting they aren’t immediate: typically it can take two weeks, though in some cases a lot longer.

How have FCA pension transfer rules changed things?

In March 2018 the Financial Conduct Authority (FCA) announced UK pension transfer rule changes following an FCA pension transfer review to ensure that policyholders get better, reliable, honest advice about pension transfers before they make a decision.

They drew up an FCA pension transfer checklist which includes the following:

Qualifications: All pension transfer specialists are required to be qualified to provide financial advice under the latest regulations.

Advice: Any advice that pension transfer specialists give should take into consideration their client’s understanding of risks and what the impact will be on their benefits. This has been the case for some time.

If you need to speak to someone regarding pension transfer  FCA rules, you should always choose a qualified FCA pension transfer advisor.

We can help you find one from the pool of carefully selected advisors that we work with. Make an enquiry to arrange a free, no-obligation consultation.

What do I need to know about executive pension plan transfer rules?

Executive pensions are an older form of pension offered by companies, so you’re only likely to have one if you’re retiring soon or are already retired and held a senior position, such as a director, executive or other key employee.

It’s possible to transfer this type of pension, however in doing so you may lose out on specific benefits. If the market rises while a transfer is taking place, you won’t receive the benefits. It’s also harder to transfer back if you change your mind after transferring elsewhere.

We advise that you discuss your options with a qualified pension transfer specialist.

I want to transfer to a pension abroad. Are there pension transfer specialist rules I should know?

It is possible to transfer your pension to a provider abroad, but only if the new scheme is a Qualifying Recognised Overseas Pension Scheme (QROPS.)

This is to ensure it’s recognised under the HMRC’s pension transfer rules, meaning the pension is eligible to receive transfers from pension schemes that are registered in the UK.

The benefits of doing so include that you’ll receive your pension in the currency of the country where you’re now a resident, which is more reliable than relying on fluctuating exchange rates.

However, as with all major changes to your pension, it’s advisable that you speak to a qualified pension transfer expert first. Make an enquiry to be matched with a suitable advisor with experience in overseas pension transfers.

What is the UK pension transfer 10-year rule?

This is one of a set of specific HMRC requirements related to transferring your pension to a QROPS.

The ‘10 year rule’ obliges you to report to HMRC for 10 years, to ensure that you abide by pension rules during this time. For example, you can’t release funds before you reach 55, otherwise, you could face a tax charge of up to 55% with a penalty on top. (This is unless you have special circumstances such as a serious illness.)

Another rule states that you cannot take retirement benefits until you’ve been living outside the UK for five or more consecutive tax years if you transferred to QROPS before 6th April 2017.

What is the two-year pension transfer rule?

Pensions transfers made by a person who’s in ill health can raise suspicion that they were made for the financial benefit of the beneficiary.

To safeguard against this, personal representatives are required to report pension transfers made within two years of the account holder’s death. No transfer of value arises if an HMRC review finds nothing untoward about the transfer.

Due to the implication of this pension transfer 2-year rule it’s important you speak with an expert on the rules on transferring pensions before you transfer your pension.

Finding out more information on pension transfer rules

For any further queries, including those related to new UK pension transfer rules give us a call today on 0808 189 0463 or make an enquiry online.

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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.

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