Deferred Pension Transfer
Many people delay taking their pension in a bid to gain a higher potential retirement income, later down the line.
That being said, pension scheme members can be tempted to transfer their pension after seeing other schemes that offer lower fees or better benefits.
If you’re wondering whether you can transfer your deferred pension and what the potential implications could be on your overall income, then this article is for you.
We’ve included the information you need to know about deferred pensions as well as where you can turn to for advice.
What is a deferred pension?
A deferred pension can be defined as one where you have stopped paying into the scheme, but you are not yet receiving a pension. Another definition is that some people delay claiming their pension, based on the premise that the longer you wait to claim, the more money you will receive in payments.
How do I defer my pension?
Your pension will automatically defer until you claim it, although, it’s important to inform your pension provider of any changes to your address, health or marital status as this can affect or delay your pension payout.
Can I transfer my deferred pension?
If your current pension provider doesn’t offer you the benefits or options that you desire, you can transfer your pot to another scheme.
Depending on the terms and conditions of your agreement, it may even be possible to transfer your pension after you’ve started to draw down retirement benefits.
Additionally, if your new pension scheme is outside of the UK, you may need to provide documentation that proves you have emigrated permanently.
This can vary from scheme to scheme, so check with a pension professional before transferring.
Should I transfer my deferred pension?
As with any investments, there is a risk. If you transfer your pension to another scheme, the value of your investment can go down as well as up, meaning that there is a chance that you could lose money.
Furthermore, your current pension scheme provider may charge you an exit fee.
However, if you defer your pension, there is a potential for your savings to continue growing as your money will be invested for longer.
In order to make your decision clearer, you will need to calculate how much your pension will potentially be worth in each scenario.
Things you need to know before you transfer
Ask your current pension provider the following questions before you transfer your deferred pension.
- 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?
- Will I lose the right to take a tax-free lump sum of more than 25% of my pension?
Calculate my deferred pension transfer value
So, exactly what is a deferred pension transfer value?
Your transfer value, also known as a ‘cash-equivalent transfer value’ or ‘CETV’, is the amount your pension pot would be worth if you moved it to a different provider.
It is calculated using a number of variables which may include:
- Your age
- How close you are to retirement
- The investment strategy of the pension scheme you’re currently in
- Life expectancy
Calculating your transfer value can be difficult with so many variables to consider, especially if you are unsure about the current inflation rate or your scheme’s investment strategy.
Should I use a deferred pension transfer value calculator?
You may have come across deferred pension transfer value calculators online. These are designed to provide quick quotes which can be helpful for those looking for a rough guide or estimate.
However, these calculators may not always provide a clear or accurate reflection, so speak to one of the independent pension experts we work with, who can take all of the variables into consideration and calculate it for you.
They can also take the time to look at all of the options available to you and then provide you with a summary of the advantages and disadvantages of each recommendation.
Where can I transfer my deferred pension?
Your retirement income will depend largely on your pension, so before you transfer it, always seek advice from a financial expert as well as a pensions professional.
Depending on your circumstances, you may be able to transfer your deferred pension to:
- A self-invested personal pension (SIPP)
- A new employer’s workplace pension scheme
- A personal pension scheme
- A stakeholder pension (SHP) scheme
To discuss which option may be best suited to your situation and needs, talk to one of the advisors we work with.
Transferring a deferred pension to a SIPP
A SIPP, or self invested personal pension, offers a great opportunity for more control over how your pension fund is invested.
While it’s possible to transfer your deferred pension to a SIPP arrangement, rules for doing so differ greatly between providers and the kind of account which you can invest into.
Due to the varying rules from different pension providers and the costs involved in transferring pensions into a SIPP, it’s advisable to seek expert advice ahead of committing to a decision.
The experts we work with are independent financial advisors with access to all the pension providers in the UK. Make an enquiry and we’ll match you with an expert in SIPPs and all the ways you might benefit from transferring your deferred pension to one.
How to transfer a deferred pension plan
Transferring your pension can seem daunting but with the help of an experienced pensions expert, the process can be made a lot smoother.
Here are the steps to take if you are considering transferring:
- Find a pensions expert
- Have your pensions expert compare the market and check whether it’s in your best interest to transfer
- Find a new pension scheme that will accept the transfer of your pension
- Calculate your transfer value
- Inform your current provider that you want to switch
Your pensions advisor can also check your contract thoroughly for any fees or charges that you may incur.
Talk to an expert
If you need more information or would like to talk to a professional about how to transfer your deferred pension, please contact us for a free no-obligation chat.
One of the pension specialists we work with will be happy to help answer whatever questions you have and our advice is always confidential.
Call on 0808 189 0463 and a member of the team will be in touch shortly.