Transfer your pension: compare pension transfers deals

Pension transfer deals

What is a pension transfer?

A pension transfer is when you move your pension savings to another provider. There are a few reasons you might be interested in doing a pension transfer, for example:

• If a different company would charge you less for managing your pension fund

• If you can get access to a wider range of funds

• If you've got different pensions from various jobs and you want to consolidate them into one single pot

• If your current scheme is being closed

Should I transfer my pension?

You could save money by doing a pension transfer, but there's lots to think about before making a move.

First, check whether the management fees are lower elsewhere. 

Second, check how much it costs to transfer your pension fund to make sure you’d save overall. For instance, you may be charged a fee by your existing pension company.

Third, check for any benefits you could lose by transferring. Look for special features, such as a guaranteed annuity rate, and check whether transferring could impact the age you can access your money.

Finally, check your pension provider’s transfer rules before you switch. It's important to avoid any nasty surprises and to get the full picture before you go ahead.

Plus, you might lose out on special features by transferring, such as accessing your pension at 55 rather than 57.

How to transfer pension providers

Before making any decisions on transferring your pensions, you might want to talk to a pension transfer specialist to get some advice. They can help you make the right decision for your circumstance and understand the pitfalls. 

If you’re thinking about transferring a defined benefit or final salary pension and the value is worth more than £30,000 – advice is a legal requirement.

Even with a defined contribution workplace pension, you might have to take advice. For instance, if you have “safeguarded benefits” worth more than £30,000, such as a guaranteed annuity rate.

If you decide to go ahead with a pensions transfer, you need to contact both your existing and chosen provider.

You’ll need to get the transfer value, which is how much your pension savings are worth. You then need to apply to your new scheme. Your new provider may ask you to fill in an application form, or they might have an online process. Your current scheme may also need you to fill in some forms.

How much does it cost to transfer pension funds?

A UK pension transfer could mean costly fees, such as exit charges or administration costs. These might come from your existing pension company or your new one.

Sometimes, pension transfer charges are a percentage fee of the amount you move across. For example, you could be charged 2% of the pension transfer value. So, if your pension fund is worth £20,000, a 2% fee would mean you would need to pay £400.

With other companies, pension transfer costs are a set fee - for example, £500 - whatever size your fund is.

There's no set rule as to which of these pension transfer charges will work out cheaper for you, as it depends on how much you have saved up in your pension.

Here are a couple of examples:

Remember that when you do your calculation, pension transfer value is an important factor. Compare the prices to see whether a set fee or percentage value will be best for you.

I want to transfer my pension. How do I find the right pension transfer for me?

Before you transfer a pension, you should consider the following:

How much do you want to invest in your pension?

You might only want to put in a small amount, such as £1 a month, but most pension providers ask for a higher monthly contribution - perhaps around £200 a month or £2,400 a year. Check the rules before you change pension provider.

Questions to ask before you transfer

• Does my new pension provider have a good reputation? Check out some reviews before you make any decisions

• What are the fees involved in the new pension? Compare these with your old one

• Can you be involved in any of the investment decisions with the new pension? You might prefer to choose a provider that allows you to select your own funds

Getting defined benefit pension transfer advice

Once you're ready to transfer a pension pot, you can use our comparison to find the best pension transfer options.

Pension transfers can be complex. That's why it's a good idea to get pension transfer advice from someone who knows the rules before you switch.

Remember, for some people, getting financial advice before transferring a pension is a legal requirement - for example if you have a defined benefit pension worth more than £30,000. The same applies if you have a defined contribution pension with special benefits worth more than £30,000.

The difference between a pension fund value and the pension transfer value

If you want to do a defined benefit transfer, the CETV (cash equivalent transfer value) is the amount of money your employer will offer you in return for your forfeiting and rights or benefits of the scheme. Speak to a financial adviser to get defined benefit pension transfer advice.

If you've got a defined contribution pension, the pension transfer value or fund value is the value of your investment. This is often lower than the fund amount, so you'll have less in your pot if you decide to do a pension transfer. It could mean switching isn't a good idea.

How to transfer your pension to another person

Your pension can be transferred to someone else if you die. You'll usually nominate who this will be when you set up your pension.

If you die before you're 75, your nominated person doesn't have to pay income tax when they withdraw money from your pension. But if you die after you're 75, they'll have to pay income tax. The amount they have to pay will be based on their existing income.

It might be possible to transfer your pension to someone else in other circumstances, for instance, if you’re getting divorced. 

Transferring your pension to someone else isn't usually a legal event needing solicitors. But if it relates to getting divorced or dissolving your civil partnership, solicitors will need to be involved.

Transferring to an overseas pension

Transferring your pension to an account in another country can be very complicated from a tax perspective.

You will need to make sure that your chosen overseas pension provider is offering a recognised overseas pension scheme, otherwise your current UK pension company may refuse to transfer your funds across. This means investing in a ‘Qualifying Recognised Overseas Pension Scheme’ (QROPS). 

In some circumstances, you can transfer without paying any tax. But in others, you’ll have to pay 25% tax on the transfer.

Things to consider when it comes to transferring pension funds

If you're contacted out of the blue by someone suggesting you transfer pension then it's important to be cautious. You should be aware that there are lots of pension scams out there.

Always make sure you find a reputable pension broker to talk to about your options.

Last updated: November 18, 2022