Very often, routine transfers of defined contribution workplace pensions can turn into horror stories. This is because people often don’t know their service provider or policy number or have lost the necessary documentation. And the complicated transfer process can be so off-putting that often savers stick to a pension plan that is not serving them, rather than move their funds.
Follow this guide to transfer your pension with minimal hassle.
When Should You Switch Pension Providers?
Before deciding to switch pension providers, investigate what benefits are attached to your pension scheme. Some types of pensions offer additional benefits while you remain with that pension scheme, called safe-guarded benefits. If you transfer your pension to a different service provider, you could lose the benefits.
Most people chose to change pension providers to get better benefits for their savings. These could be lower fees or better investment options. These are some reasons people move their funds:
Most pension providers will charge an annual management fee for the administration of your pension pot. But some pension schemes rope you into paying fees you may not even know about. These fees can quickly add up and chip away at your savings, especially if you have a small pension pot. Moving your fund to a service provider that charges fewer fees could help to increase your savings in the long run.
If you’ve worked at more than one job, chances are you had a workplace pension at each employer. Over the years, it becomes easy to forget about these pension pots. Tracking down these pensions and combining them into one fund can allow you to manage your funds better. You can keep track of your fund more efficiently, and you may save if you move away from a pension scheme with high costs.
If your pension is performing poorly, you may consider moving your fund to a new provider. Most defined contribution pension plans invest your assets across a range of funds in markets across the globe, in what is called a diversified investment portfolio. This investment plan reduces risk and protects your interests, ensuring your pension fund will continue to grow.
How To Switch Your Pension
Find Your Details
Before you’re able to move any funds, you’ll need to have the details of your pension provider and policy number to give to your new service provider. Should you have misplaced your pension paperwork, you can contact your old pension service provider or ask your employer for the information. Another option is to contact the Pension Tracing Service offered by the government1.
Speak to Your Pension Provider
It’s best to speak to your current pension provider about what fees could be involved in transferring your funds, what restrictions might apply and if you’ll lose any benefits, such as a guaranteed annuity rate. You’ll also have to liaise with your new service provider, as you’ll have to fill out an application form to request the transfer – if you’re combining your pension pots, you may have to fill out several forms.
Find Out Your Transfer Value
Your transfer value is the amount your pension pot is worth if moved to another pension provider. If there is a difference in the transfer value and the amount in your fund, it could be that your service provider is charging you a fee for an early exit.
Get Financial Advice
You may need to get financial advice before you can transfer any funds. You are legally obligated2 to seek out financial advice if you’re going to move a defined benefit pension valued at more than £30,000, or a defined contribution pension worth than £30,000 with a guaranteed annuity rate.
A Few Common Questions
The annual management fee on your pension covers the scheme’s administrative costs. Each pension provider offers different fees, but the annual management fee is usually listed as a percentage of the value of your pension.
Some types of pensions offer additional benefits while you remain with that pension scheme. These benefits could include early access to your pension, a guaranteed growth rate on your fund, or a bigger tax-free cash amount.
A diversified investment plan reduces risk and protects your interests, ensuring your pension fund will continue to grow. This is done by investing your assets across a range of funds in markets across the globe.
Combing your pension plans can allow you to manage your funds better. It will allow you to keep track of your money more easily, and you may save if you move away from a pension scheme with high costs. You may also have a wider choice of investments if you consolidate your funds into one plan.
Transferring your pension fund to a new service provider may seem complicated. Still, you could benefit from lower fees, better performance or easier management of your funds – all of which can help you ensure a comfortable income once you reach retirement age.