7 Key Pension Transfer Questions

There are many questions we are asked when it comes to pension transfer options. Our IFA, Paul Clifford, answers 7 of the most asked questions…

1. Will the new pension be more expensive than my existing one?

If the new pension costs more, make sure you’re satisfied that the additional costs are for good reason. For example, if the new pension offers you access to more funds than your current pension(s), ask yourself whether you need them.

You wouldn’t take out a more expensive mortgage or insurance policy without good reason, so why do it with your pension? You’ll get information about the costs of the new pension from the pension provider or your adviser. You need to read all the documents you’re given so you can clarify any issues you’re unsure about.

2. Would a stakeholder pension meet my needs and objectives?

Stakeholder pensions can be cheaper than other personal pensions and have a cap on the annual management charge they can make, so if you have an adviser, make sure they discuss this option with you. If your adviser doesn’t think a stakeholder pension would be suitable for you make sure you understand why.

Most stakeholder pensions now provide access to a wide range of funds. So even if you’re looking for some flexibility in your investment choices there is likely to be a stakeholder pension to suit you.

3. Is it a good idea to transfer all my pension pots into a single new one?

There is no right or wrong answer to this question – it depends on why you want to do this. Some people just prefer having all their pension savings in one place to make it easier to keep track of them and this is a valid reason for consolidating.

However, costs are very important. There is no point transferring from a low charging scheme to a higher charging one just to keep things simple.

That said, if you are coming up to retirement and your current scheme doesn’t offer the retirement income option you want then consolidating all your pension pots into one scheme that has the flexibility you need would be a good idea. Everyone is different. That’s why, unless you are very sure you understand the implications of transferring, it’s a good idea to consult a regulated financial adviser who will go through the pros and cons with you.

4. Will I lose any benefits?

It’s possible that your current pension has valuable benefits that you’d lose if you were to transfer out of it, such as additional death benefits, a pension for your partner after you die, or a Guaranteed Annuity Rate (GAR) option. A GAR option is where the pension provider will pay your pension at a particular rate, which might be much higher than the rates available in the annuity market when you retire.

You don’t have to use your pension to buy an annuity, but buying an annuity is still an option so it’s important to understand the pros and cons of transferring where you have a Guaranteed Annuity Rate.

If your benefits are worth more than £30,000 and you have a Guaranteed Annuity Rate you’ll have to have the transfer signed off by a regulated financial adviser before your pension scheme will release the money. This rule is there to protect you and make sure you’re fully aware of what you’re giving up.

5. Are there any charges if I transfer?

Some pensions might apply a charge when you transfer out. These can be significant – sometimes several thousand pounds (depending on the size of your fund) so it’s important to check if one applies in your case.

6. Will the investments in the new pension be right for the amount of risk I’m prepared to take?

You might want to decide for yourself how to invest your money, you can ask your financial adviser to make recommendations for you. Either way it’s important the investments chosen are appropriate for the amount of risk you’re prepared to take with your money – remember, investments can go up or down. If you use an adviser they will need to be clear about what fee they will charge, whether it’s for one-off or ongoing advice – find out more below.

Still looking for advice on your pension transfer options? Get in touch to arrange your free initial pension review. Clifford Osborne are Independent Financial Advisors (IFA) based in Eastbourne, East Sussex, offering pension planning advice, mortgage advice and more. You can read our VoucherFor reviews here. Our clients often come from Uckfield, Lewes, Brighton, Tunbridge Wells, Hastings, Bexhill, Newhaven, Seaford, Crowborough and further afield.