If you're contemplating transferring your current pension(s) into a new individual pension plan, a self-invested personal pension (SIPP), or an employer's pension plan, then there are various issues for you to consider before you do that, such as whether you will benefit from transferring your pension or whether you may end up losing out, are there any penalties for transferring etc. It is essential that you seek professional advice from an Independent Financial Adviser (IFA) before you transfer your pension, since your individual circumstances can greatly affect the outcome of the transfer.
Eligibility for Pension Transfers
Almost all types of occupational and individual pensions can be transferred to another scheme. However, there are several exceptions, for example, if you fall into one of the following categories, you will not be able to transfer your pension:
- If you are within one year of your pension planâ€™s retirement age;
- If you have left a public sector pension plan before January 1st 1986;
- If you are a member of a final salary pension scheme that provides a pension that rises in line with inflation.
Transferring out of one of these pension plans would almost certainly result in a huge reduction in your pension entitlement when you retire, so there are rules to prevent you from doing so.
Why Transfer Your Pension?
There are various situations where it makes financial sense to transfer a pension to a different pension plan, such as:
- Your existing occupational scheme is being wound up;
- You would like to add your existing personal pension to a company pension scheme to benefit from employer contributions and lower fees;
You have a personal pension that has high fees and you would like to transfer it to a personal pension with lower fees.