How Do Pension Transfers Work?

The first thing you have to clarify before you decide on pension transfer is the type of pension you want to transfer from. It depends whether it is a money purchase pension scheme or a final salary scheme, as the transfer value of your pension is calculated differently for each type.

Money Purchase Pension Schemes

In case you have this pension scheme, before you transfer, you need to request a statement of transfer value from your current pension plan administrators, which will be based on the current value of your contributions. If you decide to proceed with the transfer, you should make a written application to your pension plan administrators, who will be obliged to complete the transfer within following 6 months.

It is always worth keeping in mind that the statement of transfer value will only be a snapshot of your pension value at that time, and when your pension is actually transferred, you may get less than you were expecting.

Final Salary Pension Schemes

In case you want to transfer this type of pension, then you will need to make a written request to the administrators of your pension plan for a Statement of Entitlement. Then, within next 3 months of this request, the pension administrators will provide you with a transfer value for your pension, which will be guaranteed for another 3 months.

Before you transfer any type of pension, make sure that you are aware of all the penalties for leaving your existing pension scheme, and also, make sure you have compared the different products as closely as possible.