Paul Leatherbarrow, Liverpool
To transfer, or not to transfer
All You Need To Know About When To Transfer Pensions
Opting for a pension transfer is something you can do at any stage of your working career. Like many investment decisions, though, the timing of a pension transfer is crucial, and it's for this reason that you should never transfer your pension without consulting a pensions expert. There are several factors to take into consideration when you are thinking about transferring your pension:
Why Do You Want A Pension Transfer?
For most people, thoughts of pension transfer occur when they are moving jobs. The majority of companies offer pension schemes as part of their benefits package, and although you are unlikely to see the details of the new scheme before you join, the fact that a good pension scheme acts as an incentive to prospective employees. If you start work at a new company and join the pension scheme, what happens to your old pension?
In many cases, you can transfer your pension in order to take advantage of better annual management rates, or better benefits than your current scheme offers. This means that the money you have invested will be working harder for you when it comes to retirement. Alternatively, you may want to transfer your contributions to a scheme where you can continue to contribute throughout the rest of your working life, ensuring a continuity of benefits and a more valuable pension pot when you reach retirement.
When Should You Transfer Your Pension?
Every pension transfer in the UK falls under FSA regulation, and you should only transfer your pension after you have taken independent specialist advice. The pensions market is notoriously complex and, in order to ensure that you are getting the best deal, you need to speak to a pension transfer advisor who knows the market well and can give you the advice you need.
Don't rush into transferring your pension. If you get it wrong, you could end up with an inferior pension scheme to the one you came out of, and you could end up paying higher charges to transfer, or a higher annual charge than you need to. Make sure you have done some research on the types of pension that may suit you best, and that you consider all the pros and cons of transfer before you commit yourself.
Options on leaving your company
If you leave your job, you also automatically leave the company pension plan. Many companies stipulate a length of time that you need to work for them before you can keep the funds you have accrued in your pension plan. If you have worked for the company for longer than that period, you can do one of a number of things with your pension:
Freeze Your Company Pension
If you freeze your company pension, you stop putting money into it. The investment accrued to date will still grow with the fund, and you will get a pension when you reach the age defined by the scheme. However, this pension may be limited, so you will need to make additional pension arrangements.
Transfer Your pension To Your New Company -
If your new company operates a good pension scheme, with benefits that match or exceed your previous scheme, it may be worth considering transferring the cash from your existing pension into a new one.
Transfer Your Company Pension To A Private Pension
Having a personal pension gives you the flexibility to pay into a scheme no matter where you are working. Investigate personal pension plans (PPPs) carefully, though. The benefits may not always match a corporate scheme, and you are more at risk from fluctuations in the stock market.
For the last two options you will need to get transfer value on your pension. this is an assessment of the total amount of money you will be able to take out of your existing pension and move into your new one. If your existing pension fund is reasonably large (at least £10,000), it is well worth considering a transfer. You could move to a more flexible scheme with greater benefits and lower administration costs. When you transfer your pension there will be some costs associated with the transfer. Your existing pension provider may charge for moving your funds, your pension advisor may charge for advice and the new company may make an administration charge for setting up the new scheme. only if you can pay these charges, transfer a significant amount of investment, and choose a new pension scheme that can quickly increase your investment is a transfer the right thing for you.
Speaking to a pension specialist will let you see what the possibilities are for your pension, and help you with planning for the future. We can arrange for a current transfer value on our pension, so that you can see whether it would be worthwhile moving your current investment to a new fund and we can recommend the funds that will provide both the growth and the benefits you need in order to enjoy your retirement.
What To Look For When Choosing A Pension Transfers Advisor
Transferring your pension without using a specialist will almost certainly result in disaster. The pensions market is extremely complex, with legislation and regulations changing constantly, and only an expert can keep up with new requirements and make educated recommendations.
Your pension fund is one of the most important sources of money you have. The pension fund is a tax-efficient way of saving for your future, and if you are thinking of transferring your fund from one provider to another, you want to be sure that your money will be safe, will still grow at a good rate and that you will get good benefits from the new scheme.
It's important that you get independent advice, from an authorised advisor. All pension advisors need to be regulated by the Financial Services Authority (FSA), and any information or letters they send to you should state that the business is fully authorised. You can get pensions advice from an advisor who works for a large bank or investment company, but they will only be able to advise on their own products, not on the whole marketplace. To give you the best chance of getting your pension transfer right, pick an independent pension transfer advisor, who has broad knowledge of the market, and will advise on what's best for you.
Once you have ascertained that your advisor is authorised by the FSA and independent, you should find out about their charges. Remember that talking to a financial advisor is no different to talking to a solicitor or accountant, so some may charge a fee for their advice, whilst others may make a commission on the product your pension is transferred to. Whichever method of payment they use, they are obliged to set it out to you in a Key Facts document. This helps to ensure that you are aware of how the advisor works, and that you have a method of redress if you feel you have been overcharged or miss-sold.
Find out exactly what the pension transfer advisor will do for you. You will need to get a transfer value on your current pension and you will want to compare benefits to ensure that you are getting the same level of benefits from the new pension as you did with the old one. In addition, your advisor should provide you with clear, understandable illustrations of the products you are looking at, so that you can make an informed decision. There should also be a cooling-off period, where you can change your mind if you need to.
Can I Transfer My Pension?
In today's working world, it is less common for people to begin and end their working lives with the same company. It is far more likely that you will move between companies during your career, and you will need to consider what to do with your pension when that happens. In some cases, you may be able to keep your current pension scheme and pay into it independently, or ask your employer to pay a contribution. Alternatively, you could freeze your pension and, when you retire, you will receive a limited income from whatever money you have in that pension pot. Many people, however, choose to transfer their existing pension contributions into a new scheme, which allows them to continue adding to their pension without suffering a loss in pension value.
What Is A Frozen Pension And What Can You Do With It?
If you have recently had your company pension frozen, do you know what to do with it now? On leaving a company, many people just have their company pension frozen. This is common practice, and a new company pension is started with the next employer.
Once your pension is frozen, you are unable to make any further payments into it. The contributions that you and your employer made to your fund now make up the fund's total investment, and whilst it will continue to grow in line with the general fund, you cannot add to the capital. You should still receive an annual illustration of benefits and projections of income from your trustees or fund provider, so you will be able to plan ahead for your additional pension arrangements.
If you have a substantial investment in your frozen pension - at least £10,000 - it may be worth investigating a pension transfer. This will allow you to move your investment into a fund you can add to, or that has a higher level of benefits than your current scheme. If you're considering such a transfer, you need to get professional advice to make sure that you can transfer the total fund; in some cases, an employer may have placed restrictions on how long you needed to work for the company in order to retain the employer contributions.
If you have changed jobs regularly, you may have several frozen company pension schemes. Some companies now operate pension schemes that you can move with you, allowing you to maintain your contributions to your pension fund when you begin your new job. You can negotiate with your employer to see if they will pay contributions into your scheme, or you can increase your own contributions to maintain the fund level.
Whatever the situation with your frozen pension, you should keep all the information in a safe place so that when you reach the age at which you can collect your pension, you can easily get in touch with the trustees or the fund managers to request that the monies be released. File all the annual illustrations, and make sure that your spouse or other beneficiaries know where to find the paperwork in case you die before reaching retirement age. It may not be a pleasant subject, but it happens frequently, and it is an additional burden to those left behind if your paperwork is in a mess.
If you decide to investigate transferring your frozen company pension into another pension vehicle, then contact our Pension transfer advisors. Fully qualified, regulated by the FSA and independent, they can advise you on the best course of action to ensure a comfortable retirement.
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