HOW TO TRANSFER A PENSION
Feeling apprehensive about transferring your pension?
This does not need to be an issue, with the right financial advice.
Transferring your pension is made simple with the advice from a financial advisor. Prior to transferring your pension, you probably have some burning questions and concerning theories, but hopefully, these can all be addressed going forward.
The real worry on everyone’s mind is if they will lose their current benefits they have built up and this can be answered with financial advice. These benefits belong to you and your pension provider will have options available to make the transition seamless, where possible. Before you get started, understanding the definition of what a pension transfer is can help decide if it is the right move for you.
What is a pension transfer?
A pension transfer is as simple as transferring your current pension into another provider.
This can occur due to several reasons; you may have been made redundant, you may have changed employers, or you just want to change providers.
Whatever the reason, you want to make sure the decision has been given some serious thought and if it is the right one for you.
Before considering a pension transfer, your best bet is to consult with a financial advisor to go over your options.
Pensions aren’t necessarily a one size fits all matter, and by discussing with a financial advisor you will be able to figure out what is best for your current situation.
Pension transfer ‘rules’
If going forward with a pension transfer, you should know that this process may come with its own set of rules and fees.
Due to the nature of transferring large amounts of potential cash, this process is protected and governed by its own set of rules to make sure you are protected as an individual, as well as your provider.
Before you decide to transfer, get your financial advisor to go over the small print of the transfer itself.
By contacting your current provider, they will give all the details you’ll need to know, but your financial advisor is the one who can go over the jargon to simplify it.
You do not want to be charged thousands and counteract any benefits.
With larger pension pots this can be a risk when fees come into play.
It is always wise to check the fee of moving your pension and to discuss with your advisor whether it is worth moving as in some cases, you may be better off staying with your current provider, where possible.
Final salary pension transfer
If you are deciding to transfer your final salary into a completely different type of pension, such as a personal, it really is advisable to speak to someone who specialises in pension transfers.
For a start, you want to make sure this is the correct move for you and, that the transition is done smoothly.
However, final salary pensions are usually the preferred pension to stick with, as the benefits can certainly outweigh any cons.
They can even offer partners/spouses of the pension holder, added benefits.
If you are considering transferring from a defined benefit scheme, you will need to ask your provider for a CETV- also known as a cash equivalent transfer value.
You can usually access this from your annual statement, but it is advisable to double-check with your provider.
If you will be transferring onto a new employer’s pension, you may be rewarded additional benefits due to the value of your cash transfer coming in. This in itself can also outweigh any fees that are applicable.
Again, this process should always be discussed with a financial advisor. We can refer you to a pension transfer specialist if you are considering this option.
Defined contribution pension transfer
If you are transferring from a personal pension, your first step will be to contact your pension provider or administrative holder regarding a transfer value.
If your transfer is successful, you may potentially lose any previous benefits from your original provider. However, you could still obtain new benefits, depending on the new provider.
Again, you can usually find the value transfer worth on your annual statement, but it is always advised to double-check.
As you may know, your pension is determined by the outcome of the level of earnings that your pot can generate.
This is done by the personal contributions you have made.
As and when you decide to retire, you can access this contribution at 55 onwards.
This can be done by cashing out, annuity or drawdown.
For more information on defined contribution pensions transfers, and other types of pensions, it is advisable to visit the official GOV
website: https://www.pensionwise.gov.uk/en/transfer-pension This will show the official and legal way of pension transfers, and what to expect.
A financial advisor will follow the framework to this and be able to aid with any questions you may have.
But it is always best to do your research prior to considering a pension transfer. We can refer you to a pension transfer specialist if you are considering this option.
Why some people don’t transfer their pension?
Transferring your pension can come with its own set of risks, not to mention potential astronomical fees.
If your current pension offers benefits such as health insurance and life cover, there may be a possibility of losing this if you switch.
Also, if your current pensions offer a guaranteed annuity option; other providers may not be able to compete with this.
But the main reason for not switching or transferring your provider will be if you are not far off from retiring.
Changing provider may cost more and cause you more hassle, not to mention losing lifetime benefits for the sake of a few years with a new provider.
This is why it is always best to consult with a financial advisor so they can direct you in the right way to suit your current financial situation.
Do I need a financial advisor to transfer a pension?
If your cash equivalent transfer value is over £30,000, then yes you will need a financial advisor.
This is due to the way pension transfers are governed, of which they will need a regulated financial advisor to process this correctly.
This is purely to cover not only your provider but also your own back.
Moving large amounts of money need to be regulated to avoid any issues going forward.
And again, due to large cash movements, you would want a financial advisor to aid you in helping make the right decision.
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