Transfers
Transferring your pension to another scheme
If you have left a job you may still be entitled to a preserved pension. You could consider transferring your preserved pension to your new employer’s company pension scheme or to a personal or stakeholder pension. This leaflet describes how the transfer system works, your rights, what you should do and some of the problems that can arise.
Should I transfer my pension?
We cannot provide advice on whether or not you should transfer, or on the most suitable place to put your transfer value. These are complicated matters on which you need independent financial advice. You should use an adviser who is registered with a regulator. Your Yellow Pages should have a list of independent financial advisers or you could telephone IFA Promotions on 0800
085 3250 or visit the IFA Promotions website: www.unbiased.co.uk
The main regulator is:
Financial Services Authority (FSA)
25 The North Colonnade
Canary Wharf
London E14 5HS
Telephone: 0845 606 1234
Have I a right to transfer?
If you left the scheme before 1 January 1986 you do not have a legal right to transfer if it was a public service scheme (such as for teachers) or a scheme which fully protects the value of the preserved pension in line with inflation. In all other circumstances you have a legal right to transfer your preserved pension to another pension arrangement. This right continues until you are within one year of the original scheme’s normal retirement age.
How do I arrange for the transfer to be paid?
If you were a member of a final salary scheme you must make a written request for a ‘statement of entitlement’. Unless there are exceptional circumstances outside the scheme authorities’ control, they have three months from the date of your application to provide you with a statement of your transfer value, guaranteed for three months from a ‘guarantee date’.
If you wish to proceed with the transfer you must make a written request within the three-month guarantee period. The scheme authorities must then pay the transfer value within six months of the guarantee date.
If you were a member of a money purchase scheme you are entitled, on request, to a statement of the transfer value available within three months of your request.
If you are having difficulty in obtaining the necessary information you should contact us.
If you wish to proceed with a transfer you must make a separate written application to the scheme authorities. They must then pay the transfer value within six months of receipt of your application.
What happens if the transfer is not paid?
If the scheme authorities fail to meet the six month deadlines outlined above the transfer eventually paid must be the greater of an updated calculation of the transfer value and the original transfer value plus interest. If you have waited for longer than six months after your written request, contact us for help.
What can I do if my new scheme will not accept my transfer value?
There is no legal requirement for a company pension scheme to accept your transfer value. If this happens there is nothing you can do, other than ask for the decision to be reconsidered. You can transfer to a personal pension or to a buy-out policy but you should seek independent financial advice before doing so.
What can I do if the transfer value paid was less than the original quotation?
If you were a member of a final salary scheme and did not accept the quoted figure within the three-month guarantee period there is nothing you can do.
If you accepted the transfer value before the end of the guarantee period the transfer value figure should not be reduced. If it has been, point this out to the scheme authorities and ask them to pay the amount they quoted. If they refuse contact us for help.
If you were a member of a money purchase scheme it is quite possible that any figure given to you was not guaranteed. If this was made clear there is nothing further you can do.
Will my transfer be delayed if my old scheme is being wound-up?
When a company goes into liquidation the company pension scheme usually has to be wound-up. This process can take a considerable time, often several years, to complete. During this time it is possible that the scheme authorities will not be able to pay transfer values. Our leaflet Winding-up a pension scheme will give you further information about this.
My transfer value has been reduced because the scheme is in deficit. Is this allowed?
If the scheme actuary has said that the scheme is in deficit, the scheme authorities may reduce transfer values to take account of this. The amount of the reduction will reflect the proportion of the benefits that cannot be provided by the scheme assets. The scheme authorities will usually have no choice but to reduce transfer values. Remember that you do not have to transfer your pension from the scheme and so you could wait and transfer your pension at a later date when, hopefully, the deficit has been made up. But you should consider the financial status of the company and try to find out why there is a deficit.
You will need to take independent financial advice to help you decide what is the best course of action.
My transfer value is too low but the scheme won’t increase it - what can I do?
This depends on why you think the transfer value is too low. In a final salary scheme, the starting point is the calculation of the preserved pension. If you think the calculation is incorrect then you should tell the scheme authorities what you think is wrong or missing and ask them to check the calculation.
Things that may be wrong or missing are, for example, an incorrect pensionable pay figure being used in the calculation of the preserved pension, a transfer from a previous scheme may have been overlooked, or the payment of additional voluntary contributions may have been missed.
However, if the scheme confirms that the calculation is correct, in accordance with the rules and based on the advice of the scheme actuary, it is unlikely that anything can be done.
Why should a transfer value reduce?
If you were a member of a final salary scheme, you are entitled to a preserved pension rather than to a fund of money. In this situation the transfer value is the scheme actuary’s assessment of how much needs to be invested now to produce a pension equal to the preserved pension payable at the scheme’s normal retirement age. The rate of return used in this calculation is based on the return from equity investments with an allowance for an element of gilt returns. The transfer value is not related to contributions paid to the scheme.
The lower the rate of return used the lower the expected future investment return and so the higher the transfer value needs to be. Conversely, if investment conditions justify the use of a higher rate of return, transfer values will reduce.
If you are transferring to a new employer’s scheme you will not necessarily lose benefits from a drop in the transfer value due to a change in the rate of return. This is because the new scheme can invest the smaller transfer value in similar investment conditions and so may be able to offer you the same benefits as if they had invested the higher transfer value at the lower rate of investment return.
If you are a member of a money purchase scheme (where the benefits are based on contributions paid in and not your salary) the transfer value will usually reflect the value of your fund. The value of your fund can drop if the investment is linked to the stock market as, in this form of investment, values can fall as well as rise. There may also be charges or penalties in such an arrangement which can reduce your transfer value.
What information should the Trustees give me?
Members of an occupational final salary scheme who have left pensionable service should on request receive a written statement of their transfer value, giving what is termed a 'guarantee date'. As from 6 April 1997 you have a legal right to the amount stated if you confirm in writing to the trustees within three months of the guarantee date that you would like the transfer to be paid.
Legally, trustees/scheme authorities have up to 6 months from the guarantee date (i.e. the date on which the transfer value was calculated) in which to pay your transfer value. If they delay payment of a transfer value without good reason for more than 6 months, they are obliged to increase the amount of the transfer value either by adding interest or by recalculation. (Under a money purchase scheme the trustees/scheme authorities have up to 6 months from the date of your written request in which to pay the transfer.) If the trustees/scheme authorities wish to delay making payment for more than 12 months, they are obliged to obtain prior approval from the Occupational Pensions Regulatory Authority.
Members of a money purchase occupational scheme should receive an estimate of their transfer value or cash equivalent within 3 months of requesting one.
I transferred to a personal/stakeholder pension but have been badly advised - what should I do?
You should write to the Compliance Officer of the company which advised you to make the transfer, ask him to review the advice you were given and provide a written explanation of his findings. The Compliance Officer should investigate your complaint, but if you do not get a reply or are not satisfied with the reply that you get, you should write to the Financial Ombudsman Service at:
The Financial Ombudsman Service
South Quay Plaza
183 Marsh Wall
London E14 9SR
Telephone: 0845 080 1800
You can also refer to our leaflet Personal Pension Problems for more information.
My service finished after 17 May 1990 - does this make a difference?
If your transfer value is based wholly or partly on a period of service after 17 May 1990 then the benefits should comply with sex equality rulings from the European Court of Justice.
It may be worth checking with your old schemes for confirmation that the scheme has complied.
