If you leave your pension scheme the benefits you’ve built up still belong to you. One of the options that you have is to transfer them to another pension scheme.
Transferring to another UK pension scheme
You can normally transfer pension benefits held in a scheme that you have left to a new pension scheme at any time up to, generally, one year before the date when you are expected to start taking retirement benefits. In some circumstances, you can also transfer after you have started to receive retirement benefits but this is not common.
The first step is to find out your cash equivalent transfer value (CETV), also known as the transfer value, by asking your scheme administrator or pension provider. They may ask you to do this in writing, and may have a form that you need to complete.
Your scheme administrator or pension provider will then provide you with a Statement of Entitlement. If you're eligible for a CETV this must be provided within three months of you asking for a transfer value. It’s a written document that sets out your transfer value, together with details of the benefits you have built up under the scheme, and information that your new scheme will need if you decide to proceed with the transfer. There may also be additional forms included to start the transfer process.
If your Statement of Entitlement relates to benefits held in a defined benefit pension scheme, the transfer value is guaranteed for three months*. If you do not start the transfer process within the three month period, the actual amount transferred may be higher or lower than the amount shown in the Statement of Entitlement.
If you’re a member of a defined contribution pension scheme, the transfer value may change as the value of the investments held in your scheme changes.
If you decide to transfer to a new scheme, your scheme administrator or pension provider must pay the benefits across to the new scheme within six months from the start of the transfer process.
*NOTE: You must have left your scheme and no longer be an active member for this to apply. If you are still an active member then the guaranteed transfer value will not apply.
Unfunded defined benefit pension scheme
If you’re a member of an unfunded defined benefit pension scheme (public sector pension schemes), you will not be able to transfer to a defined contribution pension scheme after 5 April 2015, but you will still be able to transfer to another defined benefit pension scheme.
Funded defined benefit pension schemes
If you’re a member of a funded defined benefit pension scheme (usually a private sector defined benefit scheme), you are able to transfer to a new defined benefit or defined contribution pension scheme, but, if you are transferring to a defined contribution pension scheme after 5 April 2015, you will be required to take advice before the transfer can proceed if the value of the benefits is £30,000 or more. You will have to pay for this advice.
What happens when your pension has been transferred
Once you have transferred to a new scheme, you’ll have given up all benefits under the old scheme. If you are transferring from a defined benefit pension scheme, this may mean that you have given up some valuable, guaranteed pension benefits, so it is a good idea to seek regulated financial advice to check that a transfer is in your best interests.
If you are transferring to a defined contribution scheme, you should check the charges that may apply under the new scheme.
Transferring a pension is a big decision and there can be a lot of different factors to take into account. We can’t give you advice on whether or not you should transfer, but we can discuss the things that you should consider. We do suggest that you should seek regulated financial advice as well.
Where can I find out more?
If you need more information, please contact us. A pension specialist from our team will be happy to help with whatever pensions-related question you have. Our help is always free.