Pension transfers

There are a number of reasons you may be thinking about transferring your pension savings to a new scheme. Before you do there are some important things you need to think about first.

The first thing you need to do is find out if your scheme is a defined benefit or defined contribution scheme. Your scheme administrator will be able to advise what type of scheme you’re in if you’re unsure.

Defiened Benefit transfers

You will need to ask your scheme administrator for a cash equivalent transfer value (CETV) if you want to transfer a defined benefit pension. This value is only guaranteed for 3 months and you are only entitled to one every 12 months (although many schemes will provide more than this). You will give up any benefits you’re entitled to in your existing scheme when you transfer, such as an entitlement to more than 25% tax free lump sum. A defined benefit scheme is a safeguarded benefit, so if the value of your CETV is above £30,000, the trustees of your scheme have to ensure you have taken professional financial advice before you can proceed with your transfer.

Defined contribution transfers

The amount you transfer to your new scheme is the value of your existing arrangement. It’s important you check if your existing scheme offers any additional benefits that will be lost on transfer, such as an entitlement to more than 25% tax free lump sum or a safeguarded benefit such as a guaranteed annuity rate.

Safeguarded benefits

A safeguarded benefit is any pension benefit that provides a promise or guarantee during the accumulation phase about the rate of income you will receive or have the option to receive. If the value of this benefit is greater than £30,000 the trustees of your scheme or your scheme administrators have to ensure you have taken professional financial advice before you can proceed with you transfer.