Pension Reviews, Transfer & Switch
Is your current pension giving you value for money? If not then you might be able to review your current pension and if appropriate provide a more secure retirement and long term future.
What is a pension transfer?
A pension transfer involves transferring out of a defined benefits (salary-related/occupational) pension scheme. A transfer from a defined benefits pension scheme means giving up your scheme benefits in return for a cash value which is then invested in another pension scheme.
What is a pension switch?
A pension switch involves moving pension benefits from one scheme to another scheme of the same type. These are referred to as defined contribution or money purchase schemes such as personal pensions or stakeholder pensions. Both are the same type of scheme and, if applicable, transfers can be made between either schemes.
Comparing the benefits of transferring from a defined contribution or money purchase pension to a personal pension can be relatively simple (unless there are guarantees from a previous defined benefit s scheme) as both schemes work in essentially the same way – they provide a pot of money with your name on it, and when you retire that fund is used to provide retirement benefits.
Defined benefits pension transfer
The considerations whether to transfer from a defined benefits/final salary pension is more complicated and because of this there is a legal requirement for advice if your pension is worth more than £30,000. This is because there’s no individual ‘pot’ with your name on it – instead, you are building up a promise from the scheme to pay you an income when you retire. It makes it difficult to compare possible benefits of staying in with benefits of transferring, and make it important to ensure that people understand the risks they will be accepting if they do transfer. In most cases a transfer from a Final Salary Scheme will not be in the best interest of most people.
The transfer value from a defined benefits pension is known as a cash equivalent transfer value (CETV) because it’s the equivalent cash amount you would need to buy the same income your company would have previously paid you under the scheme.
Which pensions can you transfer?
- Defined contribution or money purchase schemes – If you have a defined contribution pension worth more than £30,000 and it has a guaranteed annuity rate, you’ll need to seek pension advice before transferring.
- Private-sector defined benefits pension schemes – If your final salary pension is worth more than £30,000, you’ll need to receive regulated financial advice before transferring. It’s also important to consider very carefully whether this is in your best interest, as a defined benefits pension transfer isn’t right for most people.
- You can transfer out of funded public sector final salary schemes, such as the local government pension scheme – However, again it’s important to make sure this is the right decision for you before transferring.
How Pensionlite can help?
To find out more about reviewing or transferring your pension you can contact our expert team of advisers. They will provide you with advice and recommendations in an easy to read format based on your own personal plans, the options available and your unique needs and circumstances.
We will communicate with you by post, email, text and telephone, at your convenience. And your own adviser will be available, on the phone, to answer any questions and address any queries, once you have had time to read your recommendation report and made a note of any questions.