In this article, Acumen demystifies pension transfers and explains the options available to you, as well as what considerations you should make when deciding which course of action to take.
What is pension transfer?
Let’s say for example that you leave your employer, you may decide to opt out of your current pension scheme and stop making contributions. The benefits you’ve accrued will still belong to you If you do leave your pension scheme. You will normally have the option to leave them where they are or transfer them to another pension scheme altogether.
The options available to you are:
Seek financial advice – to check whether it is in your best interests to transfer. Acumen’s expert advisers are on hand to guide your decision-making process. Consider whether you will lose any benefits offered by the original scheme, such as a guaranteed income or life cover and be advised that transfers from unfunded public sector schemes are no longer allowed.
Transfer your pension benefits – if after taking professional financial advice you do decide that a pension transfer is in your best interests, then the pension rules dictate that you can transfer to a new scheme at any time up to a year before the expected date that you will begin drawing retirement benefits.
Pension advice to consider before transferring
You could be financially better off if you transfer your pension to another company if they charge less for managing your pension fund. However, as part of our pension advice, there are several things matters that we would recommend considering beforehand.
- How much will it cost to transfer your pension fund?
- Will you save money by transferring over the long-term?
- Are the management charges less with another company?
- Will your pension company charge you for transferring away from them?
Acumen’s commitment to you
At Acumen, it has always been our intent to provide the best possible pension advice available. Since the introduction of the new pension rules in April 2015, consumers have more options available to access their pension savings. This has combined with more recent changes to the financial environment leading to historically high levels of transfer values.
As such, we are firm supporters of the Financial Conduct Authority’s (FCA) recent mandate to ensure that pension transfer advice takes full account of an individual’s circumstances, so that consumers make the right decision for them. That includes replacing traditional transfer value analyses with a comparison to show the value of the benefits being given up.
Christopher Woolard, Executive Director of Strategy and Competition at the FCA, said:
“Defined benefit pensions, and other safeguarded benefits such as guarantees, are valuable so most consumers will be best advised to keep them. However, we recognise that the environment has changed significantly, so we want to ensure that financial advice considers the customer’s circumstances in full and recognises the various options now available to them.”