If you're looking to bring your retirement savings under one roof or move to a better scheme, a pension transfer is a smart step in the right direction. Here, we’ll cover how pension transfers work in the UK, what the rules are, why you might want to transfer a pension, whether you need a financial adviser, and much more.
What is a pension transfer?
This is the process of moving your pension savings from one provider or scheme to another. It could involve switching from a workplace scheme to another type of pension with more control (like a SIPP), consolidating multiple pots into a single, more manageable plan, or moving to a provider that better fits your needs.
Pension transfers take place for a variety of reasons, and there are numerous transfer options, depending on your overall financial goals. You can typically transfer most types of pensions, including defined contribution (DC) pensions and, in some cases, defined benefit (DB) pensions. But the latter usually requires financial advice.
How do they work?
The exact process will depend on the existing pensions you hold and what type of transfer you’re looking to make. However, in general terms, a pension transfer works by moving the existing value of your pension pot from your current scheme to a different provider.
The process involves your current and new pension providers coordinating to complete the transfer. Once completed, your new provider will manage your pension going forward. You’ll keep your tax benefits and pension status as long as the transfer is to a registered scheme.
Depending on your pension type, the process can be quick and straightforward. For some transfers, the process can be more complex, especially if you have a DB pension or one that includes safeguarded or guaranteed benefits.
Pension transfer rules
There are rules and regulations in place in the UK to help protect your retirement plans. Here are the key areas to be aware of:
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If you have a DB pension worth at least £30,000, you must get financial advice before transferring.
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You can’t transfer a State Pension, but you can usually still claim it from another country, like Ireland or further afield.
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You’re unable to transfer your pension to someone else. However, someone can receive part or all of it as a beneficiary if you pass away or get divorced.
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Pension schemes for some professions (like teachers, police and NHS staff) are usually not transferable, unless under certain circumstances.
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Armed forces pensions can sometimes be transferred, provided it hasn’t been accessed.
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Any transfers to overseas schemes must meet current HMRC criteria (there’s no longer a loophole for tax-free transfers to QROPS schemes in the EEA and Gibraltar).
Where can you transfer pension funds to?
Your options will depend largely on where your current pension funds are held. Depending on your situation, here are some pension transfer possibilities:
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Another workplace pension scheme (although employers may only contribute to their chosen scheme).
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Self-invested personal pensions (SIPPs), which give you much greater control.
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Personal or group pensions (including stakeholder pensions).
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Overseas pensions (like an eligible QROPS scheme) if you live or plan to live abroad and meet the requirements.
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To a deferred annuity that can provide a guaranteed income at a later stage.
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A small self-administered pension scheme (SSAS), if you run a limited company or partnership of a certain size.
Each destination has advantages and disadvantages, depending on your retirement goals, risk appetite, and tax situation. It's important to ensure the scheme you’re moving to is relevant based on your personal circumstances.
How to transfer a pension
The exact pension transfer process and timeframe will depend on your current pensions and where you’re moving, but here’s a typical step-by-step overview of how it works:
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Initial review: Take a thorough look at your current situation (usually with the help of an adviser) to assess where you currently stand.
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Research new schemes: You’ll need to find a pension scheme that suits your future retirement needs and goals.
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Request a transfer value: Your current provider can calculate the value of your pension, known as the Cash Equivalent Transfer Value (CETV).
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Submit your details: Complete any paperwork required by your current and future providers.
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Execute the transfer: With everything in order, your pension funds can begin to be transferred, and the process may take as little as 2 to 8 weeks.
It’s worth keeping in mind that while the value of DC pensions can usually be calculated quite easily based on the value of the underlying investments, DB pensions are more complex and typically require actuarial assumptions, which can delay the process.
Transfer your pension today
Do you need a financial adviser for a pension transfer?
With some pensions, it’s a requirement. For example, DB pensions worth over £30,000 require you to get financial advice before you can transfer to a DC pension. Also, if a pension has safeguarded benefits (like a guaranteed annuity) worth over £30,000, you need to get advice first before transferring.
However, regardless of your overall situation, it’s usually recommended to speak to an independent expert before transferring your pension. This is because they can give you a proper explanation of your current position and explore all the best options. They can also help guide you through the whole transfer process.
How much does it cost?
Our independent financial advisers can carry out an initial pension review for free, providing a basic overview during your initial consultation. Depending on how simple or complex your pension transfer is, they’ll make recommendations based on your needs that will dictate any future costs.
For a straightforward transfer, your adviser may charge a one-off fee as a flat rate or a percentage of the transfer amount. However, some people prefer an ongoing relationship to keep plans on track. This typically involves an annual percentage fee, often ranging from 0.5% to 2%, based on the complexity of your pensions.
Benefits of a pension transfer
Here are the key reasons you might want to consider transferring your pension:
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Lower fees: Moving from high-fee schemes can save you thousands of pounds over time.
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Better performance: Transferring may allow you to access a broader range of investments and potentially get better returns.
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Consolidation: Combining multiple pension pots into one makes it much easier for you to track and manage everything.
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Greater flexibility: Modern pensions may offer more flexible drawdown or access options that you can’t get with older, traditional schemes.
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More control: Particularly if you move to a SIPP, where you can customise your investment portfolio and even invest in assets like commercial property.
Why choose Money Helpdesk for your pension transfer?
No matter what stage of life you’re at, finding the right financial advice for your pension transfer is crucial. Your retirement goals, pension pots, and family circumstances are all unique. Getting tailored guidance for a transfer makes a big difference.
At Money Helpdesk, our expert advisers can help you get some clarity and confidence with your pension. Whether you want to consolidate old pensions, improve your investment performance, or reduce your fees to keep your retirement on track, they can help.
Here are some more of the reasons why people trust us to help them arrange a pension transfer:
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Our advisers are independent, giving you the widest options
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Free initial consultation, with no obligation to go further
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Fully qualified, FCA-regulated financial planners
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Access to pension specialists with experience in complex transfer cases
Ready for a free, no-obligation initial pension transfer review? You can get started here.
FAQs
Some overseas pensions (like an approved QROPS) make it simpler to transfer your UK pension to an overseas scheme. Previously, there was a loophole that allowed you to transfer your pension to a QROPS in the European Economic Area (EEA) or Gibraltar without incurring the standard 25% Overseas Transfer Charge (OTC).
In practice, this meant you could leave your maximum pension allowance of £1,073,100 in a UK pension and transfer anything over that into these QROPS. This would mean you could take your maximum 25% tax-free lump sum of £268,275 from your UK balance, as well as accessing tax advantages from the overseas QROPS.
However, in 2024, the UK government closed this loophole for overseas transfers, which had allowed people to get beneficial tax treatment from multiple countries. The rules from HMRC now state that overseas pension transfers to a QROPS in the EEA or Gibraltar are also subject to the regular 25% OTC tax charge.