Lots of retirement savers could benefit from moving their pensions but fail to do so.
After a year of two of upheaval in pension rules, many savers are left holding pensions that are not fit for purpose for a host of reasons.
Modern pensions need to have an option for flexible draw down, low charges and no early exit fees, but many providers are trying to cling on to the old contracts because they are more profitable.
Reasons for moving a pension
So why would a retirement saver want to transfer a pension early?
- Fund consolidation – One way to reduce pension charges is to put several small funds together into one larger fund that charges less
- Pension freedoms – If your current provider does not offer flexible access and you want to take advantage of the facility, then consider moving your savings to another provider ready to help
- Passing on savings – Check the small print on older pension plans to see what happens to the contributions when you die. Many will limit how much of the fund passes to beneficiaries. An early transfer to a provider willing to offer a better deal avoids the problem
- Expats moving overseas – Many will want to switch their savings from a UK pension to a Qualifying Recognised Overseas Pension Scheme (QROPS)
- Golden goodbyes – Many workplace schemes are offering attractive incentives for workers to move their pensions to another scheme
- Better investment performance – Savers can manage their money better by moving to a self-invested pension plan (SiPP)
- Saving on charges – Older pensions tend to cost more than modern funds
Moving a pension
Transferring a pension is not complicated.
To move a fund, speak to a financial adviser about the best pension that matches your personal financial circumstances.
Then contact the pension scheme and ask for a transfer value analysis (TVA). This will tell you how much your pension fund is worth and if any fees are due to exit the current scheme early.
If the fund is worth £30,000 or more, retirement savers must take professional pension advice from an IFA or a free service like Pension Wise or the Money Advice Service.
Either open another pension or let your adviser do this for you. The new scheme will send paperwork that releases the money in the old scheme for transfer to the new one.