Lately, many businesses have been moving to a new pension scheme, so how can employees transfer their old pensions into the new scheme? Transferring your old private or company pension into a personal one is simple enough. You will need to contact both your current and prospective schemes’ administrators to get everything sorted out.
This process normally just takes a few days before you receive the money in your new account. By the time you retire, you might have accumulated money in various pension schemes that are still active. It’s worth considering transferring these into one cash fund so that it is easier to manage your savings. Consolidating multiple investments will also help reduce risk and minimize future fees or charges.
Procedures Undertaken During Pension Transfer
The first thing to consider is whether you want to transfer your pension pot into a new product or opt for self-invested personal pensions (SIPPs). SIPPs tend to be more flexible and allow people access to a wider range of investments such as shares and bonds. The trade-off with these types of plans is that they might not always offer the same level of security and protection because there tend to be more risks involved.
Follow the steps below during pension transfer:
- Contact both current and prospective schemes’ administrators
- Get everything sorted out within 1-2 days
- Receive money in a new account a few days later
- The two sets of administrators must agree upon transfer price
- If the benefit is less than it would have been, the employer must top up to full value
- If an employee has a pre-existing medical condition, they may need to pay an insurance premium
- Decide who will manage money in the retirement account and what charges the employee will have to pay
Facts To Consider Before Transferring Pension
Transferring old pensions into a new private or company pension scheme is not so straightforward. Insurance companies normally run these schemes, and therefore any change in circumstances requires you to speak to them directly. Some companies even recommend that if their employees wish to transfer an existing pension into a new one, they should do this before joining the company.
The old pension needs to be valued by an actuary before it can be transferred into a new scheme. The schemes are not allowed to take more than 15% of the value in charges, and both sets of administrators will need to agree on the transfer price. If the benefit paid on the new scheme is less than it would have been, then your employer must top up to the full value. If you have a pre-existing medical condition, this might not be covered under some company schemes, so you may need to pay an insurance premium. You will also need to decide who will manage the money in your retirement account and what charges you will have to pay. There’s often a lot of confusion surrounding pensions, and many people try to dodge the issue altogether, but ignoring it won’t do you any good and could leave your retirement fund short-changed.
What Happens if You Are Employed?
When you change jobs, transferring the pension rights from one job to another is often necessary. The rules for transferring pensions are complicated, and you should get expert pension transfer advice before making any decisions. For some years now, there has been a trend towards so-called ‘portability’ in employment markets. This refers to an individual’s ability to keep their pension rights when changing jobs. Some pension schemes are more flexible than others, so you should investigate your company’s pension scheme rules before making any changes.
If you have been working for 25 years or more, it is possible to take up to 25% of your fund as a cash lump sum. If you have worked for less than 25 years, you can take up to the full amount if you want to. You will then not be able to re-join that company’s pension scheme but may join another one or purchase an annuity.
A pension transfer could benefit your financial situation and potentially improve any savings you may have. However, it’s important that you fully research all the options so you can make an informed decision before committing yourself to a new plan. Before making any decisions about transferring your pension rights, you should discuss them with your new employer and be aware that the transfer of pension schemes may not always be in your best interests.