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WHAT
IS A PENSION TRANSFER?
A pension transfer means putting a money value
on the pension benefits you have built up in one scheme and using
this to buy benefits in another pension arrangement.
When you leave an employer’s pension scheme, you can usually
choose to leave behind in that scheme the pension and other benefits
you have built up. The scheme will pay them to you when you retire.
Instead, either when you leave or later on, you may be able
to transfer the pension rights you have built up in that scheme
to:
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A pension scheme run by a new employer; or |
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A personal pension; self invested pension plan (SIPP) |
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A ‘buy-out contract’ (also called a ‘section
32 contract’), which is similar to a personal pension
except that it can be used to provide some guaranteed benefits. |
Before the benefits you have built up in your former employer’s
scheme can be moved, they must be converted into a cash lump
sum, called a ‘transfer value’. The transfer value
is either invested in the new scheme or plan, or used to buy
benefits in it.
In most cases, it is your right to take a transfer value from
your employer’s scheme if you wish to do so. It is always
possible to invest it in a personal pension. However, if you
want to transfer to a pension scheme run by a new employer or
to a buy-out contract, you must check if this is possible since
they do not have to agree to accept your transfer value.
Before you decide whether to transfer, you need to find out
about the benefits provided by your former employer’s pension
scheme. These will depend on what sort of scheme it is.
Personal Pension Transfer
Many people have invested into pension funds held in poorly performing funds with companies who are no longer open to new business. In addition pension charging structures have changed dramatically over the
past few years. Due to the influence of stakeholder pensions
the cost of a new pension is now far lower than in the past.
Many individuals now find themselves with outdated, overpriced
pension contracts. In some cases you may even be able to switch
contracts with the same provider to better your charging structure.
However, there are still a number of factors that need to be
considered. If you are considering transferring your pension
away from your current provider, the main factors you have to
consider, are the possible benefits of transferring your pension
against the associated costs of moving, including any penalties
you may incur by your existing provider.
We have been told that the easiest way to make a charge comparison is to ask your provider
for a Current Valuation and Transfer Value. This will enable
you to see what the costs are in moving away from your current
provider. In addition by asking your insurance company to provide
a pensions projection to your chosen retirement age, you can
make a comparison with a newer charged pension contract. This
will assist in making a decision as to whether a transfer is
the best thing to do.
The above view we have been given by an independent adviser who was attempting to highlight the main factors that could influence whether or not transferring to another provider is the right thing to do, there may be other reasons as to whether this is a suitable product to transfer to and if you are in any doubt you should seek independent financial advice
We have attempted to highlight the main factors that could influence
whether or not transferring to another provider is the right
thing to do, there may be other reasons as to whether this is
a suitable product to transfer to and if you are in any doubt
you should seek independent financial advice.
To have an independent expert get in touch with you to offer initial advice,
simply enter your details below.
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