There are a few reasons why you might transfer your pension savings from your current provider to a new one. These could include:
- A change of job
- Your current pension scheme is being closed
- There's a better pension scheme that you want to transfer into
- You want to consolidate various pension pots into one
- You're moving abroad and want to move your money to a scheme in that country
Transferring into a new UK pension scheme
You can transfer your pension pot to another registered UK pension scheme without incurring tax charges – although usually you can only do so until one year before you're due to start taking retirement benefits.
- The first thing you'll need to do is contact your current provider and ask for your cash equivalent transfer value (CETV). You may have to do this in writing, and/or complete a form.
- Your provider will then give you a Statement of Entitlement, which they must provide within three months of your request.
- This document outlines your transfer value, any benefits you're entitled to, and any other information your new provider will need.
- If your Statement of Entitlement refers to a defined contribution scheme, the transfer value is guaranteed for three months – if you wait longer than this to start the transfer the amount could change.
- You can then contact a new provider and begin the transfer process.Your new provider must pay the benefits across to the new scheme within six months from this time.
Transferring into an overseas pension scheme
If you want to transfer your pension into an overseas scheme, the new scheme must be a “recognised overseas pension scheme”, and it's up to you to check this. You can check with the scheme in question, your current provider or a financial adviser. If the overseas scheme doesn't qualify, your UK provider could refuse to make the transfer, or you could face a 40% tax charge.
You'll need to fill in a form which can be found on the government pensions website, and give it to your current pension scheme administrator. If you're under the age of 75, your scheme administrator will work out how much of your lifetime allowance the transfer will use, and you'll be taxed on anything above your allowance.
You'll have to pay UK Income Tax on payments from your overseas pension if you were a resident in the UK in any of the last five tax years – although 10% of the income you receive will usually be tax-free. Contact your provider to find out more.
Pension transfer pitfalls
- Be alert to the potential for scams, especially if you're transferring your pension abroad. If you’re not sure what the best course of action is, consider speaking to a financial adviser.
- Watch out for pension transfer exit fees and penalties.
- Make sure that the benefits of the pension scheme you want to move into outweigh those of the one you're already in.
- If you have valuable guaranteed annuity rates and bonuses, check and double check that you're not going to lose these unless it is for something that you understand is definitely better. If in doubt, seek financial advice.
Last updated: 04 June 2015