Pension transfer considerations
What to consider before transferring your pension
When you transfer a pension to Bestinvest you do so on an execution-only basis. This means that you have not asked for or received advice, it is your decision alone to transfer, and that Bestinvest will not take any responsibility for whether or not the transaction is suitable for you.
Before you begin the transfer
Before you consider transferring your pension you should be aware of the implications this may have. We have therefore produced the following notes to help you decide if this is the right decision for you. Bestinvest reserves the right to refuse to accept (or at least to consult with you further) pension transfer instructions where it is advised of information that might indicate the transfer may not be in your interests (for instance, if we are made aware that the existing pension contains benefits that might be lost on transfer). Although, as noted above, as this is an execution-only transaction the responsibility for the suitability of the transaction is yours alone.
You may ring us for guidance on pension issues generally if you are unsure of any technical matter either in this note or elsewhere. But if you consider you would benefit from specialist pension transfer advice, specific to your circumstances, this is available through the Financial Planning Service we provide as part of the Tilney group. Such work is, however, normally carried out on an agreed fee basis.
Is the new plan more expensive than your current plan? Does your current plan provider impose any exit penalties or charges if you transfer or cease contributions?
The benefits of your new pension arrangements and service should outweigh any increase in cost to you or be worth the fees/penalties incurred. You should ensure that the transfer is not going to disadvantage you financially.
Guaranteed Annuity rates
Does your existing pension plan provide an entitlement to a Guaranteed Annuity Rate or a Guaranteed Investment Return?
Although rare, some pensions have inbuilt guarantees of investment growth or annuity rates. These could be lost on transfer.
Has your current pension exposure to a With Profits fund?
You may have attractive bonus rates that could be lost on transfer. Moreover, the transfer value of With Profits funds may be subject to something called Market Value Reduction, which will reduce the size of your pension fund available to transfer.
Does your existing pension scheme provide life assurance, waiver of premium (a form of premium insurance) or the option of an early retirement age?
These may be lost on transfer. Any subsequent deterioration in your health, since these additional benefits were provided, may mean that replacement cover will be more expensive or difficult to obtain.
Final Salary Pension Schemes, Section 32 policies and other occupational pension schemes
Do you have a Final Salary Pension Scheme or a Section 32 policy?
It is generally not advisable to transfer benefits built up in a Final Salary Pension Scheme or Section 32 policy and we will not accept these pension transfers on an execution-only basis. Other Occupational pension schemes (including Executive Pension Plans) should similarly be checked carefully to ensure that valuable benefits are not being lost. In particular, you should check the amount of tax-free cash your current pension allows you to take, which may exceed the 25% limit allowed under normal pension rules.
Will the length of time your fund is invested offset any cost or lost benefits? If you are close to retirement it may not be worth considering a transfer; ask yourself whether the new service will provide the options you require in retirement.
During the pension transfer period you may be exposed to fluctuations in the value of your pension due to market volatility.
Pension transfers can sometimes take a while to complete. There may be significant changes in market prices during this period which may affect your pension value, in particular you will not benefit from any rise in markets whilst your pension fund is not invested.
This list covers some of the main considerations but is not exhaustive. Your decision will depend on your personal circumstances and objectives, and the characteristics of your current pension plan. Your current plan provider/administrator will be able to provide information about your current pension plan. Information about pension transfers at www.moneyadviceservice.org.uk.
SIPPs are not suitable for everyone. If you don’t want to invest across different asset classes or don’t think you will make use of the investment choices that SIPPs give you then a SIPP might not be right for you. Please contact us for guidance or advice if you are unsure whether a SIPP is right for you.