Transferring From a Company Final Salary Pension
WARNING You should only ever consider transferring a final salary plan to another final salary plan. Unless you fear for the financial health of your old company, it is usually best to do nothing.
If you are considering transferring from a final salary pension scheme, you need to make a written request to the administrators of your pension for a ‘Statement of Entitlement’.
Within three months, your pension administrators should then provide you with a transfer value for your pension. This may be less than its current value.
This will be guaranteed for three months – the guarantee date will be shown on the document.
This transfer value is not calculated based on your contributions to the scheme.
Rather, it is an assessment of the amount of money that would need to be invested now to provide you with your “preserved pension” – ie your pension entitlement under the final salary scheme.
If you decide to go ahead with the pension transfer…
… you should do so before the guarantee date to ensure that the transfer value is the same as in your statement of entitlement.
Your pension scheme administrator is then required to complete the transfer within six months of your request.
Transferring From a Money Purchase/Personal Pension
If you are thinking about a pension transfer from a money purchase pension, you need to request a statement of transfer value from your current pension scheme administrators.
The transfer value of your money purchase pension will be calculated based on the current value of your contributions. But it will not be the same as that value. You may have to pay an exit penalty to leave your fund.
This transfer value may not be guaranteed at all – check the small print.
You need to remember that these are typically invested in stocks and shares, so the total value of your contributions can go up and down depending on market conditions.
This can vary by substantial amounts over a short period.
Often, the transfer value is calculated at the time of transfer and the statement you get in advance is only a snapshot of your pension value at that time.
This means that when you transfer your pension, the final transfer value could be more or less than you were expecting.
If you decide to proceed with the transfer, you will need to make a written application to do so to your pension scheme administrators. They are then obliged to complete the transfer within six months.