Transferring your pension basically means moving it from one scheme to another which offers more favourable conditions and management options. There are various situations why this might become necessary, including:
- You’re leaving your employer or changing job – anything you’ve contributed to one corporate pension plan is your property and therefore you have every right to transfer it to a personal account or to another workplace pension once you resign or switch employers.
- You wish to consolidate numerous pension pots – at one point, you decided to not ‘place the eggs in one basket’. However, managing all your plans has become bothersome and you just really want to look after one scheme. In this case, time to unify your funds in just one pot.
- Your current pension scheme is going to close – when this happens you have no choice but to go for another reliable account.
- You’re relocating to another country – it would make sense to relocate your funds as well to a scheme in the country you are moving to soon.
Although there are various instances that will prompt you to process a pension transfer, things are not as cut and dry as you would expect. There are numerous factors to consider and the whole process can become confusing pretty fast. To avoid the stress, it is highly advisable to seek pension transfer advice from experts. They can take a look at your particular situation and give you assistance tailored to your needs.
So you won’t be totally in the dark about this matter, here are some important things to be aware about and consider:
Cash equivalent transfer value or the CETV – when you decide to transfer from a ‘defined benefits pension scheme’ to another, you will lose all the benefits from the previous pot and you will get a cash amount also known as the CETV. This is the funds you will use to buy benefits under the new pension scheme. Be aware that these benefits may have similarities but they won’t entirely be the same. In other words, you are not transferring the previous pension benefits to another scheme, you are transferring your money and earning a new set of benefits and being subjected to a whole new set of rules. And yes, you might be losing out if you don’t consider carefully the terms and conditions of your new plan.
Handling fees may be involved – ask both your old and new plan provider about this before you make the switch to make sure you don’t get surprised with charges later.
Seek professional advice – once again, it is recommended to consult with a professional before you commit to any transfers. It might be that your pension type isn’t transferrable in the first place, so the matter becomes pointless. But by consulting, you’ll be aware plus you will be advised with an alternative solution. Additionally, you can weigh all the pros and cons of the process. Note that this will affect your retirement planning and therefore must be done with care.
Use the information here and the given tips to move in the right direction. Knowledge is power and that is especially true when it comes to managing your retirement finances.