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How does a pension transfer work?

A pension transfer is made by transferring the invested funds from one pension scheme to another. Pension transfers are normally made to improve fund performance and/or reduce fees and charges.

A pension transfer should be considered in meetings with a financial adviser. The adviser will look into the make-up of your existing scheme and find out if there are any characteristics that make a transfer a bad option. Some pensions offer guarantees that mean it is unwise to move away to a riskier proposition.  They will contact the pension scheme provider and get a breakdown of growth projections. Once these steps are done they will be in a position to judge whether other pensions available are able to trump your current scheme.

If after the IFA fee, and any other charges, a new scheme is a good idea, the IFA will liaise with the pension administrator of your current scheme and get things transferred across to your new vehicle. There will be paperwork to complete, but a good IFA will help you out with this.

The transfer can take a while, not least because the existing scheme providers are not set up as well to transfer pension away as they are to transfer them in. Mainly because it is money going away rather than coming in.

Once the transfer is completed your financial adviser should review your plan regularly to ensure that performance is as expected and that any economic changes are catered for. The IFA will probably want to have a face to face meeting with you every now and then to make sure they are doing the best by you.