How To Transfer From Other Plans
There are dozens of pension schemes where individuals may be better off transferring out of including:
Section 32 Transfers
Also known as buy-out plans, these individual transfer plans are purchased by transferring from any occupational scheme. You have certain rights when transferring out which may lead to some small benefits. Examples of these benefits are the ability to withdraw more than the usual 25% tax-free cash lump sum as well as a retirement age that is protected.
Retirement Annuities
Personal pension plans have been available since 1 July 1988. Prior to this, individual pension plans known as retirement annuities were on offer.
FSAVC
The Free Standing Additional Voluntary Contribution scheme is another contribution pension plan which is individually defined. Even if you change jobs, you can still make FSAVC contributions.
Can Any Pensions Be Transferred?
No. There are certain plans that do not allow transfers including:
Transfers from certain schemes if you are less than 12 months away from the retirement age set out by that particular pension scheme
Public sector pension schemes will not allow a transfer if you left the scheme after 31 December 1985
Certain overseas schemes
There are also income drawdown plans that forbid transfers
What Fees And Penalties Apply When I Transfer?
There is the possibility that certain pension schemes will hit you with financial penalties for transferring pensions. Always check with your financial advisor to see if the penalties are so high that it is not worth making the transfer. You may be fined by a pension scheme if:
You elect to transfer out of a scheme before a certain deadline
You decide to transfer out of a with-profits pension scheme when market reduction values occur
Defining A Block Transfer
A block transfer involves two or more people who have the same type of pension plan transferring to the same type of alternative pension scheme. This type of transfer is common when a pension scheme is reaching a conclusion and everyone is leaving en masse. With a block transfer, you could retain your right to retire early and withdraw more than the standard 25% tax-free cash lump sum.
As the above rights are so important, it is necessary to talk to a financial advisor to make sure that these benefits are protected. Other factors relating to individual circumstances should also be taken into account.
Miscellaneous Information
Not all pension schemes will accept transfers. Contact a financial advisor to see if your pension scheme is one of these.
It is only possible to transfer from one UK pension scheme to another.
You must find out more information about primary and enhanced protection before following through with a pension transfer.
Plans that offer guaranteed annuity rates could provide you with a more valuable pension than what you would receive upon retirement as current pension rates are quite low. By transferring from such a scheme, you would lose your right to a guaranteed annuity rate.
