Pension transfer and switch

Pension switch means transferring one or more schemes to a new provider. The principle is much the same as switching to a new bank account or energy provider. Other phrases used to describe pension switch: pension transfer.

Why would I bother switching?

Your pension could have a big part to play in how you live your life in the future. And if it is not currently working how you need it to, then simply sticking with what you have got could create issues further down the line.

There’s plenty of time left, can’t I leave checking my pension for another day?

Making small changes to your pension now could make a huge difference to your future. For example, let’s consider pension provider charges. Typically, these can range from 0.5% to 1.5% per year. At Portafina, we negotiate for our clients annual provider charges as low as 0.2%. While these different rates may seem marginal on paper, they can have a significant impact on the size of your pension pot further down the line. Provider charges are just one of the fees generally associated with pensions. It’s important to understand all the charges you are paying. This is where a regulated financial adviser, such as Portafina, can help.

So, basically it’s all about how much I am being charged?

The fees you are being charged is just one aspect. Pensions are complicated products with many different elements and it’s all about getting the right balance for you. For example, your pension could currently be shrinking, rather than growing, because of the way it is invested. Or, you might not be able to leave any remaining funds to a loved one when you die – which is far from ideal if this is what you want to do.

Can I switch any kind of pension?

You can switch all private pensions and most employee pensions. You do need to be careful if you are thinking about switching a final salary company pension. These types of schemes generally come with guaranteed benefits when you retire, which you would lose if you were to switch. You cannot switch out of unfunded public sector schemes which cover organisations and professions including the NHS, teachers, armed forces and the police.

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There seems to be a lot to consider, I think I’ll stick with what I’ve got

Being completely frank, sticking with what you have got could seriously undermine your plans for the future. Alternatively, it could be absolutely the right decision for you. The issue is not knowing and when it comes to something as important as your pension, is this a gamble you are willing to take?

Your questions answered

What to look out for?

If you are doing some research around pension switch then you are probably looking at more than just one company. So, we have listed below some important questions to bear in mind.

Is the company regulated?

When seeking the help of a financial adviser or looking into a pension provider, it is important to make sure they are regulated by the FCA. This will make sure that your savings are safe and you receive the right advice from trained professionals. You can check if a company is regulated by using the FCA register. Our FCA number is 754580.

What will it cost you?

We won’t charge an upfront fee to check your pension, to see if you could be better off switching to a different scheme. And in most cases we can fully advise you with no obligation. As part of that process we would tell you how much it would cost to follow our advice, and if you gave us the go ahead, any fee would come out of your pension so there would be no extra money to find. Otherwise, you could walk away, fully informed with nothing to pay. Some advisers will charge a flat fee for advising on and switching a pension. Many others, like Portafina, calculate fees based on a percentage value. The rules vary when it comes to final salary (defined benefit) pensions. In our view it’s almost never the right decision to switch this type of pension unless you are looking to take money early from it. And even then, the chances are your best option is to stick with your final salary scheme because of the valuable benefits on offer.

Do you know if you will be giving up any benefits?

Certain pensions – especially final salary company schemes – come with a set of guaranteed benefits, such as a promise to pay you an income for the rest of your life. A financial adviser should make very clear to you any such benefits and advise on whether giving them up is the best thing for you to do or not. Ultimately, you should always have the right information, presented clearly, so that you can make a balanced decision.

If you switch your pension, how will your savings be invested?

The way your money is invested matters. It could be the difference between just getting by and having the freedom to do what you want to do in the future. If a financial adviser cannot clearly show how your savings will be invested and the impact this could have then you should seriously consider not using them.

How will your pension be managed over time?

It is likely that your circumstances and goals will change over time. This is why it is important that your pension is reviewed at least once a year, so that it is always tailored to suit where you are at in life. It’s not worth settling for advice that promises grand changes in the short term but cannot back this up with thorough ongoing management of your pension.

4 ways a pension transfer could benefit you

Increased growth and reduced fees are just two benefits you could be missing out on by staying put with your current pension. However, transferring from a fund that is performing well could be the wrong decision. Find out the benefits of pension transfer and the reasons why it is important to always take advice first.

Find out more