What Is a Pension Transfer?
A pension transfer involves moving your retirement savings from one pension scheme to another. This could mean moving an old workplace pension to your current employer’s scheme, consolidating several small pots into one, or transferring to a Self-Invested Personal Pension (SIPP) for more control over your investments.
The average person in the UK changes jobs 11 times during their career, which can mean accumulating multiple pension pots with different providers. Consolidating these pots can simplify your finances and potentially reduce fees, but it is important to understand the implications before transferring.
Types of Pension Transfer
Defined Contribution (DC) to DC
This is the most straightforward type of transfer. You are moving a pot of money from one provider to another. The value of your pension is simply the amount in your pot, and the transfer is usually completed within 4 to 8 weeks.
Defined Benefit (DB) to DC
This involves giving up a guaranteed pension income for life in exchange for a cash lump sum (the Cash Equivalent Transfer Value, or CETV) that is invested in a defined contribution scheme. This is a significant and irreversible decision.
Workplace to Personal Pension or SIPP
Moving from a workplace pension to a personal pension or SIPP gives you more control over your investments but typically means losing employer contributions. This usually only makes sense for old workplace pensions where you no longer work for the employer.
Reasons to Transfer Your Pension
- Consolidation – combining multiple small pots into one for easier management
- Lower fees – moving to a provider with lower annual management charges
- Better investment options – accessing a wider range of funds or assets
- Flexibility – moving to a scheme that offers income drawdown or other options
- Poor performance – transferring away from consistently underperforming funds
- Inheritance planning – some pension types offer better death benefits
Reasons Not to Transfer
- Guaranteed benefits – DB pensions offer a guaranteed income for life that cannot be replicated
- Exit penalties – some older pension schemes charge significant exit fees
- Protected tax-free cash – some older pensions offer more than the standard 25% tax-free lump sum
- Guaranteed annuity rates – some older pensions include guaranteed annuity rates that are very valuable
- Active employer contributions – never transfer away from a scheme where your employer is still contributing
How Much Does a Pension Transfer Cost?
| Cost Type | Typical Range | Notes |
|---|---|---|
| Exit fees (old provider) | £0–£300 | Many providers have no exit fees; check your scheme rules |
| Financial advice (DB transfer) | £1,500–£5,000+ | Required for DB transfers over £30,000 |
| New provider setup | Usually free | Most providers waive setup fees to attract transfers |
| Ongoing charges (new provider) | 0.2%–1.5% p.a. | Compare carefully; even small differences compound over time |
The Pension Transfer Process
- Gather your pension details – contact all your current pension providers and request up-to-date statements
- Get advice if needed – speak to an FCA-regulated adviser, especially for DB transfers
- Choose your new provider – compare fees, investment options, and service quality
- Initiate the transfer – your new provider will typically handle the paperwork
- Monitor the transfer – check that funds arrive correctly and are invested according to your wishes
Pension Transfer Timescales
| Transfer Type | Typical Timescale |
|---|---|
| DC to DC (electronic) | 2–4 weeks |
| DC to DC (manual) | 4–8 weeks |
| DB to DC | 3–6 months |
| Overseas pension transfer | 3–12 months |
Pension Scam Warning Signs
Pension transfer scams cost UK savers millions of pounds every year. Be alert to these warning signs:
- Unsolicited contact about your pension (cold calling about pensions is illegal)
- Promises of guaranteed high returns
- Pressure to transfer quickly or before a deadline
- Suggestions to invest in unusual assets such as overseas property, storage pods, or forestry
- Offers of a free pension review
- Encouragement to take all your pension as a lump sum