Saving for your retirement is a good way to take control of your future, but are you sure you’re doing enough to maximise your income in later life?
If your pensions aren’t working hard enough, or you have multiple ones with different providers due to your past jobs, it could be worth transferring them to another place. Here’s everything you need to know about pension transfers and why you might want to consider it.
What is a pension?
A pension is a sum of money that is paid to you, often on a regular basis, as soon as you retire. And if you want to be sure to get any pension, then you’ll need to put money aside during your working life.
In other words, it's all about putting money away now so you can treat yourself in the future.
Sounds easy, right? Well, pensions can, in fact, be quite complicated as there are different types which come with their own benefits and rules.
If you want to make the most of your future retirement, it could be helpful to familiarise yourself with the world of pensions. Here's a quick guide that explains what the different types are.
What are the different types of pension?
State Pension: this is a regular payment from the government that you'll get when you reach State Pension age. Typically, the income you receive (or if you get any at all) depends on you having paid a certain number of years' worth of National Insurance (NI) contributions over your working life. As of the 2023/24 tax year, the full State Pension amount is £203.85 per week.1
Workplace pensions: these are set up by your employer and you'll both contribute. As standard, you will pay in 5% of your paycheck each month, while your employer puts in another 3%, making your contribution 8%. There are a few different types available, and you'll be automatically enrolled into your employer's workplace pension scheme provided you meet certain conditions.
Personal pensions: this is a pension you open and make contributions to yourself, and you're able to pay into one alongside any workplace pensions you have. These can give you more flexibility as you can choose how much you put in and how often you make contributions, but your employer won't be able to pay in to boost your savings.
Although we've gone into a bit of detail on these above, you can check out our full guide to find out more about how they work: what are the different types of pensions in the UK?
What does it mean to transfer a pension?
When you transfer a pension, you’re typically moving any money you’ve built up in previous years to a new provider, whilst preserving the tax benefits of your pension.
Whilst you can’t transfer a State Pension, you’re allowed to move certain workplace pensions and any personal pensions you have to another pension provider.
Why transfer a pension?
There are many reasons for transferring your pension to a new provider. For example, say that you’ve moved jobs several times and have enrolled in different workplace pensions throughout your career. You may have so many workplace pensions that it’s hard for you to keep track of your money and how much you have tucked away for your future.
Plus, you could be paying lots of different fees to each of your providers, which may add up.
One thing you could do to make it easier to keep track is to consolidate all your pensions by moving them into one Personal Pension. That way, you’ll find yourself with a single pot of money, a single set of fees, and a single withdrawal policy.
Another reason to transfer a pension could be because of poor service. If you’re disappointed with the investment strategy of your current provider or think you’re paying too much in fees, it could be worth looking at what others have to offer.
Also, if you want your money to only be invested in organisations that are having a positive impact on the world, or you don't want to support certain industries, then you may want to go for a provider that offers ethical pensions (like us!).
How much can you pay into a personal pension?
In practice, you can pay as much as you want. However, the amount you'll get tax relief on is limited to £60,000 a year (or 100% of your earnings – whichever is lower).
This is your pension annual allowance and it includes the combined contributions made by you and the government.
What are the rules when transferring a pension?
Transferring a pension comes with many different rules, so it’s worth being aware of them if you want to move your money somewhere else.
- Transferring a defined benefit pension (a type of workplace pension) can be quite complicated, and if your pension is worth £30,000 or more, you’ll need to get financial advice before doing anything.
- If you do transfer a defined benefit pension to another provider, you may lose some of the valuable benefits attached to it – such as a final salary promise where you’re guaranteed to receive what you were paid for your final or average salary when you finally retire.
- Not all providers will accept the transfer of a defined benefit pension, so make sure you check this before requesting a transfer.
- Some providers will not accept a transfer if you’re already taking an income from your pension.
- Some providers will charge an exit fee for transferring your pension before a certain date, so make sure you check the transfer policy of your current provider.
- Transferring a pension can require your investments to be sold, so they can be converted into cash, transferred over, and then invested by your new provider. Basically, this means that you could find yourself with less money after the transfer is completed if the value of your investments are down during the sale (it's normal for their value to fluctuate over time).
- Some providers will be able to transfer your money whilst it’s still invested – this is known as 'in-specie' and is sometimes available for transfers between personal pensions. However, doing this may incur additional charges, so remember to check when shopping around for your new provider.
- Beware of scams – if a pension scheme claims you can withdraw money without penalty before the age of 55*, it’s probably too good to be true.
If you’ve decided to transfer a pension, it’s important to check the different rules and it may be worth seeking financial advice to ensure you make the right decision for your later life.
*55 is normally the age that you can currently start taking money from a personal pension. However, this will change to 57 from 6th April 2028.2
What if I've lost track of a pension?
To be able to transfer a pension, you should be able to locate it. So, what happens if you’ve lost track of one and don't where where it is?
Firstly, try not to worry as you wouldn't be the first to lose one, and there are some things you can do. In fact, we've written a complete guide on how to find a lost pension that could help.
How long does it take to transfer a pension?
This is tricky to answer as it all depends on the type of pensions you’re transferring and the pension providers you’re dealing with.
If there are issues locating your pension, or there are important documents missing, then it could take longer. So, before you start the transfer process, it could be wise to locate your pension and gather all the paperwork you’ll need to move your pension. This includes a copy of your ID and details about the pension you want to transfer.
Can you transfer an ISA into your personal pension?
No, you can’t transfer an ISA (an account you use to save or invest) into your personal pension. This is because both account types are subject to different tax treatment.
Put very simply, with an ISA, you don’t pay tax on any profits you make or interest you gain, but there’s no tax relief on your contributions. On the other hand, with a pension, you'll get a 25% tax relief top-up on your contributions you make (as a basic rate taxpayer). More on that below.
When you decide to draw your benefits (which you can normally access from age 55, rising to 57 from 2028), up to 25% can usually be paid tax-free and the rest will be taxed as income.
Also, ISAs and personal pensions come with different allowances.
With an ISA, you can only save and invest up to £20,000 per tax year (though this is subject to change in future). With a personal pension, there is an annual pension contribution limit of £60,000, or 100% of your UK earnings (whichever is the lower). Whilst you can contribute more than this, you won't receive tax relief on any amount over the contribution limit. If you exceed it, you will need to pay a tax charge.
And remember, this must be the combined contributions made by you and the government.
Finally, ISAs and personal pensions also have different rules when it comes to accessing your money. Although withdrawal rules differ for Lifetime ISAs and Innovative Finance ISAs (find out more about the different types of ISAs here), with a Cash ISA or Stocks and Shares ISA, you’re allowed to take your money out at any time.
If you have a personal pension, you won’t be able to access your money until you turn 55 (or 57 from April 2028), so you’ll need to be prepared to leave your money alone for some years.
How to find the best pension provider
If you’re looking to transfer your pension, it’s important to try and find a provider that suits your needs and can help you reach your retirement target. But how do you find the right provider for you?
Well, the term ‘best’ is subjective, and it will depend on what you’re expecting from your pension. Due to the fact that your money will be invested, some people may focus their attention on performance, others may be looking for more transparency when it comes to what their money is invested in and how much money they could end up with in future, while others may want flexibility over how much they're able to pay in and how often.
So, you could start by asking yourself this simple question: ‘What am I looking for?’ This should help you narrow down the choices.
Then, it’s time to shop around and compare what different providers have to offer.
Depending on your priorities, you may want to look at the fees taken by each provider. These will eat into your returns, so it could be wise to think about this.
And you may want to ask yourself the following questions:
- What kind of pension is it?
- Where is your money going to be invested?
- How easy is it to check how your pension is performing?
- What is their withdrawal policy?
- How good is their customer service?
As online investment providers are multiplying, it could also be worth checking out robo-investing platforms – that's what Wealthify is.
These services are designed to make investing as effortless as possible. With Wealthify (for instance), you get to choose how much you want to put into your pension and you can select a level of risk that suits you. This will determine how your money is invested.
Our investment experts will then build and manage your pension for you. This means you can spend more time enjoying the present and less time worrying about the future.
How to transfer a pension
Transferring your pension can feel daunting, but it doesn’t need to be.
Before starting the transfer, you’ll need to locate your pension (or pensions, depending on how many you want to transfer) and collect all your pension documents. Then, all you need to do is contact your new provider and let them know you want to transfer your pension.
You’ll also need to provide them with some information, including who your current provider is, your reference number, and an estimated value of your pot. These details can easily be found on your latest pension statement.
Then your new provider will contact your old provider to get the transfer process started.
You may also have to get in touch with your old pension provider yourself, especially if they object to the transfer or need further confirmation, but you will be told if this happens.
Throughout the entire process, your new pension provider should be in touch with you if anything is needed from you, whether it’s signing a form or sending over more documents. And once the transfer is completed, you may want to check that everything is where it belongs.
At Wealthify, transferring your pension has never been easier! All you need to do is let us know when you’re ready to transfer your pension to us – don’t forget to provide us with all your pension details and documents.
We’ll do the work for you, from contacting your old provider to getting your money transferred to us. Once the transfer is completed, we’ll manage your Wealthify Pension and make any adjustments when needed to keep your Plan on track with your investment style and retirement goals.
If you have any questions about pension transfers, please feel free to contact us on 0800 802 1800, or get in touch with us via Live Chat.
Do you know how much you’ll need for your dream retirement? Our pension calculator can help give you a good idea of what you might need to save.
Past performance is not a reliable indicator of future results.
The tax treatment depends on your individual circumstances and may be subject to change in the future.
Please remember the value of your investments can go down as well as up, and you could get back less than invested.
Wealthify does not provide financial advice. Seek financial advice if you are unsure about investing.