Transferring pensions

There are a number of different reasons why you may wish to consider transferring your pension schemes, whether this is the result of a change of employment, poor investment performance, issues over the security of the pension scheme, or a need to improve flexibility.

You might well have several different types of pension. The gold standard is the final-salary scheme, which pays a pension based on your salary when you leave your job and on years of service. Your past employer might try to encourage you to move your pension away by boosting your fund with an ‘enhanced’ transfer value and even a cash lump sum.

However, this still may not compensate for the benefits you are giving up, and you may need an exceptionally high rate of investment return on the funds you are given to match what you would get if you stayed in the final-salary scheme.

Alternatively, you may have a money purchase occupational scheme or a personal pension. These pensions rely on contributions and investment growth to build up a fund. When you retire, this money can be used to buy an annuity which pays an income.

If appropriate to your particular situation, it may make sense to bring these pensions under one roof to benefit from lower charges, and aim to improve fund performance and make fund monitoring easier. Transferring your pension will not guarantee greater benefits in retirement.