Compare Pension Transfer Companies
What is a pension transfer?
A pension transfer is a transaction resulting from the decision of a retail client who is an individual, to transfer deferred benefits from either an occupational pension scheme, an individual pension contract providing fixed or guaranteed benefits that replace similar benefits under a defined benefits pension scheme or a stakeholder pension scheme or personal pension scheme. In any circumstance the transfer is made to a stakeholder pension scheme, a personal pension scheme or a deferred annuity policy where the eventual benefits depend on investment performance in the period up to the intended retirement date.
The glossary definition of a pension transfer refers to deferred benefits. In this context benefits are deferred if they are not continuing to accrue and the benefits are not being taken. If an individual has access to the benefits (perhaps due to early retirement rights) but is not intending to crystallise the benefits then they are deferred benefits.
Important things to do if you are considering a pension transfer
Make sure that you go to a specially licensed independent financial adviser. Demand a transfer value analysis. This is a computerised calculation which allows you to compare the benefits of your frozen pension with the alternatives. It also gives a critical yield (usually between 7-11 per cent), which indicates how fast an alternative scheme will have to grow to match the benefits in your old pension. If the critical yield is 8 per cent or less, then a transfer may be worth considering. It is also worth considering your retirement options. Are you intending to retire early? Check if the scheme to which you are switching has the flexibility to handle your requirements.
Check on the financial position of your old scheme. If it is in surplus (it has more assets than pension liabilities) it may be advisable to stay with the scheme.
The advantages of switching pension providers
In this day and age it is extremely common to have worked for a number of different employers, joining new company pension schemes every time we move to a new job. Consolidating all your pension fund into one is a good idea and could save you money in fees and headache in paperwork.
The disadvantages of switching pension providers?
Choosing the wrong provider or route in switching your pension plan could cause you a lot more damage than good. You must ensure you are aware of any exit penalties, loss of benefits, lost bonuses or tax-free cash. If you are unsure what provider is suitable for you, you must ensure your seek independent financial advice. Ensure that your financial adviser has specialist pension qualifications so you can be certain you will receive the best service.
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