Defined Contribution Pension Transfer | Money Saving Advisors
Find out how to transfer your personal or workplace pension pot and combine your defined contribution pensions.
Feeling stuck with your old pension?
It's not surprising. Many people lose track of old pensions or wonder if their money could be working harder in a different scheme. Transferring a defined contribution pension could give you more control, better performance, or lower fees. Here's what you need to know before taking the leap.
What is a defined contribution pension?
A defined contribution (DC) pension is the most common type of workplace pension, especially in the private sector. It means both you and your employer add to a pot that's invested for your retirement. The amount you end up with depends on how much goes in and how well the investments perform.
If you've changed jobs a few times, you may have several DC pensions scattered across different providers. That's why many people consider combining or transferring them - to make their retirement savings simpler and more productive.
Should you transfer your pension?
There are a few good reasons you might transfer a DC pension:
- Lower fees: Some older pension schemes have high charges that eat into your savings. Modern providers often have lower fees and better tools to manage your money.
- Investment options: You might want more choice or access to investments that more closely match your goals.
- Easier management: Having several pensions in one place can make it easier to track your progress and plan for retirement.
But there are also things to watch out for:
- Exit fees: Some providers charge you for leaving. Always check the small print.
- Loss of guarantees: While DC pensions don't usually have the guaranteed benefits of defined benefit (DB) pensions, some may have extras like life cover or early access terms. Be careful not to lose something you'd rather keep.
- Investment risks: If you're transferring to a self-managed or riskier fund, make sure you understand the all the issues involved.
The key is to weigh up what could be a boost to your financial circumstances against what you might be giving up. It's worth speaking to a regulated financial advisor, especially if your pension pot is large or you're unsure about your options.
Summing up
Transferring a defined contribution pension could help you reduce fees, boost your returns, and simplify your retirement income and planning. But it's not always the right move, and it pays to understand the risks. A bit of research - or professional advice - can go a long way.
Frequently Asked Questions
Can I transfer my pension myself?
Yes, you can transfer your DC pension on your own, without needing to go through a financial advisor. Most providers have a simple process, often online or over the phone. But just because you can go it alone, doesn't mean you always should. It's important to compare fees, investment choices, and any useful pension benefits you're leaving behind. If you're unsure, or your pot is large, always seek advice first.
Is there a cost to transferring my pension?
There can be. Some older pension providers may charge exit fees when you transfer out, especially if you're under a certain age or haven't had the pension for long. The new provider may also have set-up fees or ongoing charges. It's essential to review all of these to make sure the switch actually saves you money or gives you better value. A good transfer should leave you in a stronger position overall.
Will I lose any benefits if I transfer?
Possibly. While DC pensions usually don't have the same guarantees as DB schemes, they may have guaranteed annuity rates, life insurance, or early retirement terms - and these can be lost during a transfer. That's why it's important to read the small print or ask your provider directly before moving. If you're unsure about what benefits your current pension includes, consider getting regulated financial advice.
What is cash equivalent transfer value (CETV)?
This is the estimated lump sum amount that represents your pension savings if you choose to transfer your DB pension to another scheme. Instead of taking a guaranteed income from your current pension, the CETV lets you move your savings into a different pot where your income will depend on how your investments perform. You may also be able to take some of this amount as tax-free cash.
Is pension transfer advice mandatory?
Advice is only legally required if you're transferring a defined benefit pension worth over £30,000. For defined contribution pensions, it's optional - but still a good idea in many cases, especially if the pension is large or has special features. A regulated financial advisor can help you understand the pros and cons, compare your options, and avoid any downsides you didn't see coming. They can also make sure a transfer matches your goals and risk comfort.
Articles that might interest you
Defined Benefit Pension Transfer | Money Saving Advisors
Learn about transferring a final salary (defined benefit) pension and what to consider before moving it.
Pension Transfers for Expats | Money Saving Advisors
Learn about options for UK expats to transfer pensions overseas and what to consider when living abroad.
Pension Transfer Charges | Money Saving Advisors
Understand the fees and charges that may apply when transferring a pension, so you know the true cost.
