Proactively managing your pensions could help you grow your retirement savings more effectively, ultimately meaning you can afford a better quality of life.
In some cases, this might mean opting for a pension transfer.
However, before moving your savings, it’s important to consider whether a transfer is the right choice for you and be aware of the potential challenges involved.
A pension transfer allows you to move your savings to a different provider
A pension transfer involves moving your savings from one provider to another. This process is often referred to as “combining your pensions” or “pension consolidation”.
Before deciding if you want to complete a pension transfer, it’s important to understand the process and some of the potential challenges.
This article provides key information to help you decide whether transferring your old pensions to MyExpatSIPP is the right decision for you. It will cover:
- Reasons for combining your pensions
- Types of pensions you can transfer
- Key considerations to make before choosing a pension transfer.
Keep reading to learn more.
There are several reasons why you might consolidate your pensions
You might think about consolidating your pensions if you:
- Are starting a new job
- Want more investment options or flexibility
- Have pensions with multiple providers
- Are moving abroad and want to access your pensions from overseas.
Transferring your pensions to MyExpatSIPP could simplify your finances and give you more control over your retirement planning.
Read more: What is a SIPP?
Simplify your savings
Under the auto-enrolment rules, your employer is obliged to enrol you in a pension scheme and contribute to it if you meet certain earning requirements. As a result, you may accumulate several pensions if you move between jobs.
Transferring old pensions into a single scheme keeps all your savings in one place, making it easier to manage and track your retirement savings.
Plan confidently for retirement
Combining pensions may help you better understand exactly how much you have saved, what level of growth you’re benefiting from, and how much you are paying in fees. This means it’s easier to see if you’re on track to achieve the retirement lifestyle you want.
You can transfer many types of pensions into a MyExpatSIPP, but there are important exceptions
We accept transfers from many types of defined contribution (DC) pensions.
A DC pension is one in which you build your savings and then when you turn 55, you can draw flexibly from the pot. You can take as much or as little as you like, until you have spent all your savings.
You can transfer various DC pensions into a MyExpatSIPP, including:
- Personal and stakeholder pensions
- Self-invested personal pensions (SIPPs)
- Group personal and group stakeholder pensions
- Occupational money-purchase schemes (including Master Trusts)
However, there are certain types of pensions we can’t accept, including but not limited to:
- Defined benefit (DB) schemes
- Additional voluntary contributions (AVCs) linked to DB schemes
- Executive pension plans (EPPs)
- Small self-administered schemes (SSAS).
It can be challenging to understand all the different varieties of pensions, and you may not know which type of scheme you are paying into.
It’s important to speak with your employer and consider taking professional advice so you can find out which types of pensions you currently have and whether they are eligible for a transfer.
5 crucial factors to consider before transferring
While pension transfers can be beneficial there are potential pitfalls too. Here are five important factors to consider when making your decision.
1. Retirement income
Combining your pensions doesn’t guarantee a higher income in later life. Investment values can fluctuate, meaning you don’t see as much growth in your new scheme as you would from your current pension. You could even get back less than you invested.
That’s why it’s important to review the potential growth you could achieve before transferring your pension, to ensure you can build an adequate savings pot.
You may also consider how and when you will be able to access your savings, so you can plan your retirement income.
2. Investment choices
Each provider offers different investment choices. Some might offer a small range of funds, while others will give you more control over the specific investments.
It’s important to compare the different investment options on offer and decide what level of risk you want to adopt.
3. Existing benefits
Some plans offer valuable guarantees or benefits which will be lost when transferring your pension. For instance, certain schemes might allow you to access your pension savings earlier in life or take a larger tax-free lump sum.
It’s crucial to understand what you might be giving up, so you can decide whether transferring your pension is worthwhile.
4. Charges and fees
Pension providers typically charge fees for managing your savings and making investments on your behalf. It’s important to compare the fees from your current pension with the new one that you plan to transfer into.
If the fees are significantly higher, this could reduce the size of your pension pot over time and make it more difficult to grow your savings. This ultimately affects the level of income you can draw in retirement.
You also need to check whether your current scheme charges exit fees when you move your savings.
5. Small pension pots
Different tax rules apply to small pension pots worth £10,000 or less if you take the entire amount at once.
Normally, when drawing from a DC pension, you trigger the Money Purchase Annual Allowance (MPAA), which limits your ability to make tax-efficient contributions to your pension in the future.
As such, if you want to access a portion of your savings while continuing to contribute to other pensions, it might be beneficial to leave small pots as they are instead of transferring them.
However, if you don’t plan to access any of your pensions until you retire fully, consolidating could help you manage your savings more easily.
A financial adviser can answer difficult questions about pension transfers
If you’re unsure about transferring, we recommend seeking professional advice.
We can:
- Help you understand your personal situation
- Highlight the pros and cons of pension transfers
- Recommend the most suitable options for you.
You can also visit MoneyHelper for free, impartial guidance.
Get in touch
If you need support with your pensions, we can advise you.
You can email us at [email protected] or call 03303 202091 for more information.
Please note
This article is for general information only and does not constitute advice. The information is aimed at retail clients only.
All information is correct at the time of writing and is subject to change in the future.
Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.
A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future performance.
The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates, and tax legislation may change in subsequent Finance Acts.
Pension transfers are a complex area and may not be suitable for everyone. Eligibility to invest in a SIPP and tax treatment depends on personal circumstances and all tax rules may change in the future. You cannot normally access money in a SIPP until age 55 (57 from 2028).
