Who knows about the UK rules on transferring pensions?

Question

I want to tidy up my finances. I have been contributing into my existing pension scheme for about seven years now, but before that (in previous employments) I had two other schemes.

I only have a vague understanding of the rules here and this is what I am hoping someone can help me with. Can I apply to have the money that's in these other funds transferred to my current fund? If so, how do I do it? Or is it a bad idea and I should leave everything where it is? (Why?)

One is a "Group Reflex Personal Pension Plan" with Scottish Equitable, the other is a "Group Money Purchase Scheme" with Scottish Widows.

I left both jobs within 6-12 months of starting to make contributions, and my salary wasn't up to much back then either, so we are not talking about massive amounts here - but it was my money and I paid it in, and I don't want to risk forgetting about it or losing it because I've left it too long.

Thanks!

Answer 1

All Pension Schemes must (by law) allow you to Transfer your benefits.

UNLESS you can Transfer INTO a Final Salary Scheme (highly unlikely these days), it's always a good idea to leave Final Salary scheme pensions where the are, because, by law, the benefits have to be increased every year by Inflation (or 5%, whichever is lower).

However, Money Purchase schemes (including AVC's) depend on the Stock Exchange performance and the value is often eroded by high charges .. so you are often better off transferring.

Write to each of the old scheme administrators and ask them for a Transfer value (you then have (typically) 30 days to decide to go ahead or not).

You can only transfer into an 'approved' pension scheme (this includes Self Invested Pension Plans = SIPP's, which you have control over).

Typically it's a good idea to transfer into whatever scheme your current employer offers because (usually) your employer will be paying the scheme administration costs.

Your current Employer is NOT forced to accept Transfers from other schemes .. however most do.

Answer 2

In most cases you’re likely to be worse off if you transfer out of a defined benefit scheme, even if your employer gives you an incentive to leave. Before you go ahead, you should seek advice from a financial adviser. If you’re in what’s called an ‘unfunded’ public sector pension scheme, you won’t be able to transfer your pension. However, if you’re in a funded public sector pension scheme or a private sector defined benefit scheme, you will although there are certain safeguards in place.

Answer 3

Free, expert and impartial advice at:

www.pensionsadvisoryservice.org.uk

They have an on-line 'live' Q&A session coming up on 7 November 2007 but you can always ring the helpline or e-mail them (details on website) and they can explain the options.