Pension Transfer Advice - Why Do I Need It?

There are three main reasons why you might need pension transfer advice.

1. You are in a final salary or defined benefit pension scheme at work, and your employer wants you to move to a defined contribution scheme, or some other pension arrangement.  In some cases employers might offer incentives to you to switch.  If you have any choice in the matter, it is extremely important to take pension transfer advice to help work out what is best for you.

2. You decide you want to transfer accrued benefits within a company pension scheme to your own personal pension fund.  Whether or not to transfer is an extremely complex area and you really should seek specialist advice.

3. You are already in a personal pension plan, but feel the charges are too high.  Many of the plans sold before 2001 have high charges and management fees that can really eat into the final amount you accrue.  So if you have one of these it could well pay you to transfer – newer pension plans mostly have lower fees, as well as being more flexible as to the assets you can use as part of your pension fund.  However it’s a complex decision – you really must take pension transfer advice, both to check that it’s the right decision, and to help you select the right pension plan to move into.

Whichever of these situations applies to you, the pension transfer needs to be an informed decision.  You should look for an IFA (independant financial advisor) with a specialised qualification in pensions (you can check this out before you proceed).  Most providers of pension transfer advice will charge a fee rather than operating on commission. 

So what questions do you need to ask the adviser?  Whatever questions you ask, they should include the following:

• What are the risks of switching?  Do the risks outweigh the benefits or vice versa?
• Does the scheme you are transferring out of have transfer penalty charges?  If so, is there any way of reducing them or avoiding them?
• Request a “transfer value analysis” which will help you compare your current scheme with any alternative you are considering.

The final decision is always yours, but pension transfer advice will help you be clear about the best course of action.  Remember that in some cases the advice will be not to transfer.  It’s a big decision but advice will help you avoid a step which you later regret.