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Before transferring a pension, it’s important to understand the different charges you’ll pay. Here we look through what those charges are so you can see if a pension transfer is right for you.
Pension transfer charges
Most providers have no fees for joining, leaving, or transferring your pension. However, this isn't the case for all, and there are some charges you may need to consider when deciding if you should move your pension. Here is a list of some of the charges and fees you may need to pay.
Exit fees
Your provider may charge you to move your pension to another provider. You can check what this fee would be with your provider. If you’re over 55, the maximum exit charge is 1% of the value of your benefits. For this reason, if your charge is more than this and you’re close to 55, you may want to wait until this cap starts before transferring.
Set-up fees
Some providers may charge you to get your pension set up after moving to them. It’s worth noting that this isn’t particularly common. Most providers won’t charge a new set-up fee if you already have a pension with them.
Annual management charges
If you're charged an annual management charge for a pension, the amount may vary based on the value of your pension. You should speak with the provider to find out if this would change if you decided to transfer in other pension plans.
Financial adviser fees
If you get financial advice before transferring, the adviser may charge a fee.
Understanding pension transfer values
Many people find the jargon around pension transfers confusing. Here we explain what some of the terms mean and where to get more information on them. Alternatively, take a look at our list of pension jargon and terms.
Pension transfer value
The final amount that will be transferred into your combined plan minus any fees. Working this is out is often not as simple as working out the amount of money you’re moving. You need to consider any fees and the type of pension scheme you have. Any fees and charges you’d have to pay before transferring will be deducted from your initial pension value.
Pension fund value
For defined contribution pensions, this is the value of your pension at any given time. You can find this on your latest pension statement or by getting in touch with your provider.
Defined benefit pensions are slightly different as they are calculated based on your salary and how long you’ve worked somewhere. It’s still possible to see how much your plan would be worth if your salary stayed the same until you retired. But knowing what it’s worth at any given time isn’t as helpful as with a defined contribution pension.
Cash equivalent transfer value
The amount your current pension scheme will offer you to transfer out of your defined benefit pension into a defined contribution scheme. This is only relevant for people transferring out of a defined benefit pension into a defined contribution scheme.
You'll see this amount as a lump sum, but it’ll be used to buy a pension plan that could be worth a similar retirement income to what you already have. This isn’t guaranteed though as the new pension can be worth more or less than your current plan.
You can find out your cash equivalent transfer value by speaking with a financial adviser.
