Busting pension transfer myths

Hi, I'm Sarah Pennells, and I'm the consumer finance specialist here at Royal London

And I'm Clare Moffat, Royal London's pensions expert, and we're going to be spending the next 45 minutes or so talking about pension transfers and ten myths around them. Sarah, it's a big topic. In fact, we tend to get the most questions about it, and there's so much we could talk about.

Yeah, you're absolutely right. In fact, in the poll at the end of our last webinar, it was a topic you voted to hear more about, and over the years, lots of myths have been doing the rounds, some of which could be quite harmful if you were to act on them. So, we'll spend some time guiding you through these myths and explaining the rules step by step. As we go through, we'll point you in the direction of further information, including guides and articles that we've written. Now, we've already had hundreds of questions, and we've tried to incorporate some of the most popular ones into this webinar, but if you'd like to ask a question we have left plenty of time at the end to answer them, and we'd love to hear from you. However, we aren't able to give you financial advice or answer a question that's about your specific circumstances or a Royal London policy. If you'd like to leave a comment or question, you can do so via the Slido link. Also, we are recording this webinar, and we’ll be sharing a link to the recording afterwards with everyone who's registered for it. And, finally, if during the webinar the streaming freezes, please refresh your page, and that should get rid of the gremlins. But let's get started. Clare, there are a lot of myths around pension transfers, aren't there?

That's right. As with many things pensions-related, there is a lot of confusion. So, today we're going to try and sort out the fact from the fiction, but first, Sarah, you used the term 'transfer,’ and people may have heard of or used the term 'pension consolidation,' or just thought about it as combining their pensions, switching or merging their pensions, or just bringing them together. We had almost 1,500 questions asked before our last webinar in March. More than 150 of those questions were about moving pensions, and all of those different terms were used, but really, they all refer to the same thing. What we're talking about is moving one pension pot to another pension pot. Now, this is normally in relation to defined contribution pensions, so that's the type of pension where you, and perhaps your employer, have been paying money in and building up a pot of money that you can then live off in your retirement. By transferring, you're putting them all into one pot. Now, before we get started properly, it's time for our first poll question. Have you ever transferred your pension? So, please vote using the Slido link.

Okay, so-, Votes coming in. Yeah, we've got a lot of people who have transferred their pensions. Still moving about. Right, yes. Oh, so this is interesting, actually. So, three-quarters of people are saying-, and it's moving, of course, as I'm saying these words, but about seven in ten say they've not transferred their pension, and about a quarter are saying that they have. So, I think that's interesting, I-, personally, I expected it to be a bit higher, but good to know where we're starting from, so-, Exactly, and I think that brings us neatly onto our first myth, which is, 'You can transfer all types of pension.' Now, this is definitely a myth. There are some people who won't be able to transfer their pension, even if they want to. Now, we had a question from Andrew, who says, 'I have multiple pensions, including my final salary teacher's pension. Can I transfer all of these pensions into one?' So, the answer, in relation to the teacher's pension, is no, and that's the same for other people who are in public-sector jobs or who have some public-sector pensions. So, Sarah, why is that?

Well, the reason is that those pensions don't have any pots of money. Now, they're defined benefit pensions, and with this type of pension, the amount you get in retirement depends on how long you're in the pension for and your salary, among other things. If it's a private-sector- defined benefit pension, then you can transfer it, but it's normally not recommended. However, if you're in a public sector pension scheme, then the money that you and your employer pay into your pension today goes to pay the retirement income for today's public sector pensioners. So, your pension contributions don't build up a fund that you can transfer. There's one major exception in the public sector, though, and that's if you work for local government. If you're in the local government pension scheme, then it does have a fund of money, and you can transfer your pension out of it. But, and it's a big but, like private-sector- defined benefit pensions, it's generally a bad idea to transfer your pension. So, why is it a bad idea? Well, because these pensions make a promise to pay you, and maybe your husband, wife, or partner, if you have one, a regular payment for the rest of your life. That's a really valuable benefit to have, as it would cost a lot more than the amount you've paid in to buy that privately. But if you have a final salary or other type of defined benefit pension that I was just referring to, and you want to read more about transferring it, then there's a guide on our website which highlights what to think about and what the risks are. So, Clare, the flip side brings us onto myth number two, and that's that it's always a good idea to move your pensions into one pot. Is that true?

Not necessarily, Sarah. So, for many people, transferring your pensions can be a good idea, and we'll come onto that in a minute, but it's not always the case. The first example where it might not be a good idea is if you're currently working. If you don't want to stay in your employer scheme, then you'd need to check whether you would lose that pension contribution from your employer. Now, often, employers will only pay into the workplace pension that they set up, so by transferring away, you may be losing out on valuable employer contributions, which could result in a lower pension pot at retirement. Currently, under automatic enrolment rules, employers will pay an equivalent of a minimum of 3% of your salary into your pension, but many pay more, and it could be a lot more, so you don't want to miss out on that. The next example where it might not be a good idea is if you have an older pension, and by older, we mean that you took it out in the 1980s or 90s, so that is a long time ago now, but you could've been at the very start of your career, and you might have something called a guaranteed annuity rate, also known as a GAR. Now, this was quite common a number of years ago, and although you couldn't take them out after a certain time, you could still be paying into that pension now. A guaranteed annuity rate means that there's a guaranteed minimum level of income that a pension provider will pay when you start taking your pension savings and convert your pension into a regular, guaranteed income for life. Now, it will generally be higher with your existing provider than the rates available in the market when you retire. So, you might be wondering, 'Well, how much of a difference could it make? Are we talking a few extra pounds of income a month, or a chunk of extra money?' Well, it really depends on how much you have in your pension pot. Common rates offered on guaranteed annuity rates were around 9% to 11%, occasionally higher. Now, that might be around 30% more than the best rate that most people can achieve now.

And what that means is that, for every £100 in your pension pot, you get £9 or £11 as income a year, compared with, say, £6 or £7 for every £100 in your pension pot that you might get based on today's rates. There are other factors to consider here, as well. The highest rate is clearly important, but you may have other needs. For example, does this rate just apply to you, or is there an option for your husband, wife, or partner, if you have one, to continue to receive a regular payment or lump sum if you were to die before them? These are important factors to consider. To make sure that you don't miss out, regulations say that if you have a pension with a guaranteed annuity rate, and it has more than £30,000 in it, you have to take financial advice before you're able to transfer it.

Tax-free cash is another one to think about. It's the money you can take as a tax-free lump sum, or a series of tax-free lump sums, when you begin to take your pension. It's currently set at a maximum of 25% of the pension fund. Now, some firms-, some plans that were set up before the 1990s may allow you to take out a higher percentage of tax-free cash, with some even having 100% tax-free cash. Now, you can transfer this ability to take more than 25% tax-free cash to your new pension, but there are conditions that make it a little tricky, so it's worth asking your current pension provider about that and taking financial advice. You might also have heard of something called a loyalty bonus, particularly if you've had a with-profits policy in the past. Now, normally, to get that loyalty bonus, you need to keep the money in that fund until the maturity date. Now, that's normally your retirement date. If you move from that pension, then you'll lose that loyalty bonus. There's one other issue to be aware of, and that takes us onto our next myth, myth number three, 'The pension age has to be the same for the pensions to be moved into one pot.' So, is that true, Sarah?

Well, that's a myth, too, but let's just explain that myth a bit. Your pension age isn't the same as the state pension age. That's the age you're able to claim the state pension. It's also not the same as your retirement age either, because you don't have to retire or stop work to be able to take money out of a defined contribution pension. The topic of pension ages and retirement age can be confusing, so it's something we often get asked about. We had a question from Simon, who asked, 'Can amalgamated or consolidated existing pensions have the maturity date amended to an earlier retirement date of 55?' Now, this relates to the fact that, when you start a new job, you have to pick an age when you think you might want to retire, but that age can be changed at any time. So it's possible that you have pensions from previous jobs that have different pension ages, because you may have changed your mind about when you want to retire as you've gone through your career. So, if you want to combine, say, three different pension pots, and they have pension ages of 55, 60, and 65, it doesn't matter, just change them to the age you want. And, even then, if you, say, picked 60, and then when it's coming up to your 60th birthday, you decide you don't want to take anything out of your pension, well, that's absolutely fine, too. You'll receive letters from the pension company in the lead-up to that date, asking you what you want to do with your pension, but you don't have to do anything. You can simply tell the pension provider that you want to take your pension later. But, Clare, there are rules about the age you have to be to take money from your pensions for the first time, aren't there?

That's right. Under the current rules, you can't take money out of your pension before your 55th birthday, and this minimum age will rise to 57 by April 2028, but there are some exceptions to that age restriction. Now, first of all, if you're seriously or terminally ill, then you don't have to be 55, or 57 from April 2028, to take money out. And while it's not common, some people will have a right to take their pension earlier than the standard minimum age, perhaps because of the type of job that they did. If you're able to take your pension before the age of 55, that earlier pension age could apply if you move all your pensions together, but there are conditions attached, and you might also lose it if those conditions aren't followed. So, again, we'd suggest you speak to a financial advisor before transferring your pension if this applies to you.

Okay. Well, onto our next myth, number four, which is, 'There's no point looking for old pensions as they'll be worthless.' And this one is definitely a myth. If you decide you want to bring all your pensions together, it's a good opportunity to track down any lost pensions you might have. And we've had so many questions, like this one from Marcia, who says, 'I've had several pensions over the years, where can I go to find them all and collate them into a single pension?' If you've had lots of jobs, and particularly with jobs you had many years ago, you might have pensions that you've forgotten about. Maybe you moved house and didn't give the pension company your address, or perhaps they had your old work email address, but not your personal one. Now, it's estimated there's £31 billion in lost pensions. That is a lot of money. The good news is that you can track down your pension, and you don't have to pay anyone to do this. There's a free-to-use government service called the Pension Tracing Service. Now, what this service does is give you up-to-date contact details for your pension scheme, but then you have to contact them and claim any pension pot or plan that has your name on it. Now, the Pension Tracing Service is, is online at gov.uk/find-pension-contact-details. So, look at any paperwork that you have before you start to go through the admin process of moving your pensions together. What you might think is worthless actually may not be worthless at all.

Okay, we're halfway through this, and this is one that's worth spending a few minutes on. Myth number five is, 'There is no good reason to transfer your pension.' Well, that's definitely a myth. We've already covered some reasons not to transfer, but there are some very good reasons to transfer. Sarah, why is this a myth?

Transferring your pension isn't something to rush into without checking what you could lose, but you could, for example, end up saving money by transferring if you move your pension pot or pots to a pension provider that's got lower charges. Now, talking about pension charges can make some people's eyes glaze over, plainly not Clare's or mine, but comparing your charges on your pensions is important. And we've got a question from Charles, who says, 'I have several small pensions from working with different companies, is it more cost-effective to combine them or leave them as separate pensions?' So, how do you go about comparing the charges? Well, all pension providers apply a yearly charge for managing your pension. This is known as the annual management charge, or AMC. It's taken automatically once a year or once a month from the value of your pension savings, and you can find information about this charge in a variety of places. First of all, there's a document you'll have been given when you joined the pension scheme called the key features document. This will have information about charges in it, but you can also find this information in the annual statement that you'll get from the pension provider, or on your pension provider's app if they have one. If there is an app available and you're confident using apps, then it is usually a good idea to download it, as they often have other information that you may find useful. If you have a workplace pension, then the charges for the default fund, which is where most people will have their pension money invested, will be 0.75% or less of the total pot size. Now, the default fund is the fund that you will be put into when you are automatically enrolled. But what does a charge of less than 0.75% really mean? Well, percentages don't mean much to many of us, so we normally like to see a pounds and pence amount, but we need to compare the percent of one scheme to the percent of another to allow for a fair and equal comparison. So, that upper limit of 0.75% on charges would mean that if you had £10,000 in your pension fund, you would pay no more than £75 as an annual management charge. Many providers with modern schemes charge a similar percentage, but you might have older-style personal pensions, which could charge a lot more than 0.75%. In fact, one of the great things about workplace pensions is that they're generally quite transparent, meaning it's pretty easy to see what charges apply.

It's important you check the annual management charge on your existing pension or pensions and the one you're thinking of transferring to before you decide. So, in a workplace pension, everyone in the default fund for that particular scheme pays the same charge as a percentage regardless of how much money they have in their pot. Now, this can be particularly good for people who don't have a huge pension pot at the moment, perhaps they're young, they've had career breaks, or they started later, or whatever the reason.

And remember, you don't have to transfer every one of your old pensions. You might have, for example, three older pensions, two of which have higher charges, but one has much lower charges. In that case, you might want to transfer the two more expensive ones and leave the other where it is, and that's absolutely okay.

So, that's charges, but another reason to combine your pensions could be a reduction in life admin and the possible hassle of having different pots of money with different providers. Is that a genuine reason to think about transferring your pension, and are there ways to streamline your pension admin? Well, it's an interesting one, and I think it's a really personal decision. For some people, it can make a big difference to have all of their pensions in one place, they can see exactly what they've got, and having them dotted around could be a real barrier to starting to think about retirement. But others may not be put off by that at all, and our research shows that half of those who transferred did so to make it easier to manage their pensions. So, it's clearly a big driver of pension transfers.

And a common question asked is, similar to this one, from Joe, who says, 'Is it better to combine different pension schemes to one-, to one ahead of retirement?' If you ask someone who finds financial admin a bit daunting and would prefer to see exactly what you have saved in total for your retirement, it's worth saying that something called the Pensions Dashboard is due to be rolled out soon. Now, this will be an online dashboard that will enable you to see all your pensions in one place, even if they're with different providers. You'll also be able to see your state pension and how much that's worth, which brings us to our next poll question, 'Do you think that seeing all your pensions in one place will help you plan for your retirement?' So, please vote.

Okay, this is-, yes, wow, this-, well, this is a fairly definite one, isn't it? I mean, over nine out of ten people, Clare, here say it will help them plan. So, I mean, good news for when the Pensions Dashboard gets rolled out, but interesting, we were talking about life admin and financial admin and how, for some people, it can be a real barrier, and for others, maybe not so much. So, I think that's quite a definite response there. Definitely. But even before we get the dashboard, your pension provider may offer an app, which means you can check on your pension with them any time, and you'll also get an annual statement from every company.

Now, that brings me on to our next myth, Clare, it's myth number six, and what is it?

Well, the next myth is that if you move all of your pensions into one, you can forget about it. You might feel like you've done all of that hard work and moved them all into one place, but especially as you get closer to retirement, you'll need to work out how much you're going to have in retirement. You might have looked at the app or your annual statement and seen that there are some calculations there, but you need to do a little bit more work to see if that's going to be enough for you in your retirement. It can be helpful to plug your pension details into a calculator that your pension company might have, or else the government-backed website MoneyHelper have got one, too. Now, these calculators can let you see how much you'll have in retirement and will include state pension. You could also normally add any other savings or defined benefit pensions that you haven't transferred in. But at this point, I'd say it's a good idea to look at the retirement living standards. Now, these are based on independent research and have been developed to help individuals picture what kind of lifestyle they could have in retirement. Now, we speak about these regularly, so I won't go into a lot of detail here, but have a look at our last webinar, which was called, 'How much do I need for a good retirement,' for more information. But basically, they'll help you understand what a minimum, moderate, and comfortable retirement might cost. Now, then you can compare that to how much the calculator says that you'll have, and if you're part of a couple, you'll need to think about what you'll both have in retirement.

And coming up to retirement can be a really good thing-, time to think about your pensions and book a free Pension Wise appointment. Pension Wise is a free and impartial service from MoneyHelper, backed by the government, to help you understand your options to take money from your pension pots. Now, it's also a very good idea to talk to a financial advisor. You also need to make sure that your pension lets you make the choices you want at retirement. Older pensions might only let you take all the money that you have in your pension plan out in one go, and that could mean you pay a lot more tax than you should, or they could only offer the chance to buy an annuity. Now, that's when you use all of your pot and essentially convert it into a regular income for the rest of your life.

In addition, the workplace pension you're in might not offer something that's called drawdown or income drawdown. Now, ignore the terminology. All that drawdown means is that your pension money stays invested in that pot, and you can take your tax-free cash, and then you can take some money monthly, like an income perhaps, if you've actually stopped working. Or you might just want to take your tax-free cash and leave the rest invested because you are still working, and you don't need that monthly income yet. Or you might want to just take larger sums every now and then, maybe because you've got one of those defined benefit pensions that we mentioned earlier, and that gives you enough monthly income for the everyday bills, but you need some extra from time to time, so maybe for holidays or a new car or Christmas presents. But, Sarah, what's myth number seven?

Well, our next myth is, 'You can transfer your pension to someone else.' Now, we got quite a few questions on this, including one from Trevor, who asked, 'Can you transfer pension funds to your spouse to make use of income tax if they have a very small pension?' And in the pensions world, there are some things where the answer is maybe, but this is one which is a definite no. A pension belong to you individually, the pension income that you receive might come into a joint bank account, but legally, that pension belongs to you. The only time a transfer can take place to someone else during their lifetime is between a couple when they're getting divorced, and there's a court order that states that the pension has to be shared. And Trevor's scenario's common where one person has the bigger pension pot, and when they start to take money out of it, they're paying more tax. But, they have a wife or husband who has perhaps cared for children or relatives, they have a smaller pension, and so perhaps pay very little tax. But pensions work in a similar way to salary, they are taxed on an individual basis Another question we've had highlights another myth, too. Clare, tell us more.

This is myth number eight. This is something we get asked about from time and time, and that's, if you transfer your pension, you can't change your mind later. So, let's unpack this a little bit. Now, for a start, when you transfer your pension to another provider, you get a 30-day cooling-off period. Now, that means if you change your mind, your pension will be returned to that old pension provider. However, if you want to transfer your pension again in the future, that's your choice. If you do go ahead with the transfer, it's probably not recommended to keep chopping and changing your pension very frequently, but you can transfer again in the future. And our research shows that some people do transfer their pensions regularly, so maybe when they switch jobs. One point to mention here is that if you transfer from a private-sector-defined benefit pension, so remember, that's the type of pension with a promise to pay a regular income in retirement, and you're transferring into a defined contribution pension, you can't move back to a defined benefit pension. So, Sarah, we're nearly at the last myth, but what's myth number nine?

Well, it's the myth that having all your pensions with one pensions provider is unsafe. Now, I think it's worth spending a bit of time explaining the different rules covering different types of pension. So, if you have a public-sector-defined benefit pension, then the government guarantees those payments. If you have a private-sector-defined benefit pension, and if the employer goes bust and can't make their contributions to the pension, then the pension scheme can go into something called the Pension Protection Fund. Now, that covers pension payments up to a certain amount, or the whole amount if you've already retired. If you have a workplace-defined contribution pension and your employer goes out of business, your pension money isn't affective-, affected. That's because it's managed by your pension provider. If your pension provider goes out of business, you can usually get your money back from the Financial Services Compensation Scheme. Now, you might've heard of the Financial Services Compensation Scheme in relation to savings you may have in the bank. It's an independent organisation that protects savings, pensions, and investments if a provider goes bust. In the case of pensions, if a provider were to go bust, then the FSCS rules cover 100% of your pension money if it's invested in the pension provider's funds, which most people in workplace pensions are invested in. If you have something called a self-invested personal pension, then slightly different rules apply, but your pension provider will explain those. Having all your pensions with one company isn't necessarily a risky thing to do because of those protections that are in place. So, let's finish with, well, myth number ten, and that's that you need financial advice in order to transfer your pension.

Well, that's a maybe. For most people who have defined contribution pensions from the last 20 years, you won't need to take financial advice before you transfer. You can make your own decision. But if you have a defined benefit pension worth more than £30,000 and you want to transfer to a defined contribution pension, or you have a defined contribution pension worth more than £30,000 with guaranteed rates available when you retire, and that's what we spoke about a little bit earlier, and you'd lose this benefit by transferring, then you must take financial advice. These rules are in place to protect people from losing valuable benefits, and your pension company will keep you right. But it's often a very good idea to speak to a financial advisor about transferring your pensions, especially as you get closer to retirement. An advisor will consider your circumstances and will understand your needs, wants, your income, what type of risk you're willing to take, and can look at you and, if you have one, your husband, wife, or partner's whole life. They'll then discuss potential solutions and talk through pros and cons about drawing up a shortlist of options and providers, and they'll make a recommendation. We've got an article on our website that explains how to get the most from a financial advisor, and how to prepare for taking advice.

But now it's time to answer some of the questions you've been sending in today. And lots of questions have been coming in.

So, the first one is from Chris, who says, 'Is it better to merge pensions or keep them separate?' Now, Clare, obviously, we've been talking about this in-, as we-, as we've been covering it in some of our myths, and it is one of those, kind of, 'It depends, maybe,' questions. But just to give us a bit of a recap, what are the sort of things that Chris, and indeed other people who've asked a similar question, should think about? I think it is a very personal decision. So, if you don't have any of these, kind of, guaranteed benefits that we spoke about, so things like the guaranteed annuity rate, or an earlier pension than 55, if you've just got a variety of, sort of, standard defined contributions pensions, then you might think it is a good idea to move them together. But we spoke earlier about look at charges to check, you know, you're not going to move to something that's more expensive. And I think, you know, that key one, if you're employed, is your employer paying into the pension you're currently in? Because you probably don't want to move that pension if you're going to lose out on that really valuable employer pension contribution. So, it's really just thinking about all of these different things, and, you know, would it make life easier for you? What are the charges? All of these different ideas So, and then by comparing the charges, that means you look at the charge, both of the old pension or pensions, the existing ones that you've got, plus the pension that you're thinking of moving into so that you can work out if you'd be better off. And that's where that percentage comes in. That's right. Because you could have different amounts in the pensions, and therefore, you know, comparing the pounds amount could be quite tricky. And you mentioned about the employer contributions if you're thinking of transferring a pension you're currently paying into where you're employed, because that could add up to a lot of money. I mean, it could be roughly what you're paying, and it could be even more depending on the scheme you're in. That's right. And often, we see employers now are paying more than the minimum that they have to pay, so you could be losing out on a really valuable benefit. So, I'd say that's the one, you know, to really watch out for, that if you're going to move, then, you know, even if you move all of your other pensions together-, say, you have six pensions in total and, and, kind of, you're in one currently, you might want to move those five together, and that might be into the one that you're currently in with your employer, or it could be into a different one. But you want to keep with the one where you're getting those employer contributions, because that will make a massive difference in your retirement.

Okay. So, we've had one here which is a little bit about the, kind of, mechanics, which is, 'How do I transfer a pension into another workplace pension?' So, you know, I, I guess what's behind this is, 'Do I have to do a lot of running around myself, or does it all happen automatically behind the scenes?' What can we-, what can we share? Because obviously, different providers might have different ways of doing this. And that's a-, it. You know, different providers do work differently. If you are in a workplace scheme, for example, and say, you're-, you've started a new job, and that's why you're, kind of, in a new workplace scheme, then often when you get the paperwork, they'll talk about being able to transfer the other pensions into that pension that you're currently in. So, there will be information. It should be quite a quick process now, it depends where those other pensions are coming from, but-, so, that's-, you know, in that situation, that, that, kind of, works quite well. If you are-, say, you are maybe self-employed, you don't have a workplace, you've got lots of pensions you've just, kind of, started over the years for different reasons, then decide, you know, kind of, do all those checks that we spoke about, make sure you're not losing out on any valuable benefits. We would always say taking financial advice is really useful, so-, because they can really help you know where you should be thinking about moving your money to. But look at all of those different schemes, look at the charges, and, you know, then get in touch with the pension provider of the company of the pension that you want to move to, and they'll be able to help you through this process. Okay. So, we've got a question here from Mark, which is, 'Is there a cost to transfer pensions from other providers, you know, into your whatever the scheme is that you want to transfer?' Is there a general rule here about costs, or does it depend on whether you've got, say, a very, very old pension, for example? Well, it should be quite a simple process, and, again, I would say speak to the provider of the pension that you're moving to, but most, there will not be a cost. You know, I think, especially in kind of those modern type of workplace schemes, then there won't be a cost if you're moving your pensions in, but if you do have an older pension, it's probably worth checking with them. Also, you know, we spoke about with profits policies, there could be a cost in a different way. That's the loyalty bonus ones, yes. That's right, because you might lose out on something called the loyalty bonus, which we'd need to keep. So, again, you know, it should be clear from the provider's websites, but, you know, pick up the phone, double-check. But the majority of people who are moving it from, you know, one pension into another one, there won't be a cost.

Okay. We've got a couple more transfer ones, but I'll just break this up. So, this is one here from Trevor, who says-, it's about tax-free cash, saying, 'Is it always a good idea to take the maximum tax-free cash even if it's just to reinvest, for example, into an ISA?' So, again, are there any, sort of, general rules, or does it really depend on why you're taking that tax free cash out and what your own situation is? It's an interesting one because, actually, you could be invested in exactly the same thing in your pension and in your ISA. So, you're taking it out of your pension now, if you're taking the tax-free amount, you're not paying tax on that money, then you're going to put it, say, into an ISA, and, you know, you might want to do that because maybe you've got some ideas of things to spend it on. When you take money out of an ISA, that's also tax-free. So, you might just have an idea if, if that's, kind of, what you'll do. Now, this is where it gets a bit trickier. Currently, money in an ISA you would pay inheritance tax on, but currently, most pensions are not subject to inheritance tax. Now, we are waiting for actual draft legislation to come out, but we know there's a proposed change from the government that, in a couple of years, inheritance tax will be paid on pensions. So, you know, in the past, or even right now, I would always say that you're better to leave your money in a-, you know, a, kind of, inheritance-tax-friendly environment, if inheritance tax will apply to you, rather than taking it out and moving it into an environment which could be taxable. But there's a caveat of we are expecting this change to happen, and we'll have much more information when we actually get that draft legislation, and we know about more of the detail on that. Okay. I'll pick up a couple more of the transfer ones in a second, but one more, which is more about tax-free cash again, and this is from Maura, who says, 'Does the 25% tax-free amount apply to the combined total of all pensions, or is it applied to each pension?' Okay. So, for each pension you have, you're entitled to 25% tax-free cash. So, say you have three pensions that just happen to be worth £100,000 each, you could take £25,000 from each of those pensions, but what you can't do is say, 'I would like to take all of the tax-free cash from one of those pensions.' That's not how it works, and that's to do with the mechanics of when you take tax-free cash out, something else happens. So, that other 75%, something has to happen, so either it goes into drawdown, or it buys an annuity, or you take it out as, as taxable income. So, that's, kind of, in relation to that, but it's-, I mean, we do get asked this a lot. It's probably one of the most common questions we get asked, is about tax-free cash and how the mechanics of, of that works. So, you know, there is a maximum tax-free cash that is available, as well, and that's just over £268,000. So, if your total-, And, and just to be clear, that-, because it's a huge figure, isn't it? That £268,000, maximum, maximum tax-free cash you can have, not the maximum pension that you can then take 25% off. That is the maximum. So, you would need a pension of over £1 million to, to sort of, reach that number, but-, so there is a maximum amount. That just means anything you had over that, then you would pay tax when you're taking that out. For most people, they never have to worry about that because actually, you know, the tax-free cash they can take is going to be under £260,000. But you can-, you are entitled for each pension that you have to take 25%. If you did move all those pensions together, then you would get 25% of that total pot, but, you know, one thing we often speak about is the fact that you don't need to take all of your 25% out upfront. So, if you have £100,000 in your pension, you don't need to take £25,000 out. You can take out-, say you wanted to go on a holiday, you could take out £10,000 of that as tax-free cash. Now, sort of, another 75% of that, so there'd be £30,000 we'd then see move into drawdown. Then if you wanted some more tax free cash, you would take that again, and another part would move to drawdown. Now, doing it that way, you might think, 'Well, what's the point?' You actually-, the 25% is based on your pension pot. So, if your pension pot increased, you would get 25% of a higher amount. So, it can sometimes be a good idea to do that, but, you know, returns aren't always guaranteed. So, your pension pot might have reduced as well, but it is a good thing to think about. You don't always need to take it, and you can also decide to take tax-free cash in, you know, sort of, regular monthly amounts. So, each month, you take £2,500 of tax-free cash, for example. So, there's a lot of choices available. It's not just about taking as much of the tax-free cash you can, that 25% of that whole pot upfront.

So, we've had a question here from Hugh, which is, 'I have a few pensions from previous jobs, but I have one that's the only one I'm currently paying into.' Basically, it's, 'Can I transfer the one I'm currently paying into into other pensions I've got that I'm not paying into?' So, I think that's back to the thing we mentioned earlier about it depends if your employer is paying into the current pension that you have. Some employers might. So, say you work for-, there's only a few people working for a company, then an employer might say, 'Well, I don't mind where, kind of, I'm paying my contribution.' Most employers will pay employer pension contributions to the pension scheme that they are responsible for. So, if you're moving that current scheme into another scheme, you could lose out on that. So, I think that's, you know, the most important thing, what are you going to lose by doing that Okay. Oh, here's one from Linda, who's saying, 'My old workplace pension pot and my current workplace pension are with the same provider. Should I combine?' Well, I would say get in touch with the provider. It can be-, lots of providers have, kind of, old systems in the background, and sometimes different companies have bought other companies. So, it might be held differently, but you can really easily just move those two together. There could still be some benefits on that older scheme, so it's worth getting in touch with them, saying you've got these two policies, and what can you do.

Okay. So, just, sort of, scrolling through some of the new ones that are coming in. So, give me a second. So, we've had a question here, which is about the tax treatment. So, yes, from Helen saying, 'Are there any tax implications to transferring, sort of, at the time of transferring?' As in, you know, when your money is going from one pension company to another-, I think, Helen, I'm interpreting your question correctly, I hope I am. Does it lose the tax, sort of, treatment that pensions get? Is there anything you need to do, I guess, is maybe what's behind that. No, because you're moving from one pension to another pension, so that money is not coming out in the middle. So, basically, there's not a tax issue there. It is just going from one pension company to another pension company, for example. So, it's only when you start taking money out of a pension, so you've reached aged 55, 57, from 2028, that you need to start thinking about what are the tax implications of what you're doing. The only caveat to that, I'd say, is if you are moving money overseas, it's slightly different. So, if you're going to a pension that is overseas, then there can be tax charges, but for anybody who is just moving from one pension in the UK to another pension in the UK, that's fine. And we've had a couple of questions along similar lines. So, this one is from Jay G, and there's another one I saw earlier one, which is about, sort of, inheriting the state pension. And Jay G says, 'I'm not married, and I want to understand why I can't leave my state pension to other family members.' And I think-, sort of, kick off this, Clare, but just-, so the state pension, we've got a state pension system that came in in 2016, so April 2016, and that was for people who reached state pension age from April 6th 2016 onwards. And what that means is that instead of having an old system where we had a basic state pension and then some people who, you know, if you're employed, you could build up a pension on top, we now-, the money that you pay in through your National Insurance goes to build up, sort of, one pension amount. And one of the things that was changed, then, was that you couldn't inherit elements of a state pension because there's one overall payment. So, that applies to, kind of, the new system, which many people will-, who haven't reached state pension age, will be building up their pension under. But there, there is then-, cause we actually did a freedom of information about this, didn't we? About people who can inherit a certain amount of the-, called the SERPS or the, the second state pension.

So, people can inherit elements of it, but, but it was very specific because this question from Jay B says, 'I'm not married, can I just pass on my state pension?' And the answer there is, no, you can't, isn't it? That's right. You, you can't just pass it on. But I think it's one of these, there's, there's quite a lot of confusion about the state pension. There, there is a lot of confusion and we have lots of information on the state pension on our website. We've-, I think we did a state pension-, we've done a couple of state pension webinars because we get-, always get asked questions on the state pension. But there are-, there is information about if you-, if you've started to take your state pension before 2016, how the rules are, and after 2016. So, I would say, kind of, have a look at that, but it does feel like something-, you know, I've, kind of, paid my National Insurance contributions, so why is it different? But actually, the system post-2016 is fairer for both people. So, yeah, I think it's, it's just one of these things, but lots of information on our state pension pages about that one. Okay. So, we've got a question here, which is, kind of, a bit more of a policy question, but-, which is from Cam, who says, 'Why are pensions taxed? You save money to retire, but then it gets taxed.' And, I guess, I'll, I'll-, just to kick off on this, I suppose the money that you pay from pay into your pension, so that does come from your income, but then you get this thing called tax relief, which, in other pension webinars, we explained in quite some detail. So, that effectively means that, sort of, some of the tax that you would've paid through, you know, income tax instead goes into your pension. It's, sort of, effectively a government top-up, and the, kind of, trade-off for getting that tax relief is that you then keep your money for your pension. But at that end, apart from the 25% that you can take out tax-free, then it is taxed. I, I-, you may have a better explanation, but it's, sort of, that trade-off isn't it? Yeah. It's like you get the money-, you get the money on-, the tax relief on the money you put in, but then you don't get it on money. You don't get a, sort of, tax-free, kind of, payment when you take money out. And I think it's good to then compare it with, say, something like an ISA, because people think, 'Well, that's tax-free,' but actually, the money that goes into an ISA has been taxed. So, normally, you know, you'd been working, you get your salary, it's been taxed, and then you're putting into something. So, so it's just the different ways it works. Pensions reduce your taxable income, so you are paying less tax when you're paying into pensions. So, you know, it is a really good thing to do, especially, you know, we've spoken about this before, if you're getting close to one of those tax thresholds. So, say you're just over the higher-rate tax band, then actually paying more into your pension can mean that you're a basic-rate tax payer, so that's a good thing to do. So, yeah, but that's exactly it. You're getting the benefit of tax relief on the way in, so that's why you just get 25% tax-free and the rest is taxed. Now, it will be taxed. So, if you decided to take all of the money out of your pension pot and, say, that was £200,000, you will pay a lot of tax. You'll be paying basic rate, higher rate, you'll be paying the top rate of tax, and in Scotland, whatever, kind of, the various other tax rates as well. So, that's why, actually, taking money out in a tax-efficient way is a really good thing to do. So, if you're in drawdown, for example, you can choose how much money you want to take out so you could make sure that you stay a basic-rate taxpayer. So, so, it's worth thinking about that, but that's why it's just, kind of, the different treatments of different types of benefits like pensions, or ISA. It's, kind of, different, and some will be taxed on the way in, some will be taxed on the way out.

Okay. So, we've had a question from Sandy, who says, 'Is the best strategy to merge other pensions into the one that holds the largest funds?' Well-, It depends, it depends. This is one of these, kind of, it depends, and, you know, again, it's about, sort of, doing your homework, really. And that's-, a lot of the things we've been speaking about today are making sure you look at your different pensions, look at the charges, look at, you know, kind of, what's available when you can take money out of that pension. So, does it offer the full range of choice for you? Now, there is-, we didn't go into it in remiss, but we have spoken about it in the past. There is a reason why it might be quite good to keep a couple of small pots of less than £10,000 and not transfer that, and that's if you're one of these people who, you know, kind of, has maybe a lot more in pensions, or you want to take money out of a pension but you're still working. So, so, one of the rules about when you start taking money out of your pension is if you take any of your drawdown money, or if you take any amount of one of these, sort of, cash lump sums, then you trigger something called the money purchase annual allowance. Now, that means that the maximum that can go into your pensions in a year is £10,000. So, you don't really want to do that if you're still working, for example, because you might want to pay more than £10,000 into your pension. And just explain that £10,000 because that includes not just-, because £10,000 you might think, 'Well, I'm not going to be paying anything like that.' But that includes both the money that you pay in and the money that your employer, if you're in a workplace pension, pays in, doesn't it? So-, That's right. And so, it might be a good reason to have a couple of smaller pots because if you have less than £10,000 in a pension, you can actually take all of that £10,000 out without triggering that money purchase annual allowance. So, if you're still working, you're over 55, you want to access some pension money, then it might be a good idea, if you've got one very large pot, say you've got a couple of hundred thousands pounds in a pot, and you've got a pot of £7,000 and another pot at, you know, £9,000, it might be as well to keep them if you want to take all of them out, because you're still working, you still want to be paying a lot into pensions Okay. So, couple more questions.

So, one from RW saying, 'Will that, that pension dashboard be in England only or UK wide?' So, that's the one we talked about earlier on that, that so many of you voted on in the poll. So, UK wide, it's not an England-only thing. So, when it's introduced and when you'll then be able to see the pensions you have, not just the one-, with the one pension provider, but with all your providers, and actually how much state pension you're on track to get, that will be something that's rolled out UK wide. And we'll go to one other one, which is actually about-, it's something you touched on a moment ago, Clare. So, this is from Joe, who says 'If I take a 25% tax-free withdrawal at 55-, at the age of 55, what happens with the pension? Do I have to move to a different financial product?' So, I think it's probably just worth, sort of, repeating this, because it is quite confusing if you haven't been through it. It, it is really confusing. So, what happens is you have a pension pot, that's what you're saving up into, and then when you take tax-free cash, something has to happen. So, you take that 25%, say, as a tax-free cash, that other 75%, something has to happen. So, that'll either be starting to take income from one of those defined benefit pensions, it'll be using that pot to buy an annuity, or it'll be moving into drawdown. Now, it could be a very slick process if you stay with the same company to go from that pension pot into drawdown, for example, but it is-, kind of, there's a, a, sort of, legal and technical rules of what's happening, and that's what's happening. That, that money is moving into drawdown. Now, once you're in drawdown, you can't pay money into drawdown. You can pay money into that pension pot. So, if you, kind of, think of it like two sides, almost. You can pay money into the pension pot, but in drawdown, it's-, you know, you can take money out of that and hopefully it's still growing there. You don't need to take any money out if you're still working, for example, because, you know, if you take money out it's going to be taxable, and if you're working it's just going to add to your taxable income. But we often see people who maybe reduce their hours by 50% and top it up by taking some money out of their drawdown funds. So, that's what, kind of, there-, there's-, it's-, it feels like a lot of jargon at this point in time, but if you think about the fact that when that-, you get 25% out, something else is always going to happen at the same time. Yep. So, basically, you can't take the 25% out and then just leave everything where it is and not make any other decisions. That's right.

Okay. I think just time for one last question, which is from P Cornish, who says, 'Is there usually a reduction in fees when combining pension pots to increase the total amount invested?' And we were talking earlier on, we spent quite some time talking a bit about charges and how it's important to compare. But just on this particular point, so, you know, if you have got three small pensions or whatever they are and you put them into one big pot, does that in and of itself putting them into one bigger pot mean that you pay less? Maybe. It, it depends. And that's because-, sorry, but there are so many things in pensions that, you know, the answer is it depends. If you have personal pensions, so you're not in a workplace scheme, the more money you have in that personal pension, it could mean you get a cheaper charge. If you're in a workplace scheme, as Sarah said, you know, workplace pensions have to be less than 0.75%, so it, kind of, depends. If it's a workplace scheme you're in where everybody pays the same charge, we spoke about that earlier, it doesn't-, you know, you could have £10,000 saved, you could have £500,000 saved, you're still going to have the same charge. But if you're in personal pensions, again, maybe you've been self-employed or you've had a workplace scheme and a personal pension, then the more you have in one of these personal pensions often means the cheaper charge you'll pay. And you're mentioning about that .75%. So, just that's the, kind of, maximum that if you're in the default fund, which is the one you'll be basically put into when you're automatically enrolled, and it's the one that most people who are in a workplace pension-, they're in their pension providers default fund. So, that's the one where it doesn't matter how much or how little, you pay the same percentage charge.

Well, I think before we go, it's just time for our last poll. So, we'd like you to vote, please, in the webinar topics that you would want us to cover in the coming months. So, please vote now. Okay. Well, the votes are moving around quite a lot. So, wills, death and inheritance tax, that's the one that people are saying-, at the moment, most people are saying they want to hear about, and, I guess, Clare, that's because inheritance tax is, kind of, very topical at the moment because of the changes, you mentioned them earlier on, that are planned. I mean, they're certainly not enacted yet but are planned for a couple of years time. So, I think it's renewed people's interest. But, you know, this is something that we talk about quite regularly, that actually having a will and thinking about these things, it's a really good idea anyway, just outside of your pension, actually thinking about what you want to happen and who gets what and all those kinds of things. So, it'll be a really good topic. At the moment, that is coming out at 55%, with understanding your workplace pension the second topic.

So, thanks, first of all, very much indeed for your questions that we've just been answering. That is all we have time for. Now, we will be sharing a link to the recording of the webinar in the next few days. But in the meantime, thank you very much for joining us today. Thank you.