What’s a pension transfer
A pension transfer is when you move your UK pension from your current UK scheme to either another UK pension scheme or a QROPS. The transfer process involves cashing up your UK scheme and moving that lump sum of cash to another scheme.
There are lots of parties involved in the process of transferring a pension.
Sometimes it’s easier to list those that cannot be transferred:
- Unfunded UK pension schemes
- UK state pensions
- Any pension where an annuity has been purchased
The process for a successful pension transfer
There is a simple recipe for a successful pension transfer:
- Collecting all the relevant information on the tansfer
- Analysing that information
- Reporting the analysis on tax, financials, and scheme options in a clear report
- Making a decision on your transfer based on fact
- Transferring to the right scheme
- Constantly ensuring the scheme is still right for you
Tax on a transfer
There are lots of potential taxes on a pension transfer and it’s important to understand how to mitigate them. These are taxes like:
- The overseas transfer charge
- Lifetime allowance taxes
- Pension transfer taxes
Transfer risks and traps
- The surprise tax bill
- Hidden fees
- Rule changes leaving you trapped
- Locked in schemes
- Inappropriate investment funds
- Giving up guaranteed benefits
Final salary transfers
UK Defined Benefit Schemes or final salary schemes are the most common and largest type of pension United Kingdom. Transferring them is not a like for like swap and there are many facets that need to be understood.
You need UK FCA advice if you want to transfer a final salary pension scheme above £30,000.