You know you’re getting on a bit when YouTube targets you with pension transfer ads. At least it’s not burial plots I suppose. And the algorithm must know something about me, because I’m definitely feeling the urge to demystify the pension transfer process.
In principle you can transfer your UK pension to another registered UK pension scheme in your name without breaking the rules and getting clobbered with a massive tax charge.
In reality, the pension transfer rules vary between pension types and providers. The whole area is a minefield blanketed in a fog, mapped by Mr Muddle.
But the big question is: just because you can transfer your pension, does that mean you should?
This post is about transferring your defined contribution pension. You have come to the right place if you are considering transferring a SIPP, an occupational money purchase pension, personal pension, stakeholder pension, Nest / People’s Pension, and every other stripe of retirement money pot that doesn’t offer you a guaranteed income for life. What this post is not about is transferring a defined benefit pension. That is rarely a good idea, according to the FCA.
Should I transfer my pension?
It is often worth transferring your pension when you can access a cheaper, better scheme elsewhere, but there is no need to transfer it just because you have, for example, left your job. Your defined contribution pension is your personal money pot. It belongs to you regardless of whether you leave it alone to build up value until your retirement, or whether you move it with you to a new workplace scheme. There’s also no limit to the number of pensions you can have, bar being able to remember where they all are.
Good reasons to transfer your pension include:
- Moving all or some of your pension to a cheaper scheme that’ll save you a fortune in charges. Savings can include keener platform fees, fund management charges, or drawdown fees.
- Moving to a scheme with a better choice of investments, customer experience, or retirement options.
- Consolidating your pensions with a couple of providers because it’s easier to keep track of them and/or you’re charged less for a bigger pot.
Consolidation may not be a good idea if it means relying on a single provider to safeguard too much of your wealth. The Financial Services Compensation Scheme is likely to cover only the first £85,000 of your pension lost to fraud or some other form of mismanagement at each provider you’re with.
While such a disaster is unlikely, it’s worth thinking twice about single points of failure before succumbing to the siren calls to simplify your life.
It’s a very bad idea to transfer your pension if you’ll lose valuable benefits that aren’t supported by your new scheme. More on this in the next section.
Some people moving overseas also explore transferring their UK pension to a qualifying recognised overseas pension scheme (QROPS). This is a complex area where it’s worth getting advice.
- Where should I transfer my pension? See our cheapest online broker table for a list of platforms that offer the best value on SIPPs.
Can I transfer my pension myself?
Yes, you can transfer your pension yourself by filling in a pension transfer form with your new provider. It will then scamper off like an enthusiastic St Bernard and drag your old pension bodily to its new home.
However, it’s worth holding your St Bernards if your existing pension comes with any of the following benefits:
- More than 25% tax-free cash (available under pre-2006 rules)
- Loyalty bonuses
- Enhanced life insurance
- Additional death benefits
- Early retirement benefits (some old pensions allow you to access your cash before age 55)
- Guaranteed annuity rates
- Guaranteed returns
- Fund value underpins
- Fixed or enhanced Lifetime Allowance (LTA) protection
- Annual or maturity bonus
Your existing pension provider can tell you whether any special benefits apply to your scheme.
Typically your new provider won’t support these benefits. They are generally legacy perks that have been squeezed out of modern life, just like boozy lunches, flirting in the workplace, and hugging your nan.
It’s worth seeking financial advice before you give up any of these extra benefits. In some cases you may be required to show you’ve consulted an advisor before you can move your funds.
- See our article by financial advisor Mark Meldon for more on consolidating old pension plans.
Transfer pension from a previous employer
There is no need or requirement for you to move your old workplace pension just because you’ve changed jobs. It may actually be against your interests as described above. You don’t lose the value of the assets you’ve accumulated up to your leave date. And your holdings will continue to grow in line with investment returns, even though you’ve moved on.
Your provider may still allow you to contribute to the pension, you just won’t get a leg up from employer match or salary sacrifice anymore.
You should check that your pension won’t be charged higher fees once you leave your job, though.
Many people have left behind a trail of legacy pensions like buried treasure as they’ve sought adventure across different workplaces. Often a pension that looked competitive a decade ago may be subject to high-fee banditry today because nobody’s checking in on it.
Put a note in your digital calendar to review your legacy pensions every five years. Make sure the charges and benefits are still competitive versus your next best option. Check that your fund choices are still appropriate as the years fly by. Devil-may-care funds that made sense in your twenties could probably do with a downshift in your fifties.
Many pension providers now offer target-date funds that automatically lower the risk of your holdings as you glide towards retirement. These funds weren’t widely available a decade ago. It’s not inconceivable that the pension industry may come up with another useful innovation or two in the next ten years.
How to transfer a pension
To transfer your pension, check that your existing scheme allows you to transfer some or all of your pension pot, and check that your new scheme will accept the transfer.
When you’re ticking boxes on your pension transfer form (provided by the new provider) it’s particularly important that your assets are transferred in specie and not as cash.
In specie means that your funds and shares are transferred without being sold to cash first. In other words, they remain invested throughout the process.
If your investments are sold to cash, then you will be out of the market. That means you will miss out on gains if the market rises while you sit in cash. (It also means you’ll avoid losses if the markets fall, but we live by The Law Of Sod.)
If your new provider doesn’t offer the same funds as your old one, then those investments will be sold to cash and leave you out of the market.
In this instance, it’s worth doing a little research to see if equivalent funds exist that are supported by both providers. Then you can sell your old funds, buy into the new funds, tick the ‘in specie’ box, and probably spend much less time out of the market.
N.B. Some providers describe an in specie transfer as ‘re-registration’.
Other things to watch out for:
- Some new providers require you to transfer a minimum amount, especially if you’re in drawdown.
- Yes, you can transfer your pension once in drawdown. In fact you’ll probably be welcomed with open arms.
- You won’t be able to add new money or trade until the transfer is complete.
- Tell your old provider to close your account once the transfer is complete.
- Cancel your old direct debit.
- Your new provider should tell you when your account has transferred.
- Make sure you understand the charges that apply to your transfer. See the charges section below.
How long do pension transfers take?
Pension transfer times vary but most of the main platforms claim that electronic cash transfers will take around two weeks. Fund transfer times are quoted as 6-12 weeks, depending on the providers involved and how manual the process is.
AJ Bell Youinvest has published a reassuring table of transfer times, as below. Take it with a grain of salt because much depends on how efficiently and accurately the paperwork is exchanged between your providers. (As you can imagine, nobody over-staffs their transfer department, and regulation on transfer times is weak.)
| Type of investment | Time taken to transfer |
| Cash only | 2-4 weeks |
| Shares | 4-6 weeks |
| Funds | 6-8 weeks |
| International shares | 10-12 weeks |
Source: AJ Bell YouInvest
Even though cash transfers are much quicker, it’s still better to transfer in specie. That way you remain invested at all times regardless of whether your funds spend several weeks in a nether zone between providers.
Pension transfer charges
There are some specific fees that providers charge when dealing with pension transfers. It’s a good idea to ask each provider to list the charges that will apply.
Look out for:
- Exit fees: Your provider may charge you a lump sum for transferring your account, and/or closing your account, and a fee per investment you move e.g. per fund or stock. Often these fees are higher if you move your pension overseas.
- Entry fees: This is a pretty old-school fee. It is only levied by providers who aren’t that keen on new business.
- Dealing charges: You may be charged by both providers if you have to sell assets at one end, transfer cash, and buy again at the other.
- Platform fees: It’s possible to be charged two sets of platform fees as one provider claims they have received your funds while the other claims they haven’t let them go yet. This happened to me! I just shouted at them both until one eventually refunded. Obviously your new provider has the greater incentive to keep you happy.
Check how and when your old provider will refund your platform fees.
Ask your new provider if it will cover your transfer fees. It doesn’t hurt to ask. Also see if they’re running any cashback offers on transfers, or waiving platform fees for the first six months or so.
Pension transfer troubleshooting
Check that the right investments appear in your new account. Note your assets may not all materialise simultaneously. That can be as terrifying as a Star Trek transporter accident if you’re not expecting it. (Where’s my goddamn money gone?) I’ve had a tail-end fund turn up a month after the first. More rearguard than Vanguard!
To reduce stress:
- Record your holdings at your old provider before you start the transfer. Take a screenshot, or download a statement or spreadsheet of your investments.
- Record fund names, codes, prices, and quantities held. If there should be a dispute later then you will know exactly what you own. You can kick up a stink if anything’s gone walkies.
- When your funds arrive, match the new provider’s ‘buy’ price against the ‘sell’ price on your old provider’s exit statement. You can cross-reference those against prices quoted by an independent financial data provider like Morningstar.
Having a full record of ownership will neutralise the anxiety if you get caught in a ‘he said, she said’ dispute between two providers eager to blame each other if things go awry.
Some Monevator readers have reported transfers taking months to complete due to foul-ups. You can spend hours on the phone talking to inexperienced call centre agents about where the hell your fund is, or you can wait a while on the assumption that the fund exists somewhere and it will turn up again sooner or later.
The best bet is to keep your instructions as simple as possible. Document everything, create a paper trail, and don’t expect the customer service dept to be staffed by Jeeves-level problem-solvers.
Ask your old provider to confirm in writing how it will treat tax relief and dividends that are paid to them after your account has transferred. They may receive cash on your behalf after your online account has disappeared. Check in and chase any cash payments you believe you’re owed.
Be sure you definitely want to transfer if I haven’t put you off already. Although you do have 30 days to change your mind, the FCA say that your old provider does not have to take you back. Even if they do return you to the fold, they do not have to honour any special benefits you were previously entitled to.
Don’t transfer your whole pension if your employer is still making contributions to it. You are allowed to partially transfer any amount of your current employer’s pension, subject to your new provider accepting the transfer. This can set up some sneaky cost arbitrage that we’ll come back to in a follow-up post.
Don’t try and market time your move. You should be invested the entire time anyway if you transfer in specie. Otherwise, don’t imagine you can predict how tensions in the South China Sea or the next mad presidential tweet will affect the stock market. Transfer for rational reasons, take the precautions above, and otherwise let the process run its course.
Small Pots: If you transfer small pot pensions worth less than £10,000 into an account valued at over £10,000 then you may lose the option to take the small pots as a cash sum. It’s also possible there may be issues with taking small pots from certain pension types if they’ve been transferred within the last five years. Check this with your providers before transferring small pots.
Death or divorce!
…as Mrs Accumulator often exclaims of an evening.
You can’t transfer your pension to another person except through death or divorce.
You may have trouble transferring your pension if it’s subject to a court order – perhaps because it’s being divvied-up in a divorce settlement.
The two-year pension rule: If a person in serious ill-health dies within two years of transferring their pension then HMRC may claim they only did it to avoid tax. Some people! Such a verdict can create an inheritance tax liability on the pension.
To save myself from crossing the event horizon of a tax law black hole I’m going to transfer you to a nightmarish article on the topic and a report on a Supreme Court ruling that may make the issue go away. (It’s really impossible to tell though as with any black hole the laws of physics seem to break down once inside.)
Lost pensions: You can track down your scattered pots using the government’s pension tracing service. Hopefully it works better than that other tracing service it runs.
Happy transferring! Please tell us about your pension transfer experiences in the comments.
Take it steady,
The Accumulator
Comments on this entry are closed.
Thanks, this is a really good subject to post about. I had a terrible time trying to perform a partial transfer from my workplace DC scheme. My company pension is great for developed market funds. However for bond funds and emerging markets the fees are between 0.75% – 1.25%. So I thought I would hold developed funds in my company scheme and partial transfer the bond and emerging market allocation into a SIPP.
I kicked off the transfer but then received some really confusing literature concerning Protected Tax Free Cash (PTFC). I was asked if I wanted to proceed or not. I had no real way of understanding how much this PTFC was worth. I’ve tried to read more about PTFC but have struggled to increase my understanding significantly. I pulled the plug on the transfer as I was scared of making a massive blunder.
My research continues. Halloween is coming but few things scare me quite as much as PTFC!
First time commenting (though frequent visitor to your excellent site) – thanks for a lot of helpful information. Depending on individual future plans and timeframes regarding taking of benefits, it might also be worthwhile checking with the scheme/provider what benefit, including death benefit, options they provide and how these work. As I understand it, not all schemes/products offer all options, including on death.
A few other points re workplace DC schemes:
Workplace DC schemes have been known to negotiate favourable charges vs the providers open market charges – both platform charges and/or fund charges may be included. You may even get access to a larger pool of fund options (with favourable charges vs the providers open market offer) than were originally offered by your DC scheme.
Workplace DC schemes may enable the continuation of these benefits through deferral and drawdown too.
Therein ends the potential positives.
Now begins the list of some other issues that, on balance, may be viewed as potential drawbacks:
Your workplace DC scheme may not actually provide any drawdown facilities – and this will force you to transfer.
However, it is not entirely unknown for the workplace DC provider to offer you a better than market rate to stay with them – however, this may still require you to transfer and possibly via cash too.
Some DC providers may take an approach to a cash transfer that tries to “insulate” you from the time out of the market phenomena if you stay with them for your SIPP.
On completion of the transfer, please note, this is the point where your former employer effectively washes his/her hands of you.
Your workplace DC scheme may have other restrictions/constraints like:
a) insist that with 100% crystalisation any PCLS is drawn from the DC and the balance goes to the SIPP
b) require you to transfer to access UFPLS, phased retirement, etc
c) etc
So, there is potentially quite a lot of factors to weigh up.
@TA is 100% correct (and then some!) to issue the caution about “inexperienced call centre agents”. IMO this extends to back office staff too.
If/when you receive some information that seems incorrect be fully prepared to challenge it. If [even polite] confrontation is not your thing then, as a minimum, get them to write to you explaining where whatever they are saying to you that “seems odd” is written down in the rules, etc.
The only additional suggestion I would make to those given by @TA above is that you need to do your homework so that you are clear about what you are trying to achieve and be prepared for this “due diligence” process to take a long time and that you may well experience a few bumps in the road too!
The theme that I anticipate may emerge in the comments to this post is there can be an inordinate amount of complexity with workplace DC transfers – and I suspect I have only skimmed the surface, based on my own scenario/experiences.
Transferred numerous ones.
Wife’s Aviva Personal Pension to HL – took three weeks online
Wife’s Standard Life Personal Pension to HL – took three weeks online
My National Pension Trust DC to ii – took four months via manual forms
My Work Pension Trust DC to HL – took three months via manual forms (and had to have a anti scamming telephone call)
My second Work Pension Trust DC to HL – took three months via manual forms (and had to have a anti scamming telephone call)
My DB (DC with GMP underpin) to AJ Bell – took 9 months with IFA advice (Mercer were slow to respond so I missed the CETV date and had to start again)
Be careful with the IFA advice – make sure your SIPP will deal direct with IFAs (not all do) so you can deduct the IFA cost from the pension and not pay manually.
@never give up
One of the ones I had above had protected tax free cash, and that worried me to.
In the end when I got the figures it was 26.03% (I can live with that) and transferred anyway.
It seems you do not need IFA advice for more tax free cash (bizarre and perhaps a loop hole that needs closing)
For me, the lack of access to good funds and trusts was the biggest reason to transfer out to an SIPP. My employer’s pension provider ran some form of fund of funds – it wasn’t clear if the charges were on top of the underlying funds’ charges. Some of these funds had some random unexplained underlying asset classes, like Japanese REIT. Also they renamed some funds as their own and hid the details somewhere in the documentation. And lastly employees were encouraged to choose ‘lifestyle’ funds that were a mix of passive funds but carried their own charges. Thank god they allow partial transfers. Initiated a transfer just last week. You’d be surprised how many employees don’t even know there is an option to transfer.
I have transfered twice now, and its always been very easy with no problems.
Perhaps too easy, and i wonder about the scope for fraud in this area. At no point did i have to sign any documents other than esignatures which means nothing. The source pension provider never sent me any letters to let me know they had recieved the pension transfer request so for some one who was not on the ball it would have taken upto a year to realise the transfer had taken place when no annual statement arrived.
Perhaps there is a facility whereby you can forbid pension transfers without written consent, this is something i have meant to investigate.
We succeeded in transferring my wife’s work DC pension to a SIPP after she retired, necessary because the work pension wouldn’t offer drawdown and our plan was to use this to bridge the gap before some old DB pensions reached their dates for full payment. It was a long and tortuous process (your AJBell source is optimistic), needing frequent phone calls to chivvy. Eventually we realised it was helpful to write down the name of everyone we spoke to, so that in the end we could go straight to the one person who knew what they were talking about.
For what it’s worth, after lengthy perusal of the Monevator comparison table and double checking against company websites, we chose HL for the SIPP. Because they don’t charge an extra fee for drawdown, and because the tax free 25% and the first 3 years of drawdown were left in cash, the fees ended up more reasonable than I had expected for that company. (At the time HL were hinting that they would be introducing the possibility of keeping cash in interest-earning fixed term deposits within the SIPP, but that hasn’t materialised and we are putting up with the effect of inflation rather than take the risk of putting it in a fund only for a short time).
Anyway, thanks for helping us through your comparison charts. And if you have any thoughts on where to invest cash in a SIPP that you want to access in less than 5 years I am sure there are others who would find that useful.
@Jonathan B:
Why not take your tax free cash and ladder it – as required – in market leading fixed rate saving bonds – outside of your SIPP?
Another thing that may be worth exploring is a short fixed-term annuity -although I have absolutely no idea what those rates would be like.
@Jonathan B & @TA:
Can you either of you please confirm/otherwise that HL do not charge AMC, etc on cash holdings?
Thanks.
@Al Cam – That is correct. Hold cash in HL and it costs you nowt to carry. Watch for account closure fees if you want to open and close the account within one year, used to be £250 within a year and it is £25 if longer than a year but they seem to show no charge at this current time. Minimum to keep account active is £1000. HL SIPP charges from the horse’s mouth, to wit
@AlCam, indeed that is what they do. It wasn’t obvious from their literature, and in fact that SIPP was opened on the expectation that the account would be slightly expensive at the beginning but would then drop down below the crossover point for percentage versus fixed fees. So it was a pleasant surprise to get all the management benefits (after all they have to run a PAYE payroll) at very low cost.
And you make a good point about non-SIPP cash. Drawdown is at a rate matching the income tax threshold, and we are using unsheltered cash to supplement it. Though to be fair we are a bit spending-happy at the moment (subject of previous Monevator) for various reasons. We could probably invest cash better, though that really only became a significant issue this year. First because an inheritance means we have more cash than we anticipated, and second because until recently we had pretty good instant (or limited) access rates and weren’t too worried. I ought to check what the current offers are for fixed rate term deposits.
I’m right in the middle of this as I write. Transferring my DC pension to ii as my company’s scheme don’t do drawdown. Moved all my funds into the pre retirement bond fund before completing the paperwork in June aiming to commencing drawdown last August when I turned 55.
Got most of the funds transferred early October but they left a small COMPS funds behind so chasing that up with both parties who are blaming each other.
I’d be prepared to start drawdown with the funds that I have but unable to do that until this completes apparently.
At least the November budget was cancelled as I wanted to take the 25% tax free lump sum before St. Rishi turns bad cop and starts looking for more taxes. Surely I’ll be done before spring!
@Petepool:
I have heard/read of people having not dis-similar problems accessing their total fund if it contained even a small amount of suspended property holding(s). First time I have heard of COMPS being an issue, assuming that you mean Contracted Out …..
Best of luck.
@Ermine & @Jonathan B:
Thanks guys, and the minimum holding info is useful too.
@Jonathan B:
Fixed term deposit rates are not great – and rapidly getting worse – so I would get your skates on. Having said that, any +ve fixed rate is better than zero or …… naeclue and I exchanged a few words about this approach in the post: https://monevator.com/should-you-use-cash-to-bridge-the-gap-between-your-isas-and-your-pension/#comments
which you might remember.
I transferred an Aviva Pension to ii, mainly because of wider fund choice, lower cost, better admin, and I got fed up with Aviva selling my invested units to cover their costs, oh yes, and i never knew the price of the units they were buying with my invested money. So much better transparency. My experience took 4 weeks when it was paper based forms.
On a second transfer from Standard Life to ii, I was motivated by poor SL performance. In this case, both SL & ii used an electronic interchange system (called Origo i think) to streamline the transfer. That happened within 2 weeks.
While both were converted to cash for transfer, the FEAR of being out of the market was a lot worse than the reality of it, and once completed, i wished i’d done it sooner. Indeed once re-invested in ii, the growth has more than made up for any temporary pause over those 2 short weeks.
@Al Cam
yes I meant my DC fund from contracting out in the 90s for a few years. Not really a significant amount but the pension company held it separately. I think it was more of a admin cock up rather than any policy issue with releasing these funds as they had previously advised they could be transferred.
Informative and very timely post as I’m in the process of transferring my old occupational pension into Vanguard SIPP. Is it normal to be asked to provide a copy of my passport when transferring out? It feels excessive and disproportionate to be honest…
Is vanguard doing in specie on sipps yet? Several months ago when last I asked them they were not
@chmiel
Asking for identification is a good thing! Imagine somebody stealing your pension pot.
I just normally sellotape my Driving License to a piece of card and put it in the middle of all the paperwork.
@ST post 5
Thanks. This post has motivated me to gather some more information from my current provider. If it’s a similar figure to yours I agree it would be worth transferring.
Thanks TA, great article. I’m doing exactly this for my wife at the moment. She has 5 occupational DC schemes all in less than ideal funds with charges up to 0.98%. The tip about looking for equivalent funds and switching before transfer is a good one. As many are likely to be in institutional pensions funds that are not available in most retail platforms.
The first one from an old Fidelity scheme is being transferred to Vanguard at the moment. Incredibly simple so far but we’ll see…
Great article, I’ve transferred a number of small SIPPs into a single HL one over the last 5 years and found it very straightforward. It has been much easier to keep track of the single resulting SIPP.
However, I’m now in process of moving the resulting HL SIPP to iWeb and would strongly agree with “Pension transfer times vary” …”AJ Bell Youinvest has published a reassuring table of transfer times, as below. Take it with a grain of salt”
It’s an in-specie transfer, at the start I moved the HL SIPP into two funds that were accepted by iWeb and rebalanced other investments accordingly. It’s taken over 12 months, so far…
The two funds finally left HL 5 days ago and haven’t been seen since, so I’m right in the middle of that “as terrifying as a Star Trek transporter accident” phase you mention.
Slightly off topic but I’ve transferred company defined contribution pensions to sipps for both me and the Lady to HL and more recently Youinvest. No problems and the marginal savings are nice!
I have a DB pension worth about £12.5k from when I turn 60 (22 years).
Transfer value was around £370k 2 years ago (might be much more now!)
But I don’t want to think about giving it up for cash – the transfer value would be sweet but then I take a lot of risk for the rest of my life.
£12.5k (indexed) provides a great floor for retirement income. That with a paid off house plus the state pension would be sufficient – why risk it?
I’m in the process of transferring a work DC pension with L&G to AJ Bell.
I filled in and submitted all the info online, only to be told that I needed to print off the forms to sign. I’m working from home with no access to a printer so had to persuade AJ Bell to post out forms to me. I’m not counting the weeks this will take to complete as it will only annoy me!
So whats the consensus with the £85,000 FCA cover, split our pots into sub 85k chunks or keep a lucky rabbits foot?
Great and very timely article TA; much appreciated!
I have a Workplace DC which invests in what I can only assume is a Standard Life wrapper of some sort: (SL Vanguard FTSE Developed World ex UK Pension Fd): does anyone know whether this can be transferred In Specie to the equivalent Vanguard Fund?
@ TA “Hopefully it works better than the other tracing service it runs.”
Careful TA, just when I thought we had a Covid-free article (hurrah), this one tested positive!
I transferred a pension from Bestinvest (Tilney) to Vanguard a few weeks ago and it took just over 3 weeks from first request. Everything was completed online, including signing forms, and funds were out of the market for about 12 days. Was pleasantly surprised as I seem to recall it took months and lots of paperwork to transfer from Scottish Widows to Bestinvest several years ago.
Would have preferred an in specie transfer but Vanguard still don’t support them, and the whole process would probably have taken a lot longer that way.
My thoughts on DC provider versus SIPP: 1. former on insolvency might be fully covered under separate legislation than FSCS protection (full pot, not limited to 85K). My DC provider, Aviva, confirmed it’s fully covered in that unlikely event.
2.SIPP would offer wider market choices- attractive point.
3.Cost of each- this is the bit I dislike and why, also given 1, I’ve procrastinated: depends on each provider’ total set of charges in accumulation and then often different in drawdown, for your investment choices. One provider might be cheaper during accumulation, but another during drawdown. Some platforms cap ITs and ETFs fees very competitively for larger SIPPs. Nothing to stop a platform changing fees in future.
4.Being out of the market when you can’t transfer in specie. On top, whether to use all your transferred cash in one purchase(s) in one go or drip feed over time. Neither is ideal other than with the benefit of hindsight if you’re lucky, and unless you have a small pot.
@Tony:
Do you know if your DC a/c come’s with d/down functionality or must you transfer?
Re 1) pretty sure that unlimited protection only applies to the DC a/c, e.g. were you to stay with Aviva for a SIPP it goes back to FSCS limit;
3) re costs – see discounts vs market offering that I mentioned above at #3
4) out of the market for cash transfers – have you asked about what I refer at #3 above as an approach that “insulates” you?
P.S. I suspect it might take you a few attempts to get these Q’s answered correctly!
@weenie, I had the same experience with AJ Bell! I cannot fathom in this day and age why anyone thinks an ink signature is proof that I am me. It makes me slightly concerned that they’ll be difficult to deal with as they can’t make a transfer in easy when they are most motivated to earn my custom.
It’s so disingenuous to have a section of the website called “transfer a pension” that is only any good for populating a form (which then doesn’t print out properly even if you do have a printer – it misses out sections between pages).
@Matthew vanguard still does not do in species in their SIPP. They wrote me that they are probably planning to start doing it at the end of this fiscal year.
Beware holding a pension abroad! Having worked in other countries, I have had to deal with the transfer back to the UK and it’s not a pretty picture. Forget about weeks or months: It takes years, and requires a PhD in cultural intermediation.
@Max – Thank you I think as soon as they do a lot of us will pounce, I understand @jam13 being out of the market though with bestinvests absurd sipp fees they suddenly launched a year or two ago (although I managed to escape them in specie to close brothers), at least Vanguard would be less likely to pull a move like that – if I were to use a fixed fee provider later in the future I’d want an in specie exit plan
Kinda my worry about lifetime isas with the limited competition we could be trapped in fees. But I worry about loss of pension freedoms more (want to burn through sipp a bit before DB kicks in)
@ all – thank you for the positive feedback and for sharing experiences – which clearly cover the gamut from breezy to agony! I’m working late so no time to follow up properly.
@ Tony – that’s a great point about insurance companies claiming 100% cover. Readers have reported that previously but I can’t remember if that was Aviva too. Any idea what the mechanism is?
@ Al Cam – do you have insight into this? What do you mean by DC a/c? My brain is too fried to work it out.
@ Factor – heehee. They do say laughter is contagious.
@TA:
Re: the 100% cover of company sponsored DC pension accounts:
I have definitely heard this before, see e.g.
https://www.fscs.org.uk/what-we-cover/pensions/
And note that they clearly distinguish the £85k limit applies to SIPP’s.
However, I have never yet seen of or heard about a DC scheme that offers anything other than accumulation – but I am no expert, and things move on – hence my Q at #30 to Tony.
All the DC schemes I have heard about require you to transfer to access drawdown. A lot of DC schemes do, however, allow you on leaving the employment of the sponsoring employer to defer your DC. That is, you remain a member of the DC scheme, and are, presumably, entitled to that level of cover.
Hence, my comment at #3 above, “On completion of the transfer, please note, this is the point where your former employer effectively washes his/her hands of you.”
Incidentally, your comment that once deferred “Your provider may still allow you to contribute to the pension” was news to me wrt DC schemes.
@Al Cam
My new DC scheme (set up 8 years ago) similar to the National Pensions Trust scheme (run by XPS) allows drawdown, they just closed our old one and moved us old timers over. OCFs of 0.11 plus management charge of 0.25 plus platform cost of 0.45, no drawdown charge (From memory)
@ Simon T:
Thanks for that.
It is a DC Master Trust.
A Master Trust is a multi-employer occupational scheme where each employer has it’s own division within the master arrangement (MA). The MA provides the core functions & activities.
The NPS (by X-Affinity) scheme claims to be a “complete solution to freedom and choice”, see e.g. the video at https://www.nationalpensiontrust.com/ and the video also sets out to clearly distinguishes it from SIPPs.
The Pensions Regulator publishes a list of all authorised Master Trusts.
What is not clear to me is how many of the authorised master trusts are DC schemes that provide full functionality. But, Hymans Robertson (HR) do say that “In addition, Master Trusts offer a more joined up ‘to and through’ retirement solution, whereby individuals can seamlessly transition and remain invested from accumulation to decumulation without incurring the cost of transferring between vehicles – this is often a very attractive offering to new, and existing employees.”
To which all I can say is you are not wrong!
I have often wondered what benefits there may be with Master Trusts other than those of scale – which often proved to be entirely elusive when companies set about merging/consolidating their own [apparently very similar] in-house DB schemes. Having said that, I suspect from an employers perspective there are far fewer barriers to consolidation (with other employers) DC schemes into Master DC Trusts than there would be for so called “Full Consolidation” of DB schemes.
Thanks again for the info, as they say every day is a school day!
@Al Cam
The main benefit for employers I can see, is that the cost is now born now by the employee and not the employer.
Further to the above – I just checked the charges and my initial ones are wrong.
0.11% OCF for the multi asset and normal equity funds, rising up to 1.2% for Private Equity
a 0.3% management charge per year billed monthly
When you start taking an income the 0.3% becomes tiered above £250k
There are no transaction charges for buying, selling funds, taking up to 12 UFPLS per year etc
You can set up your income choices online
All in all it really is not a bad solution and price for those wishing an easy to use and understand platform – the only downside is the lack of all of the market.
I had two employers use the same Master Trust platform and apart from the logo there is no difference.
@ST:
Thanks very much for the additional info – very interesting.
I guess the employer loses a lot of their previous admin costs, including costs associated with their trustees. But, that does mean the employers give up that level of independence by using a Master Trust (MT) too. I also wonder – behind the scenes – what, if any, other arrangements – e.g. risk sharing, employer costs – are required.
The “to and through” must be very attractive to employees. The insurance cover may in some cases be the greatest benefit to employees – as I assume a Master Trust is not capped like a SPP. Please note this is my assumption!
FWIW, to my eyes, your costs are not excessive but not cheap either. I suspect your [former] employer(s) has some costs too.
Trading these MT advantages vs market access will be very situational – and maybe a foot in each camp approach could be informative.
OOI, given you have had two employers using the same Master trust platform, this potentially gives you some rare insight, for example:
a) were the funds available, costs, etc the same;
b) were the employers contributions the same;
c) did both/one/neither use salary sacrifice;
d) did both/one/neither offer AVC’s ;
e) did both/one/neither offer the same level of life insurance (death in service benefits) whilst an active member;
f) did both/one/neither offer [partial] transfers out;
g) did both/one/neither accept transfers in;
h) and finally, were/are you able to merge your two schemes within the same Master trust
I ask as part of the MT sales pitch is that employers can tailor/customise their segment and they are good for employees too! Thus, I am interested in your answers to the above. Apologies that it is such a long list and a summary answer would be illuminating.
@Al Cam
a. The funds and OCFs are identical – even the screens (apart from the Logo and company specific stuff in the documents)
b. That has nothing to do with the Pension provider, that is all Company specific
c. Company specific again – but both did
d. Not AVCs in the old sense, but you choose your percentage in each company’s scheme, again Company and not Pension provider.
e. Company specific again nothing to do with the Pension. But they did 4 x Salary
f. Both don’t
g. Both do allow transfers in
h. No – it’s a transfer out and in if you want to do that, like all others
More info in the downloadable documents here
https://www.natpen.co.uk/support/documents/
For info – I transferred both of mine out of the Trusts, I am still employed (retiring in the next 5 weeks)., however I still have a small amount left in yet another Trust Pension. That I plan to leave in the Global Equity Fund.
Thanks again – and thanks for the link.
Your answer to c) & d) are interesting as this means you got salary sacrifice on all your contributions – nice! I assume from the forms etc, that your contributions came directly from payroll, so zero delay in getting your tax/NI refunds invested! Doubly nice!
Some schemes are just not so sensible and efficient from the employees perspective.
I guess there was a lower limit on your contributions (minimum regulations) but do you recall if there was a maximum – the form at the URL you provided does not say so, but ….? I also note you could do ad-hoc lump sum contributions too.
Shame about f) and h) but I suspected that may be the answer – in spite of the claims to be a “complete solution to freedom and choice”!
I have to ask – although I have an inkling as to what you might say – why did you transfer out?
Very best of luck with your upcoming retirement.
Why did I transfer – flexibility on whole of the market.
Sites like this are brilliant at financial education – and this then allows you to save money with fund and platform choices.
Nice article. Regarding safeguarded benefits. These are actually fairly common among people approaching retirement age (ie in their late 50s and 60s). The most common ones in my experience are Guaranteed Annuity Rates and guaranteed minimum pension (often these are with section 32 buyout plans). For some people, the cost of providing the GMP exceeds the value of the pension pot and in these cases they won’t be able to transfer.
For funds with a GAR, if the value of the pension pot is more than £30k then advice is required to transfer. GARs can vary from the staggeringly high (8-9%) to just marginally more than market value…
So, it’s worth scrutinising that paperwork carefully, especially for plans that date back to the 80s and 90s.
@ST:
Pretty much what I thought you would say.
Personally, I am not so keen on non-branded generic funds – as they seem, at a first glance to me at least – to be somewhat opaque!
@Vanguardfan:
I am familiar with the GMP issue – and IMO whilst conceptually straight-forward the details are pretty complex. Furthermore, I believe GMP is currently under review in DB schemes due to some relatively recent (as opposed to ancient history that is!) court cases.
Extremely good suggestion that folks proceed with utmost caution if they have GAR’s or GMPs.
@al cam yes GMP rules are complex, and also section 32 plans vary in the detail of how they handle it, it seems, so hard to make general statements.
My spouse has GMP associated with an old DB pension…and it is impossible to get a forecast on what it will be worth at NRA….I’m interested to know more about the court case? I’m aware there was something about gender equalisation a few years back.
What with that and the McCloud ruling re public sector DBs I’ve given up trying to work out what we’ll actually get. And DB pensions are supposed to be the type with the certain outcome 😉
@ Al Cam (30)- yes that did take some thought! Your post 36 also helps. Aviva do offer me drawdown, no charges. Mine being 0.5% total management charges, nothing extra for my choice of a global tracker fund. It was a former employer’s GPP and negotiated fee discount. Typical range of funds from Aviva and others. Al Cam and Accumulator: Aviva confirmed in writing re my plan “our pensions are classified as “contracts of long-term insurance” and therefore fall under 100% protection under the FSCS. https://www.fscs.org.uk/what-we-cover/pensions/ ” [I asked given that FSCS link recommends you check, so I did]
Will bear in mind a fee haggle if it comes to leaving for an external SIPP with a platform. Percentage fees are unappealing as we know after a certain amount.
A few years back I transferred as much as I could out of a DC company pension (held with Aegon) into a SIPP with Cavendish. Essentially, just wanted to save costs with a cheaper platform (Cavendish use Fidelity) as well as Lifestrategy (vs the seemingly similar fund of funds but at 1% fee). This actually went quite smoothly (took ~2 weeks cash transfer). I then no longer paid into the company pension (work pays a generous 10% regardless of my contribution) and focused on the SIPP.
Cut to a few months ago where I thought I’d transfer some more. I was told that I had transferred 9 segments previously and couldn’t transfer the final 10th segment without closing the pension. The work around would be to transfer out and close after an employer contribution hit, then have them open a new pension (with a fresh batch of 10 segments) to continue paying into. I started down this route with HR then COVID hit and life became a bit more difficult. I haven’t dared ask if its possible.
So not the end of the world, but still needlessly complicated.
@Vanguardfan:
I am thinking of the Lloyds GMP case, which seems to rumble on, having now had, I think, three court hearings, the latest of which was earlier this year, see e.g.
https://www.lexology.com/library/detail.aspx?g=ad5a28db-e5b6-40cd-abaa-a26a81503115
Re DB schemes:
IMO, by comparison, DC schemes are a walk in the park!
DB scheme administrators should be able to give you fairly accurate quotations (subject to the assumptions that they have to make) – so personally I would not give up, especially if you suspect you may be headed into LTA territory.
Thanks for this helpful article. I have been procrastinating on transferring a decent sized pension from Aegon for over 1 year that is sitting in funds at 1% fees. I think it will have to transfer as cash as the Aegon funds cannot be held in a SIPP outside of their platform AFAIK and they do not have the choice of non-Aegon funds such asVanguard I could switch to. I have this fear of going to cash in somewhat turbulent markets as I have no control of when funds would be sold or the time it would sit in cash while the dally over the transfer. After reading this article and comments it seems like I might be able to do this as several smaller cash transfers to reduce the exposure that is causing my fear. Or maybe I should just go for it!
@LALILULELO:
I am not familiar with the use of the word “segment” in association with DC schemes.
A quick look on the internet hints at some kind of minimum guarantee.
Does that ring any bells?
I transferred a db pension to a sipp. Very stressful owing to time pressure. My advice would be to have an IFA ready before you request a cetv.
I have dug aound in the DC “insured” protection issue quite a bit vs 85k as it is one of the things lost in moving to a SIPP. I wanted to understand before moving my occupational DC.
A number of existing DC occupational schemes from 1980s on – have the 100% cover which is worth – something >zero. Only a small cost premium it may be argued as custody arrangments should mean you get your money eventually after SIPP company/platform failure. But for a large fund there is an underpinning with one and not with the other.
The general discussion trail on DC and insured investments vs SIPPS leads to House of Commons and Lords briefing documents on pensions reform proposals (defined ambition) where it is essentially admitted that the past legislation and regulation is opaque and situations + trusts vs legislative wording untested so that the true status cannot readily be determined in a way that would provide helpful guidance.
I am presently enquiring of L&G whether their Worksave Master Trust (for drawdown) supports full protection “insured” or 85k (sipp). On the phone they say yes “full” but I shall be getting them to put this in writing in the context of transfer in from my existing scheme. Worksave drawdown was recently added to my existing employer scheme by the trustees to add a drawdown mechanism. To access it the member “transfers” funds in whole or in part into the master trust so this is not that different from moving out to another scheme. Cash transfers (which sadly prevents in specie transfer of very old and very cheap “legacy” funds.
It is not wise to generalise. The move from occupational protected to SIPP unprotected is not necessarily *cheaper*. Often it will be. But this is not a safe assumption to make without careful checks. Partial transfers allow a mix and match approach. SIPP for more investment choice, Existing for cost+protection.
I take the point on out of the market but there are a lot of scheme specific wrapper funds out there which make in specie impractical so that aspect of the advice in the article may be overstated.
@BillD #50 – I suggest you do like I did. Spot the coming GFC, go to cash for the pension transfer and Bob’s your uncle 20% more units for your money. Easy Peasy. Course, if I wasn’t such a wimp I’d have 50% more units, but there you go.
I guess it comes down to how likely it is that there is significant upside in the near future when you’re in cash. Personally, I see very little. You may have another opinion.
@Al Cam
Thanks for looking. I’ve done some digging but can’t find anything referring to a minimum guarantee. As far as I can tell its a standard employer pension, with a limited range of expensive funds. Upon retirement I either stay invested, take the cash or buy an annuity.
@MrOptimistic, good point about an IFA. In recounting above our experience transferring my wife’s DC occupational pension to a SIPP that would allow drawdown I had forgotten about that. The company running the work scheme created all sorts of hoops, one of which included requiring the name and registration of the person advising you.
As it happens we were OK on that. After it had occurred to me that my wife (younger than me) might be able to retire early using drawdown, we had a one-off fixed fee consultation with an IFA. That was extremely helpful, not only did it confirm that my idea was feasible, he suggested the sort of investment strategy that might work with it – and in making sense of that I came across Monevator and similar websites which gave me the confidence to DIY. Anyway, with his agreement, his name went on the transfer forms.
(The IFA wasn’t unknown to us, he had been advising my mother since my father’s death and I had been part of those discussions).
And @gmo, I had somehow thought that it would only be for cash held within a SIPP that the £85K protection mattered and that anything invested in funds/shares was in an arms-length account sheltered from failure of the SIPP provider. But I may have got that idea from comments in previous Monevator threads not from anywhere authoritative! (I do though remember checking the small print of both HL and iWeb, so there could have been something there).
I have two SIPPs with different providers – Share Centre and Interactive Investor – so that should the worst happen and one goes bust then I’ll only lose (50% – £85,000) rather than (100% – £85,000).
So it was annoying to hear that SC is becoming part of II. Bang goes that plan! So I guess I’ll need to transfer one of them out to a provider that counts as different for FSCS purposes.
What’s the real risk of a broker going bust? The underlying assets in the funds remain segregated held with a custodian (and are also segregated from their assets); it may just take some admin and time to get access to them. As such, that’s the real risk. So as long as you have access to other funds in drawdown when you need the money, that’s what matters in my opinion.
@Genghis Sure, it seems like a very tiny risk that anything totally catastrophic would happen. If I was *really* worried, and a broker going bust with fatal consequences, seemed much more likely, then I’d split my SIPPs up so that no broker had more than £85,000. We can probably agree that this would be excessively cautious, not to mention expensive in terms of broker fees.
So splitting SIPPs into two feels like a decent compromise. Fees don’t increase *too* much, so long as we choose the right brokers. And if something *does* go horribly wrong – and a tiny chance isn’t *no* chance – then I would have a second SIPP still going for the period during which I have to recover assets from the first. Or, in the very, very worst case, the other SIPP will leave me with something if the other disappears entirely.
It’s a very low probability, potentially very high impact event, so it seems worth taking one simple precaution to mitigate the worst case.
There seems to be some confusion about the nature of the FSCS compensation scheme and what you’re covered for. These articles may help given the complexity of it:
https://monevator.com/investor-compensation-scheme/
https://monevator.com/financial-services-compensation-scheme/
https://monevator.com/nominee-accounts/
You aren’t screwed just because your broker goes bust. As long as they maintained adequate records then @ Jonathan B, you’d be right, you shouldn’t lose a thing. The problem is if they didn’t maintain adequate records (perhaps fraud or mismanagement) or some other creditor somehow lays claim to your assets (see the nominee account link) or the frickin’ administrator waltzes in, claiming millions to clear up the mess, and wanting to take those millions from customer accounts.
This was the sweet proposal of PWC who were brought in as administrator when Beaufort Securities went bust.
From memory that story ended well but there are enough holes and untested parts of the system that there’s no way I’d keep everything with one provider.
Neither will I break it up into £85K chunks per platform because life is too short.
Essentially I completely agree with PG.
@ Tony and Al Cam – thank you for your extra insights on 100% protection. Massively helpful.
@ Al Cam – would love to know what got you so deep into all of this.
@ gmo – let us know how you get on with the Master Trust protection. Am very interested to hear the outcome of that.
@TA:
Re: “would love to know what got you so deep into all of this.”
Sorry, but I am not really sure I can remember now. I do, however, recall being genuinely surprised at the level of complexity and, the – at best – superficial knowledge of retail teams.
P.S. some more chatter on 85k limit and number of platforms is available at:
https://www.finumus.com/blog/what-if-my-broker-goes-bust
IIRC, the general sentiment was iaw PG – with some additional points.
@Accumulator. Thanks for this article.
I have about a 6 figure pension and ISA in the hundreds. They both have exactly the same ETF. However, the ISA has a higher return than my pension. Do you know the reason for this? I just took over self-managing my pension, hence my enquiry.
Thanks
Currently trying to transfer a pension from one provider to a SIPP.
The original pension provider is being sold to another company and the new company doesn’t rate well so I am trying to move before they fully get their hands on the pension portfolio…
Looks like I am too late, I am getting letters from the provider saying why are you moving and ‘you will be out of the market and lose money’ … oh … and the added quip… we will only transfer the money in the form of a cheque to your SIPP provider.
So when I transferred money INTO that account it was all done via EFT and smoothly (I had a company pension that had to be transferred within a timeframe otherwise the company were going to just give me my contributions back – according to the small print of their T&Cs they could do that! It would have cost be thousands in lost pension value!).. now I want to move the money OUT it can only be done via a cheque…. How progressive…
Great article and fascinating to read readers’ experiences. Despite pension freedoms the whole system still seems archaic and veiled in unecessary complexity.
Maybe an industry in fear of the empowered customer?
I want to take advantage of the vanguard-fidelity SIPP hack and for that I would have to transfer my SIPP from Ajbell, first to vanguard and then from there to fidelity but I’m now worried and put off by the whole process. Also that will mean that all my funds/ETF would be vanguard to take advantage of the hack, and my ISA is also with vanguard. Not sure now if that’s a good idea…
I consolidated various ex-employer DC pensions into a SIPP last year to reduce costs, give access to a wider range of investments and to simplify management (seeing all in one place).
I did the checks suggested and most were clean (no benefits to be lost) and easy (transfers went reasonably quickly and easily). I had one however where the answer came back that I was entitled to a tax free cash sum (PTFC) greater than 25%.
When I asked the current scheme managers (L&G)”how much more?” (oh, the temerity), they said they wouldn’t calculate this and said to see an IFA. They gave me A-day values for the PTFC and the fund. These indicated a 100% PTFC, but also made no sense at all (fund value too low compared to my records). When I told them so, the response was to speak to the previous scheme manager who they’d got the values from. They previous scheme manager did not reply.
After contacting my ex-employer (a large, global business) they got L&G to do a calculation for me. When I asked some questions about that, I was told that L&G and the trustees were now looking into how the scheme worked and to ignore what they’d told me. They also asked if I had any old documents explaining how the pension scheme worked!
After seven months from when I first asked for the details and commencing a formal complaint, I finally got a correct PTFC calculation. L&G also offered £100 compensation (less the difference between their management fees over this period and those if I’d been in the SIPP).
Very stressful given I kept meeting a brick wall response of “speak to an IFA”. By this stage I’d become far more familiar with HMRC’s pensions manual and PTFC calculations than I ever wanted and knew full well that no IFA could help given that the raw input numbers being provided from L&G were junk.
After two stages of formal complaints to the trustees, they offered additional compensation, but what I’d really wanted was them to recognise and fix the way the pension scheme had been moved around from provider to provider without proper controls and L&G’s woeful “service”.
So – as another commenter said before, be prepared that due to the time that may have passed with a deferred pot and a financial service industry able to get away with murder, you need to be prepared to stick at it if it doesn’t go smoothly at first.
Hi @TA,
There was a hint at a follow post regarding partial pension transfers and potential “sneaky cost arbitrage” to watch out for. I’ve done a search on monevator and have not found any follow up. Forgive me if I’m being a dolt.
I’m looking to partially transfer about £30k out of my company pension manged by Aegon because, frankly, their investment options suck except for developed world, and even that is expensive. I’m not sure whether to wait for my 5/25 rebalance rule to kick in, but I understand I could be out of the market for anywhere between 2-4 weeks, if not longer. Since I need to rebalance mainly into bonds, this is less of a concern.
Cheers & thanks for all the hard work,
Fremantle74
Looking to move £50k from Aviva pension to Vanguard SIPP.
I assume I’ll need to move as cash as Aviva have their own units which Vanguard don’t offer?
Also the “sneaky cost arbitrage” article sounds interesting. Is it on the site or coming soon?
@ Quantum – yes, that’s right unless your Aviva pension offers any Vanguard funds.
I wrote the ISA version of the arbitrage article but not the pension one:
https://monevator.com/cheapest-stocks-and-shares-isa-hack/
For pensions, it’d be something like purchasing ETFs for free in Vanguard and then eventually transferring them to a flat free broker e.g. Freetrade, X-O, Interactive Investor, AJ Bell or Fidelity (those last 2 cap their percentage fees for ETFs in SIPPs). They’re all pretty close in terms of annual fee, if you don’t trade, and choice of funds not withstanding.
Good luck with your transfer!