5 Factors to Determine If You Should Transfer Your UK Pension

While pension transfers can benefit certain Britons, how do you know when they benefit you? In today's fast-paced world, we must make decisions based on an enormous amount of information. Besides understanding how pension transfers function, we should also determine if and when they are practical for us. While no rule applies 100% of the time, you can certainly use some information to help make your decision:

1. Fees may be charged for a pension transfer

Fees may be charged when transferring your pension, and are typically deducted from your transfer value when the pension transfer occurs. In some situations, this value could be a large portion of the transfer value. Thus, you should consider the impact of fees prior to conducting a pension transfer. In fact, the cost of fees could negate any improved benefits that a new pension could provide.

2. You cannot transfer your pension into cash money or an ISA

You can only transfer funds from one particular pension, to another pension. However, you cannot access the funds until your retirement. The purpose of this rule is to prevent tax fraud. Any contributions that you make to your pension fund are not subject to income tax. Thus, transferring the funds out to cash would result in major cases of tax evasion!

3. Carefully consider accepting a cash lump sum to switch from a Final Salary Pension scheme, to a Personal Pension

Several companies have been closing Final Salary pensions, due to their skyrocketing costs. While it is legal for a company to make you an offer to switch to a Personal Pension, remember that it is prioritizing its own interests. Thus, you should consult with an IFA, to determine whether transferring out of your employer's Final Salary Pension scheme, would benefit you. He or she can conduct an analysis to determine if you would benefit from transferring out of your employer's pension scheme.

4. Know what will happen to your Occupational Pension if your employer becomes bankrupt

The UK's Pension Protection Fund, though limited, will compensate you for this situation. However, the value of your pension could decrease. In the case that you have a Final Salary Pension and your company becomes bankrupt, you must wait until the company has completed the winding-up process.

5. Cautiously consider transferring out of an employer's Final Salary pension scheme in deficit

If your company's Final Salary Pension scheme is in the red, then you should certainly consider transferring out of it. Here are some factors that you ought to consider:

• You could lose government protection for defunct company pension schemes

• The reason the company is in deficit

• You are likely to get a lower transfer value

While transferring your UK pension is sometimes beneficial, it is not in other cases. There are several factors that you should consider, and consider very carefully. Contemplating the aforementioned tips will help to guide you when considering a pension transfer. Make sure that you transfer your pension at the right time, and in the right manner!

It is important to know when it is beneficial for you to conduct a pension transfer. Here are some tips to help you make your decision.