When and When Not to Transfer your Pension

More and more people are switching their pensions. Can this be accounted to human nature of discontentment or are there just too many inferior pension schemes going around?

Pension transfers are relatively easy to understand. However, what makes it complicated is deciding if this process will be beneficial for you or not. Remember, this is not always the solution to your pension problems. To know whether this is the best route for you or not, consider the following information below:

1. Ask for financial advice. One of the best ways to know if your circumstance warrants or requires a pension transfer is by seeking advice from a pensions adviser or an Independent Financial Adviser.

2. Seek a transfer value analysis. This process is a computerized calculation that compares benefit levels of your current pension to other schemes. It also assesses a critical yield, which can indicate what level of growth a new pension scheme should have in order for it to match your existing pension plan.

3. Review your retirement plans. Make sure that the new scheme you are transferring to can handle your retirement requirements.

4. Know the beneficiary options of a pension plan. It is better to opt for pension schemes that allow you to nominate beneficiaries so in case you pass away before your retirement, someone will receive the earnings of your pension plan.

When to Transfer your Pension

Transfer your pension if you have already consulted an IFA and you both decided that this is the better option for you. Some of the acceptable reasons for wanting to undergo in a pension transfer include the following:

1. Your current pension scheme offers inferior benefits or charges you with expensive costs.

2. Your company is being wound up.

3. You are moving to a new job.

4. You want to transfer your personal pension scheme to a company pension plan to take advantage of the benefits offered by your employer.

When Not to Transfer your Pension

If your existing occupational pension is receiving contributions from both you and your employer, it is not a good idea to move to a personal pension because it is difficult to find something that can match the benefits provided by your employer.

Do not switch pensions if yours is public sector pension scheme as this is guaranteed against inflation and the benefits from this are unparalleled. Some companies even ban on accepting transfers from these schemes, knowing that it is hard to become at par with their benefits.

Finally, it is not smart to transfer pension if you have not shopped around extensively. It is extremely crucial that you compare different pension products and providers in the market so that you can be sure that you will end up with a pension that is equivalent or better than your previous one. Remember your primary goal for transferring pension is to find a better deal. This defeats the purpose if you end with something that is inferior to your old pension plan.