1. What are Pension Transfers?
Pension transfers are the movement of pension assets from one pension scheme to another. You may want to transfer your scheme when you, for example, cease working for your employer and want to move the benefits you have accrued from your pension to another pension scheme, whether that be to the scheme of a new employer or perhaps to a personal pension scheme.
The transfer can be:
- for an individual member. Members may transfer funds from existing pension plans which have been built up in previous employer's schemes or personal pension plans(e.g. a member of Smart Pension wants to move their pension from a former employer into our scheme to keep everything together). Consolidating your funds can assist with retirement planning rather than having multiple annual statements from different providers. This is known as an Individual Transfer.
- for a group of members agreeing to moving scheme – with support from their employer. Employers or Intermediaries on behalf of Members can assist with the transfer process where there is a group of members who have previous funds in say, an employer's previous scheme (e.g. where the employer wants to use Smart Pension's master trust to get a better pensions deal for itself and for members). Forms and requests can be processed in a cluster to save time and resources. Group transfer procedures would normally involve a minimum of 10 Members. This is known as a Group Transfer.
- for employers and trustees of former Money Purchase schemes who wish to consolidate members’ funds into their auto enrolment scheme with Smart Pension. This is known as a Bulk Transfer. This is also an opportunity for considerable savings on scheme costs and annual management fees to members. Whilst the decision to carry out a Bulk transfer lies with the trustees and sponsoring employer there is invariably a consultation period with members, and unions if appropriate. There is a formal legal process to follow and Bulk Transfers usually take longer to complete.
Individual transfers typically take a few months to complete, bulk transfers rather longer due to legal requirements and consultation processes.
3. What you should consider before deciding to make a pension transfer
There are lots of different things to weigh up prior to making a decision to transfer your pension savings, including:
The amount you are paying towards charges
For example, how much are you currently paying with your existing provider, in comparison to charges if you do decide to transfer.
Whether there are any penalties for transferring
Some pension providers (not Smart Pension) may charge you for transferring your pension savings to another provider. This means that the transfer value will be lower than your fund value because of the transfer penalty.
The amount of transfer penalty can vary, and in some cases significantly reduce the transfer value. Make sure you check before deciding to transfer.
Whether there are any benefits or guarantees you might lose if you decide to transfer your pension savings
You need to be aware that if you decide to transfer your pension savings, you may lose out on valuable benefits and guarantees.
For example, this could happen if:
- You are in a defined benefit (DB) or career average revalued earnings (CARE) pension or other such scheme which pays an income based on your salary and how long you've worked for your employer
- Your scheme has a guaranteed annuity rate - this means that you may get a higher regular payment in retirement if you stay with your current pension arrangement
- Your scheme has a guaranteed minimum pension
Smart Pension does not currently accept transfers from any scheme that has any of the above benefits or guarantees.
Your current pension scheme is invested 'with profits'
This is when your current provider may offer guarantees of future bonuses and/or interest for 'with profits'. A 'with profits' investment is one where the pension scheme investment manager seeks to smooth out returns you may get in your investment fund. In some circumstances where markets become more volatile, people who try to take their money out could get a better deal than those who leave assets behind. In these circumstances, the pension scheme provider may apply a market value adjustment (MVA). This reduces the transfer value they could get, to protect those who continue to invest.
Smart Pension does not currently accept any pension transfers that have 'with profits'.
Does the pension provider I am transferring to offer the options that I might want to take when I access my pension savings from age 55?
Before you decide to transfer your pension savings, you need to be aware that some pension providers do not offer the full range of retirement options. These include Smart Pension, but we plan to launch our retirement product by the end of 2019.
You want to transfer your pension savings from a pension scheme outside of the UK.
The rules around transferring money from one country to another can be complicated. We will need further detail before we can agree to transfer any pension savings from overseas. You should also note that the rules in the country where the pension scheme is coming from may also restrict whether you can proceed.
Smart Pension will only consider a transfer from overseas if it is coming from a recognised overseas pension scheme (ROPS) and subject to appropriate advice having been taken. A request to transfer from a ROPS may be declined if the conditions of the transfer do not meet the minimum criteria.
What else do I need to know?
Scammers are now targetting pension savings, and it's important that you know how pension scams work, how to avoid them and what to do if you suspect a scam.
You can find out more information here.
The Pensions Advisory Service (TPAS) is also available to help assist with any queries you may have.
You can contact them by calling 0800 011 3797 or in writing to:
The Pensions Advisory Service 11 Belgrave Road London SW1V 1RB
We always recommend taking financial advice to ensure that transferring is the right thing for your own circumstances.
To help you find an adviser in your local area, visit www.unbiased.co.uk or call 0800 023 6868.
Please remember, financial advisers usually charge a fee for their services, but that fee will depend on your individual circumstances.
4. Individual Transfers In
You will need to obtain a current benefit statement from your old pension provider. At the same time you should request a Transfer Pack and Discharge Forms. You should also print off the Letter of Authority (LoA), sign and date it and then email it with the scanned benefit statement to us at email@example.com (please type in the Subject Heading: "Transfer-In – (Your Name) – (current Employer Name)". We will then check the plan is suitable and contact the old provider for any further information. We cannot process any request until we have both the LoA and benefit statement (a separate LoA is needed for each old plan unless they are all with the same provider).
The old plan Discharge form needs to be completed and sent to us at: Smart Pension Ltd, 40 Eastbourne Terrace, London W2 6LG, United Kingdom This form should not be emailed to us as the old provider will usually require an original signature.
Transfers-In can be accepted once you have passed the Opt-Out cooling off period (usually after at least two months' contributions).
- The funds will be added to your account in the Trust and invested in the same fund(s). You may change investment instructions via your Pension Portal any time in the future.
- There are some pension plans or schemes which are not acceptable due to incompatible type or potential loss of benefits upon transfer. The most common are: Final Salary Schemes; other Defined Benefit (DB) schemes; internal scheme AVCs, Section 32 Buy-out Bonds; any plan which has GMP benefits. If we cannot accept a particular plan we will outline the reason(s) for you, especially where there would be a cost or loss to you.
- Transfers can take 12 weeks to complete from when we receive the forms.
5. Individual Transfers Out
If you have left your current employer you may request a transfer to your new employer's scheme or to a Personal Pension plan. If you are over the minimum age (currently 55) and wish to draw your retirement benefits you may request to transfer your funds to an annuity or drawdown provider (some providers have minimum amounts). In either case, please complete and sign PART A of the Transfer Out form and then send the form to your proposed new provider for them to complete PART B and return the form to us as per the instructions on the form. DO NOT return the form to us with just PART A completed.
- Transfers-Out can only be made to registered UK Pension plans or schemes or to a Qualifying Registered Overseas Pension Scheme (QROPS).
- Your attention is drawn to pension scammers who will try to convince individuals to transfer their funds into un-regulated plans or unsuitable investments. We recommend you visit the Pension Regulator 's website for more information.
- We recommend you seek professional advice from a regulated Adviser.
- Once a transfer has been made the transaction cannot be unwound.
Employers & Intermediaries
6. Group Transfers In
Group Transfers-In are a cluster of individual transfer requests from a previous single scheme which to save time and cost can be processed together. Whether you are an employer or intermediary you can assist in this process by issuing each member with a Letter of Authority for completion and then either arrange for benefits statements from the ceding scheme, or if unable to instruct the provider, help the members obtain the information along with Transfer Packs and Discharge forms.
- For Group Transfers - When the LoAs and statements have been collated please scan and email these with the completed Employee Schedule to firstname.lastname@example.org (please type in the Subject Heading: “Group Transfer-In – (current Employer Name)”. We will then check the plans are suitable and contact the old provider for any further information. We cannot process any request until we have both the LoA and benefit statement for all transferring members .
- In the meantime, obtain the old provider Discharge forms and then post them to us at: Smart Pension Ltd, 40 Eastbourne Terrace, London W2 6LG, United Kingdom This form should not be emailed to us as the old provider generally requires an original signature.
- The funds will be added to the Member's account in the Trust and invested in the same fund(s). They may change investment instructions via the Pension Portal any time in the future.
- Before accepting any transfer value that contains a defined benefit (DB) element or underpin it will be referred to the Trustees for consideration. If the Trustees decide not to accept the transfer we will contact you to outline the reason(s).
- Transfers can take 12 weeks to complete from when we receive the forms. Whilst we can process these cases in a group cluster the ceding scheme is still likely to issue the transfer amounts separately for each individual. We will monitor these and eventually confirm when they have all been received.
7. Bulk Transfers In
Bulk Transfers-In, as explained above, are formal processes where a Deed is required involving legal and advisory expenses. Transfers would come from a single employer scheme and as such the employer would have the authority (along with the scheme Trustees) to transfer the membership and funds without individual members' authorities.
- For Bulk Transfers - Suitable schemes are CIMPs or Money Purchase arrangements. Unfortunately we are not able to accept COMPS or any schemes with GMP elements.
- Advisers normally assist with coordinating Employers, Trustees and Legal teams and we are happy for you to be involved in this way.
- All third party expenses and legal fees of the transfer process will be borne by the sponsoring employer or ceding scheme trustees.
- The very nature of Bulk transfers requires bespoke procedures. For a decision in principal that we could consider a proposal please email outline details of:- the employer, ceding scheme type and provider, membership numbers (active & deferred), funds under management.