Pension transfers uncovered
It’s easy to build up several pensions with different employers over the years, but this can make it a challenge to manage and keep track of retirement savings. Many people find it easier to have all their pensions in one place, where you only have to deal with one company. Plus it can be cheaper, if the charges of your selected provider are lower than you’re currently paying.
The majority of pensions are portable and you have the freedom in most instances to transfer your pensions to a provider of your choice. One option is to transfer your pensions to a Self-Invested Personal Pension (SIPP) due to the flexibility and convenience that this type of pension offers.
Of course, it’s not always in your best interest to move a pension and we cover the things you need to think about later on in this article. But first, let’s take a look at some of the reasons you may want to consider moving pension provider.
Why you may want to consider a pension transfer
There are a number of reasons why you may want to consider moving pensions into a SIPP.
One company to deal with
Having only one pension administrator means you’ll only have one set of paperwork and can view and manage your pension in one secure account management area. You’ll be able to more easily see how much you have, where your money is invested and how your investments are performing, enabling you to take more control of your retirement savings.
Easier to manage your investments
It’s important to have a well-diversified portfolio to help spread any performance risk. It could be that across your current pensions you hold a high percentage of investments in a particular fund, asset class or region. Being able to see your investments in a single place makes it easier to see how your investments are split, and if you feel you are over-exposed in a particular area then make changes to give you a more balanced portfolio.
Potentially wider investment choice
The investments you choose to hold in your pension can have a big impact on your pension’s performance. The investments in more traditional pensions can be more restricted than those in a modern SIPP, which give you a wide choice of investment options so you have more ways to make your savings grow.
Potentially lower cost
Cost is one of the few elements of investing that you can control through your choice of pension provider, and it’s never more important than when it comes to your retirement savings. A seemingly small difference in cost at the start of your savings journey can add up to a huge difference by the time you come to retire. Learn more about how pension fees breakdown and why they matter.
Flexible income options at retirement
We now have more choice and flexibility in how we access our pension than ever before. The usual age we can access our pension from is 55. You can choose to take tax-free cash, flexibly access your pension through income drawdown or buy an annuity to take a fixed guaranteed income - or indeed any combination of these. Some more traditional pensions only provide the option to buy an annuity, so if this is the case and you prefer to drawdown an income whilst keeping the rest invested then you will need to transfer. The income that you can get from an annuity also varies across providers, so if this is your preferred option it’s always wise to shop around. Learn more about pension income options.
We also recommend the Government's Pension Wise service which offers free impartial guidance to help you understand your options at retirement. You can access the guidance online at: www.pensionwise.gov.uk or call them on 0800 138 3944.
Things to think about before making a transfer
Transferring pensions may not be suitable for everyone, and although in many cases it’s relatively simple to move they can be complex at times. As with all financial decisions there are important factors to consider and you should check these with your existing providers before transferring out.
Do any of my existing pensions contain valuable benefits?
One of the most important things to check is whether any of your existing pensions contain valuable benefits that will be lost if you transfer away. For example, final salary pensions, guarantees of income or investment returns, early retirement options, a greater entitlement to tax free cash than the standard 25%, life insurance, to name a few. If this is the case it’s likely that it won’t be in your best interest to transfer, and it’s essential you receive financial advice if you still want to proceed in order to make an informed decision.
Will I be charged exit fees?
You should check to see if your current plans will impose an exit fee if you go ahead with a transfer. Fidelity cover up to £500 if any your current providers charge exit fees (T&Cs apply).
How do the charges and investment options compare?
Before going ahead with a pension transfer, we strongly recommend that you undertake a full comparison of the benefits, charges and features offered.
Are any of my pension pots under £10,000?
If the amount you wish to transfer is less than £10,000 then you may be able to take it all as a ‘small pot lump sum’ with your existing provider. You can usually take the tax-free part as normal with the balance taxable at your highest rate of income tax. Taking your money in this way doesn’t trigger the lower money purchase annual allowance that restricts tax relief on your future contributions to £4,000. It also doesn’t use up any of your lifetime allowance (the upper limit on tax-advantaged pension benefits). If you transfer such small pots in into one account which then exceeds £10,000 the option of taking it all as a small pot lump sum could be lost.
What if I change my mind?
If you transfer your pensions and then change your mind, your previous pension provider may refuse to re-instate your benefits. So check the cancellation period and whether your provider would be happy to take your money back within this period should you decide not to go ahead.
Pension transfer factsheet
Full details can be found in our pension transfer factsheet.
You can also view frequently asked questions about pension transfers to Fidelity on our pension transfer page.
It's important to remember that the value of investments and the income from them can go down as well as up so you may get back less than you invest. Tax treatment depends on individual circumstances and all tax rules may change in the future. Withdrawals from a pension product will not normally be possible until you reach age 55. If you are in any doubt whether or not a pension transfer is suitable for your circumstances we strongly recommend that you seek advice from an authorised financial adviser.
If you’re approaching retirement, Fidelity’s retirement service can provide free of charge guidance, or personalised advice at some of the lowest flat-rate advisory fees you’ll find amongst leading pension providers. Just call 0800 084 5045. Lines are open Monday to Friday 9am to 5pm.
How long can I expect a pension transfer to take?
Most leading providers use an electronic system called Origo. Electronic transfers managed through Origo do not usually require any paperwork and can be completed in a relatively short amount of time (please see table below)
Steps involved in a Transfer to Fidelity
You can apply to transfer online via our website, or via a paper application form which you can download from our website or request by phone.
We’ll then check whether the provider(s) you are transferring out of use Origo and whether your pension can be transferred electronically.
If your pension can be transferred electronically, we’ll then liaise with your provider via Origo and manage your transfer through to the completion.
Average electronic transfer times
The list below shows the average times for transfers into Fidelity for the top 15 by number of transfers for the period Oct ’17 to Sep ’18. This list is not exhaustive and many other providers use Origo.v
|Provider transferring to Fidelity SIPP||Average days|
|Legal & General||18|
|Old Mutual Wealth||10|
|St James's Place||15|
|Sun Life Financial of Canada||14|
Source: Fidelity transfer data October 2017 to September 2018. Please note these are average times and each individual case is different.
If the provider you’re transferring from does not use Origo then your transfer will need to be processed manually and paperwork will be issued by post.
Common requirements for a manual transfer include a customer signed Letter of Authority and completed Discharge Forms.
Manual pension transfers can typically take 6 to 10 weeks to complete, but this does depend on the paperwork required to be sent between the two providers.
Could your pensions be better together?
Find out more about how you could get your money working harder.
If you’d like more information, go to www.fidelity.co.uk/pension-transfer where you can find out more about Fidelity’s SIPP and commonly asked pension transfer FAQs. On our site you’ll find lots of guidance tools, retirement planning calculators and information to help. Our UK call centre is also on hand to offer you guidance and support and answer any questions you may have. Just call 0800 028 1819. Lines are open Monday to Friday 8am to 6pm and Saturdays 9am to 6pm.