You generally have a right to transfer your pension out of your previous scheme up until a year before you retire. However, there is no corresponding duty on the receiving scheme – the trustees of an occupational scheme may refuse to accept any transfers or set conditions. The GOV.UK website provides more information on this.
You can transfer it into:
- your new employer's scheme (though they do not have to accept it); or
- a personal pension.
Since April 2015, pension scheme members have been able to access their pension savings in new ways. If the member is under age 55, they cannot release their pension unless they are in ill health. If members are over 55, they can now release funds from their pension but may still be at risk from scammers, as the Pensions Regulator warns.
It also has advice on how you can protect yourself from scammers. Members with defined benefits should take appropriate independent advice from an advisor authorised by the Financial Conduct Authorityn (FCA) before transferring their benefits but members with defined contribution benefits should also consider take advice before making any decisions. The Pensions Advisory Service provides more information.
The value of a 'money purchase' pension is straightforward. If you keep it with your previous employer's scheme, they are entitled to deduct some administrative expenses, but otherwise it will just grow (or shrink) depending on how well your investment choices perform.
The value of a salary-related scheme is far from straightforward. The scheme actuary will have to work out what is called the 'cash equivalent transfer value'. This is the money you would need to invest now to get the benefits that would be provided by your deferred pension if you kept your money in the scheme.
The precise value may vary between schemes as they can make different assumptions, but there are rules that limit this variation.
If the scheme is poorly funded the trustees are allowed to offer you a reduced value, or the choice of keeping the pension with them.
As with a deferred pension, the part of your pension in a scheme that was previously contracted-out (and was meant to replace the State Second Pension) is treated differently from the rest. It may be harder to transfer this into a new scheme.
This is a complex area and you may need professional advice.