What is the cost of transferring pension funds?

Rachael Oku

by , Team PensionBee

at PensionBee

21 Dec 2018 /  

What is the cost of transferring pension funds?

This article was last updated on 07/02/2024

If you’ve had more than one job in recent years it’s likely you’ll have more than one pension to your name, and the longer you have left in your career, the more workplace pensions you’ll accumulate in the future thanks to Auto Enrolment.

Over time, managing lots of pensions can get messy and it can be easy to lose track of your savings. Maintaining multiple pension pots could also become costly if you’re paying several high fees.

If you’re thinking about transferring your old workplace and personal pensions into one plan there are a few things you’ll need to consider first, from transfer charges and exit fees to the special features and benefits you might lose. Here’s a breakdown of the things you should consider and what you can do to avoid paying for a pension transfer.

Common reasons to transfer a pension

Depending on how many pensions you have, how they’re performing and how much you’re paying in fees, it might make sense for you to consolidate your pensions into one. In fact, there’s a range of circumstances where you might want to consider transferring your pensions including:

  • Your current pension provider’s no longer offering the type of pension option you want to use to access your savings in retirement
  • Your current pension isn’t being invested in line with your expectations and you want to take more/ less risks and earn a higher income
  • You’re moving abroad and want to take your pension with you
  • You want to have just one pension to manage
  • You want to pay just one fee, which will hopefully be cheaper than the multiple fees you’re paying now.

When to transfer a pension

Transferring your pension is an option that’s open to everyone and you don’t necessarily need to have a ‘good’ reason, provided you’ve done your research and are confident you’ll be financially better off with a new provider. You can transfer your pension at any age, no matter how close you are to retirement, although if you’re nearing retirement you’ll want to make sure your savings are invested in a plan with less risk.

The majority of newer workplace and personal pensions are defined contribution pensions, which have a value based on how much you’ve contributed and how your investments have performed. If you have one of these pensions it’ll be relatively straightforward to transfer.

However, if you have a defined benefit pension you should approach any potential transfer with caution until you’ve assessed what benefits you could lose by exiting your current scheme. You can find out what type of pension you have and what benefits it comes with by checking your pension paperwork, such as an annual pension statement, or by contacting your provider directly.

When not to transfer a pension

If you’re part of an older pension scheme, known as a defined benefit or ‘final salary’ pension, a transfer might not always be the best option. Defined benefit pensions have a value based on your salary and the number of years you worked for your employer, and can often come with special benefits that you could lose if you leave the pension scheme.

Special benefits could include a guaranteed annuity rate upon retirement, regardless of the market rate at the time, and other perks that you may not want to forfeit. To ensure you weigh up your options carefully it’s a legal requirement for savers with defined benefit pension pots worth more than £30,000 to speak to an independent financial advisor before moving their pensions. If you have a public sector pension you probably won’t be able to transfer this type of pension, although you can stop paying into it and start a new one separately.

Pension transfer charges

The amount you’re charged for transferring your pension can vary from provider to provider and from scheme to scheme, so it’s important to find out how much you’ll be charged and understand the impact this will have on the size of your pension.

Pension transfer charges usually come in the form of an exit fee. This is where your current pension provider charges you a fee to release your money, and it’s usually deduced from the balance of your pension. Exit fees can either be charged as a flat fee or as a percentage of your savings, which means the larger your pension, the more you’ll have to pay. Where a percentage is charged it can be as much as 10%.

Transferring your pension’s free with PensionBee

If you decide to transfer your pensions with PensionBee, we won’t charge you a thing. You’ll get your own personal BeeKeeper who will then guide you through the transfer process, from start to finish.

All we’ll need is a few details about your pension history to get started, such as a pension number or provider name. And, if we find any pensions where your current provider charges an exit fee of more than £10, we’ll check with you before going ahead with the transfer.

It can take just two to three weeks for us to receive your pension money and we’ll always attempt to use electronic transfer technology to send and receive it safely and efficiently. Once we’ve received your pensions we’ll charge just one annual management fee, which is taken directly from your pension pot. There are no hidden transfer fees, or any other kind of fees, and the more you save with PensionBee, the less you’ll pay.

Risk warning

As always with investments, your capital is at risk. The value of your investment can go down as well as up, and you may get back less than you invest. This information should not be regarded as financial advice.

You should always thoroughly research any new providers you’re consider joining to ensure they are fully regulated. You can check the Financial Conduct Authority register to confirm that they’re authorised to manage your money and you can also check the FCA Warning List which highlights companies known for pension scams.

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