Glossary · UK
What is Pension Transfer?
Moving the value of one pension into another pension scheme, which can be straightforward for defined contribution pots but requires mandatory advice above £30,000 for defined benefit schemes.
Full Definition
A pension transfer is the process of moving the value built up in one pension scheme into another, for example consolidating several old workplace defined contribution pots into a single personal pension or SIPP, or moving a defined benefit (final salary) pension into a defined contribution arrangement to access pension freedoms such as flexible drawdown. Transfers between defined contribution schemes are generally straightforward and do not legally require financial advice, though it is still worth checking for exit fees, loss of valuable guarantees (such as a guaranteed annuity rate), or a move from a low-cost scheme into one with higher ongoing charges. Transferring safeguarded benefits from a defined benefit scheme worth £30,000 or more is different: UK law requires the member to take advice from an FCA-authorised pension transfer specialist before the transfer can proceed, because giving up a guaranteed, inflation-linked income for life in exchange for a cash transfer value is a significant and often irreversible decision that has not suited most people who have taken it, according to the regulator's own findings. The transfer value offered by a defined benefit scheme (the Cash Equivalent Transfer Value, or CETV) can fluctuate considerably with interest rates and scheme funding levels, and once a defined benefit pension has been transferred out it cannot normally be transferred back in.