Defined Contribution Pension Transfer Advice

Specialist FCA Regulated Advice

Should I transfer my defined contribution pension?

If you are aged 55+ and not currently paying into or receiving your defined contribution pension, you can cash in 100% of your pension early as a cash lump sum – up to 25% Tax Free.

What is a defined contribution pension?

Defined contribution pensions build up a pension fund through your contributions, your employer’s contributions, tax relief and any investment returns from the pension funds. Your employer usually deducts your pension contributions from your salary before it is taxed.

A defined contribution pension fund does not offer a specified income at retirement. Unlike defined benefit pensions which offer a specific income at retirement. A defined contribution pension fund can grow, as well as fall, depending on how well the fund investments perform.

Many employers now prefer to offer their employees defined contribution pensions. This is because there is no risk to them as they will not have to cover any investment loses in the pension fund. With a defined benefit pension scheme, if the pension fund makes a loss through bad investment, it may not have enough money to cover the guaranteed pension payments to its members. This is known as a pension deficit and the employer will have to cover the funds loses to ensure its members receive their full pension payments.

Types of Defined Contribution Pensions

There are several types of defined contribution pensions:

  • Personal Stakeholder Pensions
  • Self Invested Personal Pension (SIPPs)
  • Small Self Administered Schemes (SSAS)
  • Workplace Pensions
  • Executive Pension Plan
  • Group Personal Pension
  • Master Trust Pension

Should I Transfer a Defined Contribution Pension?

There are many reasons why you might be considering transferring your defined contribution pension into a new scheme or a self invested personal pension (SIPP), the main benefits being:

  • Consolidate several small defined contribution pensions into a single pension scheme, reducing fees and charges across multiple pension funds.
  • Better tax planning and less paper work; you will be able to have a clearer picture of your retirement income and plan for any pension shortfalls. 
  • Investment freedom, security and control; you may want to choose where your pension is invested, whether it be low risk, high risk or even ethical investments.
  • Greater control of pension benefits such as death benefits, guaranteed annuity rate and the ability to draw down on you pension when it suits you.
  • Move your pension fund from your ex employers or a poorly managed defined contribution pension scheme.

Defined Contribution Pension Transfer Risks

Before you transfer any defined contribution pension you need to consider the following risks:

  • Cost of any exit and transfer fees when moving your pension to a new scheme.
  • Loss of Safe-Guarded benefits offered from your previous scheme.
  • Loss of guaranteed annuity rate that you are entitled to.
  • What sort of investment risk are you willing to take with your pension fund. 

Defined Contribution Pension Transfer Advice

If your defined contribution pension benefits are worth more than £30,000 and you have a guaranteed annuity rate you’ll need the transfer signed off by a FCA regulated adviser, such as ourselves.  This rule is there to protect you and ensure you are fully aware of the risks. 

If you would like to find out more about your defined contribution pension transfer options Get Started Today and receive our free Information Pack.

Warning

This service only applies to pensions in the UK. Taking benefits early will almost certainly reduce your pension income in retirement and is only suitable for a limited number of people and circumstances. This should not be seen as an easy option for raising cash.

If you releases all your money from your pension early you will not have anything left to provide you with income in retirement. Usually 25% of your pension can be released tax-free, the balance is taxed at your marginal rate at the time of release, this marginal tax rate could change in the future.