Defined Contribution Pension Transfer (DC Pension Transfer)

What is a defined contribution pension?

A defined contribution (DC) pension is built up through your contributions, tax relief and employer contributions. This money is invested over time to provide you with a pot of money for retirement.

When you turn 55, you can choose how to take your retirement income.

Can I transfer a defined contribution pension?

Yes, you can transfer a defined contribution pension to a new provider.

When you transfer, the funds in your old scheme are moved into your new pension. It is often possible for you to keep your existing investments when you transfer.

Most providers will arrange the transfer for you. Your existing provider may charge an exit fee when you transfer.

What types of defined contribution pension can I transfer?

Almost all defined contribution pensions are transferable. The main types of DC pension are workplace and personal pensions (such as a SIPP).

Workplace pensions

You can transfer workplace pension to a new provider. However, before transferring your current workplace pension, check whether your employer will continue to make contributions. If your employer is not willing to contribute to a different pension scheme, your pension value may suffer in the long term.

Many people choose to transfer their workplace pension when they change jobs. There are potential benefits, such as lower fees and the convenience of having multiple pension pots in one place.

Personal pensions

Personal pensions, such as self-invested personal pensions (SIPPs) and stakeholder pensions, tend to be flexible and transferring them is relatively straightforward. Stakeholder pension schemes do not charge exit fees when you transfer. Some SIPPs may charge fees for transferring.

Why might I consider transferring my defined contribution pension?

Potential benefits of transferring your defined contribution pension include:

• Control - If you have a number of pension pots, you could make managing your finances easier by transferring them into one scheme.
• Lower fees - You could save thousands in the long-term by switching to a provider which charges lower fees.
• Wider choice of investments - Many older pension schemes offer a limited choice of funds. You could access a far wider range of investment options by transferring. With the ii SIPP, you have access to over 40,000 investment options.

However, transferring your defined contribution pension may have disadvantages. For example:

Loss of safeguarded benefits - Some older defined contribution pensions have benefits which are no longer available and would be lost if you transfer. These benefits include guaranteed annuity rates and the option to take more than 25% of your pension as tax-free cash.

Fees - Some providers charge high exit fees – check for fees before transferring.

Tax benefit from pensions worth under £10,000 - You may be able to take a small pension worth under £10,000 tax-free without triggering the money purchase annual allowance. You can only take up to three small pots in your lifetime.