What is a pension transfer and how does it work?

Pensions & retirement 02 January 2024

Transferring your pension could make retirement planning easier, but it may not work for everyone. That’s why it helps to do your research. So, whether you're curious about what a pension transfer is or you're simply doing a bit of research, we’re here to help.

In this guide, we’ll help you explore how pension transfers work, the pros, cons and more.

What is a pension transfer?

Simply put, when you transfer a pension, you’re moving a pot of pension savings from one pension provider to another.

You might find it beneficial to move a pension pot if:

  • You have too many pensions to manage - As having more than one pension can become difficult to manage, consolidating your pensions could lead to an increase in control over your investments.
  • You’d like lower fees - Some companies have high charges incurred on pensions, which could eat into your returns leaving you with less money in retirement.
  • You’d like more money now but later income in retirement - As your pension is a guaranteed income after retirement, you could transfer your defined benefit pension into a personal pension to be able to take a sum of money out to help your financial situation in the short term.

However, there are lots of factors to consider before doing so.

How does pension transferring work?

Transferring your pension means moving a pension pot from one provider to a new pension scheme. While this sounds easy enough, there are quite a few steps involved. 

First, you’ll need to research which new pension provider you’d like to switch to. For example, you may want to transfer a pension from a previous employer to your current one if their scheme accepts pension transfers or you might be looking for a personal pension plan. Once you’ve made your choice, you’ll need to check whether your chosen provider accepts transfers.

Do I need a financial adviser to transfer my pension?

Whether you need a financial adviser to transfer your pension depends on what type of pension you’d like to move and its value.

In either case, working with a qualified financial adviser could help you determine the best option for your needs. The adviser will determine whether a transfer of the pension is suitable for you. If they think it could work for you, they'll save you time by working through the paperwork to make the transfer happen. 

Better understanding your pension scheme can help you determine which benefits you may gain or lose by transferring.

What types of pensions can you transfer?

Defined contribution (DC) pensions

A defined contribution pension is a pension where the money that you pay into a scheme is invested overtime. In the hope that it leaves you with a sufficient income in retirement. Overall, the money is paid into this over a large period of time. 

Whilst this type of pension is transferable there are a number of pros and cons that should be thought about before making a decision. In addition, transferring a defined contribution pension is possible without a financial adviser.

Defined benefit pensions

A defined benefit scheme (also known as a final salary pension) is a workplace pension that pays you a sum of money that is based on your salary and the amount of time you have worked for that employer. This is different as it's not the amount of money you have contributed to a pension. 

Again, some defined benefit pensions can be transferred without a financial adviser. However, a pension pot worth over £30,000 can legally only be transferred using the assistance of a qualified financial adviser. However, even with pensions below £30,000 it is encouraged that you are knowledgeable on your situation so you can make the right decision for you.

You usually don’t need to get financial advice if you’d like to transfer a workplace or defined contribution pension. However, it’s a big decision to make, and you may find advice worthwhile if you’re faced with complex financial decisions.

When you leave a company, your pension pot is still yours even if you completely leave it alone. If you decide to, you can continue to pay into it or you can transfer it to your new employer. In most circumstances, pension transfer between employers is allowed as long as it’s done up to 12 months before you’re due to retire.


 What should you consider before transferring your pension?

Transferring pensions can be a hard decision to make as it can be difficult to understand the long-term effects of such a decision. To help you better understand what it could mean for your situation, let’s explore the pros and cons of transferring a pension.


Greater control and flexibility - After transferring your pension pot, the money is all yours. This gives you the freedom to choose how you would like to manage your assets. It is important that you realise most pension schemes have rules on what age you can access your pension pot from. Typically, this is from age 55 onwards.

  • Fewer pension providers to deal with - Having one less pension provider to deal with could mean less paperwork, decisions and fees to conquer.

  • More investment options - some providers may offer access to more desirable or diverse investment options, helping you better manage your portfolio.

  • Provides safety from a bankrupt employer - If the company that has your pension scheme runs into serious financial trouble, transferring your pension gives you the power to move the money where you want and when you want.


  • Risk involved - A final salary pension can be used as income for the rest of your life. If you transfer your pension, you could run the risk of not having enough money in retirement.
  • No inflation protection - If you transfer out of a final salary pension, you’ll have no income after retirement that matches inflation levels. 
  • Risk of relying on the stock market - Without a guaranteed income, it can be tempting to invest in order to provide an income for retirement. This is a risky strategy as stocks can drastically decrease at any given point.
  • Ongoing financial advice after transferring - Prior to transferring your pension, you may want advice on what to invest in. This comes with a charge which may be a factor that you need to think about.
  • Losing valuable benefits - Leaving a scheme could mean leaving behind benefits such as the option to take your pension at a certain age or take a tax-free lump sum.

Getting quality guidance or advice can help you determine whether a pension transfer is the right choice for your needs.

How to get guidance or advice on transferring your pensions

Free and impartial advice

Another way you may look for more information on transferring your pension may be using the free guide from the government ‘Pension Wise.’ This is an alternative if you don't want to pay for financial advice or you want to take a more DIY approach to pension consolidation. 

Pension Wise should help you understand the risks and the benefits of transferring your pension and help you make a more informed decision that is best for you.

Personalised financial advice

A financial adviser’s help can be invaluable when transferring your pension. For example, if you are looking for fixed fee final salary pension advice or looking to transfer a pension from a previous employer.

After choosing to get help from an adviser and if you were to transfer your pension, an adviser can help complete the range of paperwork that is needed. In addition, financial advisers are also there to be able to give you the sufficient knowledge to make the decision that is suited to you.

What do financial advisers charge to transfer a pension?

The cost of financial advice can vary. Usually, advisers will use one of the following four fee structures and they can vary depending on where you live or even where the adviser is located.

  • Set fees - This can hugely vary on the amount of the pension and is agreed prior to your free consultation.
  • Hourly rates - advisers can charge on an hourly basis, anywhere in the region of roughly £75-£300.
  • Percentage fee - advisers can also take a percentage of the pension that they are dealing with. This is usually around 2%-3%, however, this can vary depending on the size of the pension pot.
  • Monthly fees - Normally, transferring a pension would require a one-off monthly payment. But if ongoing financial advice is required then monthly charges will carry on.

    Get help and support from a regulated expert

    Hopefully, this guide has given you more of an insight into whether or not transferring your pension could work for you. If you're still unsure about whether it's for you or not, don't worry. We can still help you by connecting you with a local financial adviser.

    Working with an FCA-regulated financial adviser can help you:

  • Understand if transferring or consolidating your pension is suitable to you
  • Help to know your overall financial position
  • Get personalised advice on your financial situation and how you could improve it
  • Form a strong retirement plan

Once we find your match, your adviser will invite you to a free 60-minute consultation. This session usually lasts up to 60 minutes and can help you weigh your options.

Ready to enjoy your free consultation with a financial adviser? Click on the button below to get started and match with a pension transfer advice expert now.

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