Yellow folder with Pension label next to a pile of papers and pens

Local independent financial adviser, Becky Hammonds of Willow Financial Solutions, takes a closer look at which pensions you should avoid transferring or be cautious about transferring and why.

Consolidating your various pensions would appear to be sound advice – moving everything into one pot to achieve the highest return is something many savers consider. However, there are some pensions that you should think about very carefully before transferring. Here are a few examples:

Pensions with large exit penalties

Most modern pension plans charge little or nothing to transfer. But some older style pensions can charge larger sums, including market value reductions if you’re invested in a ‘With Profits’ fund. So, it’s important to contact your provider and check this before deciding to transfer.

There is an exception to the rule though. If you’re 55 or over and have a personal or stakeholder pension, early exit fees are capped at a maximum of 1%.

Pensions with Guaranteed Annuity Rates

An annuity provides you with a retirement income that’s guaranteed for life. If your pension scheme comes with a guaranteed annuity rate (sometimes referred to as a GAR), it’s likely to be a higher rate than what is available on the open market. You could be better off sticking with your current pension and buying the annuity through your existing provider.

Defined Benefit pensions

These pensions offer a guaranteed income when you reach retirement. It will normally increase each year, and usually continue to be paid to your spouse, civil partner, or dependants, often at a reduced rate, when you die. 

There can be some circumstances where a transfer can make sense. But the transfer value you get in return normally undervalues the benefits you sacrifice. There are DB pension specialists who will be best placed to give you independent advice.

Ongoing employer contributions

Your employer might have put you into a pension scheme that you don’t like. However, transferring that pension will only make sense if the contributions your employer makes on your behalf can carry on being paid into the pension scheme you want to transfer to.

Some employers will allow these to be redirected, but most won’t. In these instances, it’s usually best to wait until you leave their employment before deciding to transfer, so that you continue to collect the contributions in your current scheme.

If you are keen to explore transferring or cashing in any part of your pension, it is vital to secure impartial, independent advice from a suitably qualified financial adviser who can explain the implications of any move on your retirement income. 

For pensions and investment advice contact Becky Hammonds on 07969 269677 or email