What is a pension transfer?

Pension transfer is the process of moving from one pension scheme to another. It usually involves the services of a trusted financial adviser and they also offer guidance on the rules of inheritance tax. If you don’t, you might just end up making a mistake you will regret forever.

Individuals working in the public sector may find it impossible to effect the transfer if their pension scheme is unfunded. The only instances when the transfer is possible may include the following:

  • A private sector benefit scheme

  • The funded pension scheme in the public sector

Once you have made up your mind to transfer your pension scheme, the trustee in charge of the current scheme will convert your benefits into a cash lump sum. This is your pension scheme’s transfer value. Once you get it, you have the option of investing this money in the following three possible ways:

  • Stakeholder or personal pension

  • Pension scheme operated by a different employer

  • Self-invested personal pensions (SIPPs)

With the help of a qualified financial adviser offering you portfolio diversification, you will be able to know whether the recipient parties accept such transfers. Despite your incentive for initiating the pension transfer process, working with an adviser will help you address any grey areas. You may just end up noticing that your former employer isn’t as generous as they seem in their incentives.

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