Safeguarded benefits
Guaranteed annuity rate
An annuity is a regular income paid to you for life, and an annuity rate determines how much annual income you’ll get. You might have been offered a guaranteed annuity rate when you joined your pension scheme, and promised a particular rate if you used your pension to buy an annuity from your pension provider.
If you have a pension with a guaranteed annuity rate, you could get a higher level of fixed income than you'd be offered by another pension provider, no matter what the market rate is when you retire. Most guaranteed annuity rates come with strict conditions, so you might lose the rate if you transfer your pension.
Defined benefits scheme
A defined benefit pension scheme pays you a secure income for life which usually increases every year in line with inflation. It’s based on how many years you’ve been a member of your employer’s scheme and the salary you’ve earned by the time you leave or retire.
Defined benefits pensions are also known as ‘final salary’ or ‘career average’ pensions because the amount you get when you retire can be based on a proportion of the final salary you earned, or your average salary throughout your career.
If you decide to transfer your defined benefit pension, you could lose some of your benefits, like a guaranteed retirement income.
Guaranteed minimum pension
A guaranteed minimum pension is a benefit that you might have if you were a member of a defined benefit pension between 6 April 1978 and 5 April 1997.
It means your current pension provider is committed to paying you a guaranteed minimum fixed retirement income. If you transfer your pension to a new provider you might lose this benefit.
Legally you'll need to take financial advice from an adviser who has the right advice permissions before you can transfer one of these three types of pensions if they're worth more than £30,000. You'll have to pay for the advice.
Valuable benefits
Waiver of contributions
A waiver of contribution benefit (sometimes known as waiver of premium) means your pension contributions could be paid for you in certain situations. For example, if you get ill and can't work, you may not have to pay any fees and your pension contributions could be paid for you until you reach retirement age.
If you decide to transfer, you’ll lose this benefit.
Protected pension age below the normal minimum
If your pension has a protected pension age, it might allow you to take your pension before the government's normal minimum pension age.
The current normal minimum pension age is 55. This will be rising to 57 from 6 April 2028.
The Find and Combine service does not currently check whether your current pension could have a protected pension age of less than 57 after April 2028.
If you transfer your pension, you might lose this benefit so we recommend speaking to your current provider to confirm. For more details see here.
Protected tax-free lump sum
If your pension policy has a protected tax-free lump sum, it might allow you to take a bigger tax-free lump sum from your pension than you’d usually be allowed. Transferring that pension to another provider could mean losing this benefit and paying more tax when it's time to draw your pension. We recommend speaking to your current provider for more detail.
Any regular or final loyalty bonus (including terminal bonus)
If you’ve been with your pension provider for a number of years, you may receive a loyalty or fund bonus. This may either come as a rebate of your annual management charges, or as a lump sum when it’s time to draw your pension. If you transfer your savings to another provider, you could lose this benefit and we recommend speaking to your current provider for more details.
Life cover
You might have been offered life cover along with your pension. This is also sometimes known as life assurance or life insurance. It’s an insurance policy designed to leave money for your loved ones if you die during the policy term. Life cover gives you the reassurance that your family will still be looked after and whoever you choose as your beneficiaries may receive a lump sum or regular payments. If you have life cover with your current pension provider and you transfer your pension, it’s likely that you’ll lose this benefit.
Charges
Exit or transfer fee
If you transfer your savings to another provider, your current provider might charge you a fee for exiting or transferring your pension.
Market value reductions on with-profits funds
Some pension schemes invest in with-profits funds that are ‘pooled investments'. You pay into the fund, along with a number of other investors, and all the money is invested in stocks, shares, equities, bonds, and property over a set period of time.
These types of investments help balance the risk levels and the expected increases in the fund value over the long term.
With-profits funds are different from other pooled funds because of ‘smoothing’, which helps to reduce the impact that market changes have on fund investments. This means investors aren’t as exposed to the fluctuations in investment value in the short term.
This is useful if a with-profits fund is being used to fund something that happens on a specific date, like retirement. It helps to reduce variations in pay out when you need to get your money out. For smoothing to work, fund managers need to have a mechanism that protects the fund from being depleted if investors want to take their money out when the market falls. This mechanism is called a market value reduction (MVR).
If you want to leave the fund early, and its market value has fallen, a market value reduction may apply. This MVR reduces the payout you get so that remaining fund members are left with a fair share of the assets.
If you decide to transfer your savings from a with-profits fund, an MVR could apply to the value of your pension fund, reducing the amount transferred. That's unless there's a guarantee in place not to apply a MVR.
Other considerations
Crystallised funds
A pension becomes a crystallised pension when you start taking your retirement benefits from it. There are a few ways a pension can be ‘crystallised’, but one of the most common is purchasing an annuity, otherwise known as a guaranteed income for life. When you do this, you’re crystallising your fund, and you take your tax-free lump sum entitlement when you buy your annuity.
The other most common way is income drawdown. This allows you to draw directly from your fund and leave the rest invested. Only some of our pensions can accept crystallised benefit transfers into some of our pensions. You’ll need to get in touch with our pensions team before you go ahead.
Non-UK pension
This is a pension that you started saving for outside the UK, but may be subject to certain UK tax laws. We can’t accept transfers from non-UK pensions.