Do I need financial advice to transfer my pension?

Transferring your pension to a new provider is an important decision that could impact your retirement funds. We recommend seeking independent financial advice to ensure your transfer is appropriate for your needs. In some cases, such as when transferring a pension with safeguarded benefits, taking advice is mandatory to comply with regulations. An adviser can review the specifics of your transfer and help you make an informed choice. Here, we’ll explore how pension transfers work.

With some pensions you’ll have to take advice before you can transfer, to protect you from making changes that could see you worse off. Pension providers often require proof that appropriate advice has been taken before completing the transfer, to make sure you understand any potential losses or risks. Here are the situations where you’ll need to speak to a financial adviser: 

Defined benefit transfers

If you have a defined benefit pension (also called a final salary pension) and want to transfer it to a defined contribution pension, then you’ll need to take advice if it’s worth £30,000 or more. This is a requirement under Section 48 of the Pension Schemes Act 2015 to ensure that appropriate advice has been sought. 

However, while taking advice is mandatory, you are not obligated to follow it. Defined benefit pensions provide the security of a guaranteed income in retirement, and giving this up is unlikely to benefit most people.

Pensions with safeguarded benefits

Some pensions offer benefits like a guaranteed annuity rate or other guaranteed benefits. Again, if the transfer is over £30,000 and your pension has one of these, you must take advice first.  

Overseas transfers

If you're transferring your UK pension to an overseas scheme, like a Qualifying Recognised Overseas Pension Scheme (QROPS), it’s recommended that you speak to an adviser to ensure the transfer complies with UK regulations and the correct amount of tax is paid. However, advice is only mandatory if your UK pension policy has safeguarded benefits. 

Defined contribution vs defined benefit transfers

With a defined contribution pension, your pension pot is based on payments made into it, investment choices and charges. That money is then invested on your behalf, and the value of your pension depends on the performance of those investments. Since this type of pot doesn’t provide a guaranteed income, it may be simpler to transfer your pension to another defined contribution scheme including a SIPP (self-invested personal pension). Although, you may have to sell your pension investments and arrange new ones with your new provider. 

Unlike a defined benefit pension, you won’t have to speak with a financial adviser regardless of the size of your pension pot – unless it offers guaranteed benefits. So, before you start your transfer it’s best to check the terms of your pension with your new provider.

Once you’ve started a pension transfer you generally won’t be able to go back to your old provider, so you need to be sure it’s the right move. Taking financial advice can help you to make an informed decision in a few ways.  

It will help to spot any risks in your transfer. This could be losing a guaranteed income from a defined benefit scheme, or it could mean understanding the level of investment risk involved when moving to a new defined contribution scheme, such as a SIPP. Taking financial advice helps ensure that the chosen level of risk is appropriate for your personal financial goals and retirement plans. 

By taking a close look at the terms of your pension they may be able to see other things that could be missed, like exit charges.  

A financial adviser can help you see if your pension transfer meets your long-term financial goals, like early retirement or whether it will provide sufficient money in retirement. They can then create a personalised retirement plan, based on your tax situation, and give you withdrawal options. If you have more than one pension, they’ll also be able to tell you whether you’re better off consolidating them into one pot. We have more on pension consolidation here.  

Risk assessment and suitability

Financial advisers will assess the risk and suitability of a pension transfer by ticking off a few different things.  

They’ll look at your personal situation, which will include your income, any other savings, and the time you’ll spend in retirement.  

Then they’ll consider your retirement goals and how you want to use your pension money, whether you want to be able to take large sums from your pension or would prefer a stable and predictable income. If you have any special circumstances like a lowered life expectancy, then giving up a guaranteed income for a defined contribution pension pot you can access flexibly may be worthwhile. 

Your attitude to risk is also important as defined contribution pensions can have different amounts of market risk, depending on the investments you’d be moving to.

While it’s a good idea to take financial advice when you’re transferring a pension, if yours isn’t covered by the rules above, you can choose to move to another provider without it.  

Self-managed pension transfers

With most pension transfers your new provider will do a lot of the work for you. All you need to do is find a pension that suits your investment style, goals, and risk level. Then it’s often just a case of filling out a form, either online or on paper, as some providers still insist on paper transfer forms and waiting for the transfer to complete, which can take a few weeks or more. You may have an exit fee to pay to move your pension, but most providers won’t charge you to join them. It’s a good idea to check the rest of the fees you’ll be paying with your new pension and compare them with your current pension. We have a breakdown of the fees you can expect to pay here.

Where financial advice is required for a pension transfer it must come from an FCA qualified adviser who’s a pension transfer specialist. Advice must include an Appropriate Pension Transfer Analysis (APTA) and a Transfer Value Comparator (TVC) to show the value of any benefits being given up. 

The FCA also works with The Pensions Regulator (TPR) to protect customers from scams that could see them lose some or all their money. You can check out pension providers by visiting the Financial Services Compensation Scheme’s (FSCS) pension protection checker. There’s also a site where you can check on current pension scams called ScamSmart.  

Finding a qualified financial adviser

When you’re paying for financial advice, you’re going to want peace of mind that you have the right person for the job. Here are some things you can do before hiring an adviser.  

Check that they’re authorised to give advice by the FCA. You can do this by using the FCA Register on their site. There, you can also find out if the adviser you’d like to use is a pension transfer specialist and whether they have any complaints or disciplinary actions against them.   

You can also search for a qualified financial adviser by visiting unbiased.co.uk.    

Make sure that they’re clear about the fees you’ll have to pay. Charges based on whether a transfer goes ahead were banned in 2020. You can also check online for any customer reviews. Finally, you should never use a financial adviser who cold calls looking for business, reputable advisers won’t do that.  

If your pension is worth more than £150,000, Aviva Financial Advice may be able to help with your transfer. There's no cost for an initial chat and an adviser will explain about any advice fees upfront.