Since these protected rights funds have become your normal defined contributions (DC) benefits, your question is on whether you can transfer your funds from your existing scheme to another.
You can certainly transfer your defined contributions benefits to a range of schemes, as long as your chosen scheme is another registered UK pension plan.
When shouldn’t I transfer my protected rights?
Firstly, not all schemes allow you to transfer nor will other schemes accept your transference. Check whether you can transfer what used to be your protected rights.
Then consider the following:
* Exit charges – Ask your provider their rate
* Lost benefits – Your defined contribution pension may provide certain benefits that you lose by leaving. Look into these and speak to an advisor to discuss the risks vs. rewards
* Loss of guaranteed annuity rates (GARs) – Your DC may offer higher guaranteed annuity rates when it comes to drawdown. Compare the GARs of both existing and intended schemes.
Where can I transfer it to?
Your choices would be a SIPP, a QROPS or a personal pension.
A self-invested personal pension (SIPP) allows you to manage your funds and invest them as you see fit.
SIPPs can be viable for those who want to flex their benefits and manage their own investments. You’re also allowed a far larger range of investments – including property and equities – than with personal pension plans. But for some who are unskilled at investing, SIPPs can be dangerous in that you run the risk of losing part to all of your savings.
The same government rules as, for example, on contributions and age drawdown, apply with SIPPs as they do with other personal pension schemes.
Qualifying Recognised Overseas Pension Scheme (QROPS), are overseas pension schemes, usually in the countries you want to relocate to. Each of these are managed by its country of location and has its particular benefits and rules. To make sure your investments are safe, the British government obligates you to transfer your pension to one of its registered certified schemes. If you choose a non-recognised scheme, your current provider may either refuse to make the transfer, or may charge you at least 40% tax on the transfer.
Transferring to a QROPS is expensive. You’re usually charged an overseas transfer charge tax of 25% of the value of your pension transfer. Sometimes that’s lifted; make an enquiry for exemptions.
Even though these overseas pension schemes are regulated by their country of location, you still need to regularly supply Britain with a report on your QROPs income and performance.
How do I transfer a protected rights pension?
Being that we’re looking at transferring your defined contributions (DC), most times the process is simple:
* Ask your current pension provider if you’re allowed to transfer and their exit rates
* Find out your current provider’s refund policies. Pension schemes give you a 30-day cancellation period.
Choose a scheme and ask that provider whether they accept your transfer. You’ll also want to know that new scheme’s costs.
* Your new provider will want to see your latest pension statement and may request a copy of your pension valuation, namely to see the value of your pension assets.
* Get independent qualified advice on whether you should proceed with the transfer. Sometimes, a seasoned advisor can point out aspects you overlooked or were unaware of. That’s crucial, since once you proceed you can’t change your mind.
Ask for a value analysis report that shows you how much you gain or lose from the move.
If you’re transferring overseas, there can be added complications. For instance: If you’re under 75, and you’re transferring more than your lifetime allowance, you’ll be charged on that excess. Consult with your UK pension scheme administrator before you transfer.
Anything else I need to know?
At one time, the legalities on transferring protected funds could be problematic. Today, since these funds are no different than your normal pension the situation is easier, but you still want to ask yourself the following:
Will I get better benefits with the new scheme?
* What’s the drawdown age of the new scheme? Is it earlier or later than my present one?
* Am I losing anything important by closing my scheme?
* How much protection do I get with the new scheme?
* Is the customer service and administration honest, helpful and accommodating?
* What are the new scheme’s policies on factors like drawdown age and contributions?
* How much autonomy do I have in the scheme’s investment decisions? How much autonomy do I want to have?