Written by, Marija Petkova
Updated May, 13, 2022
A pension transfer is a great way to get more out of your retirement savings.
But, how do pension transfers work, what are the drawbacks, and can I transfer my pension to my bank account?
Let’s dive in.
The process of a pension transfer usually involves moving pension funds from one scheme to another.
Pension transfers are not uncommon, but before you make a final decision, it’s best to do some research and speak to a specialist that can explain the rules and regulations and guide you through the process.
Note that transferring your pension to a different provider is not the same as withdrawing the money or sending it into your bank account. Normally, you can cancel your pension and take out funds from your pension pot once you turn 55.
A pension transfer can be a great way to simplify your retirement planning and potentially increase your overall savings. But it’s important to do your homework and gain a better understanding of your pension transfer options to make sure you’re getting the best deal for yourself.
To transfer a pension pot, you must submit a written request to the scheme administrator or pension provider, informing them that you want to move your funds.
Your scheme administrator or pension provider will then give the following information:
You might need expert advice if you are:
Transferring your pension to your bank account means withdrawing the money from the pension funds.
If you’re older than 55, you may withdraw only a quarter of your retirement pot as a tax-free lump sum. The rest will be taxed as income. You can also opt for a pension drawdown and keep the rest of the funds invested.
A defined contribution pension can be moved at any time to another scheme or pension provider.
However, if you want to withdraw money from the pension fund to your bank account and you’re under the age of 55, you might have to pay a penalty and tax on the entire sum.
Here are some of the most common reasons people opt for a pension transfer.
There is no one-size-fits-all answer. Transferring a pension can be a good idea if you’re looking for a more flexible or cheaper scheme, but whether it’s worth it, depends on your circumstances and the type of pension plan that you have.
There are usually exit fees associated with the process of moving a pension, which can be quite high in certain cases, and you also might lose important benefits by transferring to a cheaper plan.
It’s always important to speak with an expert before making any decisions.
Pension transfers can be a smart choice for certain individuals who want to maximise their retirement income and have greater flexibility and control over their pension funds. When it comes to moving your pension to a bank account, that often means withdrawing funds from your pension pot, which is different from regular pension transfers. Normally, you’ll have to wait until the age of 55 to take out funds.
You may need to pay a pension transfer fee in the form of an exit fee depending on your plan’s rules. When you attempt to withdraw your retirement funds, your present pension provider will charge you an exit fee, which will be deducted from the amount remaining in your pension.
In most cases, you can move your defined contribution pension at any time before you start taking money out of it.
Pension transfers usually involve moving pension funds from one scheme to another. Moving the funds to a savings account is more similar to withdrawing money from it.
Transferring your funds to a bank account usually means withdrawing money from the pension pot and can normally be done after the age of 55.
My name is Marija, and I'm a financial writer at DontDisappointMe. Although finance might not be everyone's cup of tea, my 10+ years of working in one of the biggest banks in my country, and my interest in extensive research on everything finance/investment-related, have made me somewhat of an expert in the field (if I do say so myself). No longer having the passion to work in a corporate setting, I decided that I couldn't let all of this knowledge go to waste so I started writing. And, here I am! Today I try to share my knowledge with my audience in the hopes of making this topic as simple and interesting as possible. In my leisure time, I like spending time with my family and travelling to new locations.