Key considerations before transferring your pensions.

Transferring and consolidating pensions can be a good idea if you're looking for a simple way to manage your finances. However, before you do this there are certain things you should check for, as in some circumstances it may be in your best interest to leave your pension investments where they are.

Transferring your pensions won’t change the tax benefits you receive, but if your pensions have other benefits that you’re entitled to it could impact these, so it’s important to consider whether transferring is right for you. You should also remember tax and pension rules can and do change, and their value depends on your circumstances.

Below are some of the key things you should consider but it’s not an exhaustive list. You should take into consideration your personal circumstances and objectives, and the characteristics of your current pension plan. Your current pension plan provider/administrator will be able to provide information about your existing pension plan if you need more help. Before making the decision to transfer you should consider your existing options – check how well your existing pension is performing, what fees you’re paying and whether you have a choice of investments that suit you. Also, check whether you’ll lose any valuable benefits (see more on this below). If you have the investment choices you’re looking for, benefits and low fees, then you may be better off by staying where you are.

We won’t accept transfers from defined benefit schemes (sometimes known as final or average salary pension schemes), and we won’t transfer a workplace pension where your employer is currently contributing. If you are considering transferring in pensions, please ensure that you are not giving up valuable benefits.

You should note that once you start the pension transfer process your existing provider may not accept you back.

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Costs and Penalties

Is the new plan more expensive than your existing plan? Does your current plan provider impose exit penalties or charges if you transfer or stop making contributions?

The benefits of your new pension arrangements and service should outweigh any increase in cost to you or be worth the fees/penalties incurred. You should make sure that the transfer is not going to disadvantage you financially.

Find out if there are any transfer charges or exit penalties from your existing provider if you decide to move your pension. These could be penalties or charges that relate straight to the pension, or to the underlying investment.

Before you transfer, you need to ensure that transfering to the new pension arrangement is overall better for your needs and circumstances.

Summary of our services and what we check for

What is the service and what do we check for? / Checks carried out by Profile	Transfer only	Find, Check & Transfer
SERVICE
One-off initial fee	None	None
Find pension and detailed policy information	No	Yes
Arrange the transfer of your pension	Yes	Yes

CHECKS CARRIED OUT BY PROFILE
Guaranteed annuity or guaranteed minimum income (e.g. GMP)	Yes*	Yes
Guaranteed annuity rate	No	Yes
Guaranteed minimum future value	No	Yes
Guaranteed growth rate	No	Yes
Enhanced or protected tax-free cash entitlement	No	Yes
Exit penalties on transfer	No	Yes (if > £50)
Life insurance	No	No
Exiting plan fees and charges	No	No
Exiting plan loyalty bonuses	No	No
Exiting plan performance and/or bonus history	No	No
Exiting plan risk profile and equity exposure	No	No
Exiting plan projected future value	No	No
Exiting plan access to FAD	No	No
Advised recommendation whether to transfer	No	No

Investments can go down in value as well as up, and you may get back less than you put in. See our full risk disclosure for details.

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Guaranteed minimum increase in pension fund

This offsets inflation, but some company schemes will make discretionary increases too.

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Guaranteed spouse’s pension

Some company schemes offer a pension to your spouse once you die.

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Loyalty bonuses for staying in the pension plan

These can amount to significant amounts.

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Protected tax-free cash

Before pension rules changed in 2006, some pension schemes allowed you to withdraw more than 25% of your pension as tax-free cash. While this benefit is still protected, if you transferred your savings this protection would be lost.

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Discretionary increases to the value of the fund

Some schemes require the employer to increase the value of the fund by a specified amount, regardless of investment returns.

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Market Value Adjustments (MVA) or Market Value Reduction (MVR)

These apply to ‘with profits’ investments where the allocated returns are higher than the value of the underlying investments, so if you cash them in or transfer them, a reduction is applied. Most ‘with profits’ policies have a date on which (or after which) the MVA/MVR won’t apply. But if applied they can significantly reduce the value of your pension.

Has your current pension got exposure to a ‘with profits’ fund? If so, you may have attractive bonus rates that could be lost on transfer. Moreover, the transfer value of ‘with profits’ funds may be subject to something called Market Value Reduction (see above), which will reduce the size of your pension fund available to transfer.

Does your existing pension scheme provide life assurance, waiver of premium (a form of premium insurance) or the option of early retirement age? These may be lost on transfer. Any subsequent deterioration in your health, since these additional benefits were provided, may mean that replacement cover will be more expensive or difficult to obtain.

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Is transferring to your current employer’s pension scheme an option?

If it offers the investment options you’re looking for and allows transfers, this could be a consideration as the charges may be lower or paid for by your employer. Transfers into employer schemes are not always possible but should be taken into consideration.

*The ceding provider would flag this to us when the transfer request is received.

Investment risk refers to the potential for your investments to fluctuate in value. This can mean gains, but it can also mean losses. It’s the trade-off for seeking higher returns over time.

Managing Risk

At Moneyfarm, we work with you to tailor investments that match your financial goals, risk tolerance, and time horizon. Diversification is key: spreading investments across asset classes can help manage risk.

Past and Future Performance

Past Performance: Historical returns are not a guarantee of future outcomes.
- Simulated Performance: Any projections are illustrative and not reliable indicators of actual results.
- Future Performance: Forecasts are speculative and should not be relied upon as guarantees.

How Risk Varies by Product

We offer a range of investment options, each with unique risks:

Stocks and Shares ISAs: While offering tax efficiency, these are subject to market risk and the potential for capital loss.
Junior ISAs (JISAs): Funds are locked in until the child turns 18, and investment values may fluctuate over time.
Self-Invested Personal Pensions (SIPPs): Contributions and withdrawals have tax implications, and pension funds can decrease in value.
General Investment Accounts (GIAs): Flexible but exposed to market volatility and tax on gains.
Share Investing (Brokerage Accounts): Investments in individual stocks or shares carry high market risk, as prices can be volatile and are influenced by company performance and broader market conditions. Diversification is essential to help manage this risk.

Types of Investment Risk

Capital Risk: The value of your investments may decrease, meaning you could get back less than you invest.
- Market Risk: Prices of investments can fluctuate due to market conditions, economic changes, or global events.
- Inflation Risk: If your returns don’t outpace inflation, your buying power may decline over time.
- Liquidity Risk: Some investments may be harder to sell quickly without affecting their value.
- Performance Risk: Returns can vary between funds, even with similar objectives, depending on the strategy and market conditions.
- Interest Rate Risk: Changes in interest rates can impact investment returns, particularly for bonds and fixed-income securities.

Your Role as an Investor

Understanding your risk tolerance and financial objectives is crucial. Holding your investments over the long term can help mitigate short-term market fluctuations.

Firm Failure & FSCS Protection

Moneyfarm is a FCA regulated investment firm and it is required to ring-fence all your money, which means legally binding agreements ensure that your money belongs to you and cannot be accessed or used by us, the bank or anyone else, even in the event of firm failure. In addition, as an investment firm, in the unlikely event of our collapse due to mismanagement or insolvency, if we are unable to return funds or assets, the FSCS covers losses up to £85,000 per person. Further information about FSCS protection is available here."

Stocks and Shares ISA