Pension Transfers: How They Work, Benefits and Things to Consider

A pension transfer can be a useful way to take control of your retirement savings. Whether you have several old pensions, are reviewing your retirement plans, or simply want to understand your options, it’s important to know how pension transfers work and what to consider before making a decision.

Below, we explain what a pension transfer is, why people consider one, the key pension transfer rules, and the risks and benefits involved, to help you evaluate your options and decide whether transferring could be right for you.

A pension transfer is when you move your pension savings from one pension scheme to another. This could involve transferring:

• An old workplace pension to a new provider
• Several pensions into one plan
• A workplace pension into a personal pension or SIPP

People often choose to transfer pension savings to make their pensions easier to manage or to access different features. However, transferring isn’t always the right choice, and some pensions include valuable benefits that could be lost.

A pension transfer involves moving the value of one pension scheme into another. While the basic steps are similar, the experience can differ depending on the pension type and providers involved.

What happens during a pension transfer?

When you transfer your pension, your current provider confirms the value of your pension and transfers it directly to your new provider. The money stays within the pension system throughout, meaning it does not pass through your bank account and keeps its tax-efficient status.

Investment treatment during the transfer

In most pension transfers, existing investments are sold and moved as cash before being reinvested in the new pension. This usually means there is a short period where your pension is out of the market while the transfer is completed. During this time, the value of your pension will not rise or fall with market movements, so it will not benefit from any gains or be affected by any losses. This is a normal part of the transfer process.

Cash Equivalent Transfer Value (CETV)

If you are transferring a defined benefit pension, you will receive a Cash Equivalent Transfer Value (CETV). This is the lump sum offered in exchange for giving up your future guaranteed income. A CETV is usually valid for three months. If it expires, a new value will be issued, which may be higher or lower.

People consider transferring a pension for a range of reasons, often linked to changes in work, lifestyle or retirement plans. Some of the most common reasons include:

• Simplifying retirement planning by bringing multiple pensions into one place
• Reducing charges, particularly where older pensions are more expensive
• Gaining flexibility, especially around how and when income is taken
• Accessing a wider range of investments, allowing greater control over how savings are invested
• Matching pensions with retirement goals, such as phased or early retirement

For many, the question “should I transfer my pension” comes from a need for clarity and control rather than dissatisfaction with an existing scheme.

Pension transfer rules are designed to protect savers and reduce the risk of poor outcomes.

Important rules include:

• Most pensions can be transferred at any age, though access to funds is usually restricted until age 55 (rising to 57 in 2028)
• Transfers from defined benefit pensions worth more than £30,000 require regulated financial advice
• Providers must carry out checks to reduce the risk of pension scams
• Older pensions may include exit charges or guarantees that could be lost

Safeguards and scam protection

Pension transfers are a common target for scams. Providers look for warning signs, often called red or amber flags, such as pressure to act quickly or complex, unusual investment structures. These checks help protect your retirement savings.

There are several pension transfer options, and the right one depends on what you want your pension to do in retirement.

Common options include:

• Transfer to a personal pension
• Move to a self-invested personal pension (SIPP)
• Consolidate multiple pensions into one plan
• Transfer between workplace pensions

Each option offers different levels of flexibility, cost and investment choice.

Transferring between defined contribution pensions is usually more straightforward than other pension transfers. People may transfer DC pensions for the following reasons:

• To combine pensions from different jobs
• To reduce paperwork and administration
• To access different investment options
• To prepare for retirement income planning

It’s still important to check whether your existing pension includes features that could be lost when you transfer pension savings.

A pension transfer from a defined benefit pension is one of the most complex retirement decisions you can make. Defined benefit pensions provide a secure income for life. When you transfer pension benefits from a DB scheme, you exchange this income for a lump sum (the CETV), which is invested in a defined contribution pension. Once transferred:

• The guaranteed income is lost
• Your retirement income depends on investment performance
• You take responsibility for managing withdrawals

Why financial advice is required

If the CETV is over £30,000, regulated financial advice is required by law. This reflects the fact that most people are better off retaining their guaranteed benefits.

An adviser will assess factors such as your income needs, attitude to risk, health, life expectancy and other sources of secure income.

Defined Contribution vs Defined Benefit Transfers

Understanding the differences between defined contribution and defined benefit transfers is important when planning for retirement. This comparison highlights why DB pension transfers require much closer scrutiny.

A suitable pension transfer depends on your circumstances, priorities and long-term plans. There is no single right answer, and what works well for one person may not be appropriate for another.

Before deciding whether to transfer pension savings, it’s important to consider how a transfer would affect your retirement income, flexibility and level of certainty. Asking the right questions can help you assess whether transferring genuinely supports your plans.

Key questions to consider:

• Do I value flexibility over a guaranteed income?
• Am I comfortable with investment risk and managing my pension over time?
• Will transferring make my retirement planning clearer or more complex?
• Could I lose valuable benefits, such as guarantees or protected features?

Taking time to reflect on these points can help you decide whether exploring pension transfer options is appropriate before taking the next step.

The suitability of a pension transfer depends on your circumstances and priorities. The comparison below highlights situations where a transfer may or may not be appropriate.

Understanding how to transfer a pension can make the process clearer. While providers usually handle most of the administration, it’s useful to know what’s involved before you begin. The transfer process typically involves the following steps:

1. Gather details of your existing pensions: This includes provider names, current values and any guarantees or special features.
2. Review pension transfer options: Consider where your pension would be transferred to and how the new arrangement compares in terms of flexibility and charges.
3. Take financial advice if required: Regulated advice is mandatory for certain transfers, particularly defined benefit pensions over £30,000.
4. Submit the transfer request: The receiving provider usually manages the paperwork and contacts your existing scheme.
5. Monitor progress until completion: Transfers can take time, so it’s sensible to keep track until the process is finished.

The time it takes to complete a pension transfer depends on the type of pension and whether advice is required.

The time it takes to complete a pension transfer varies depending on the type of pension involved. Transfers between defined contribution pensions are usually completed within two to six weeks, while transfers from defined benefit pensions tend to take longer, often around two to four months.

Timescales can vary depending on provider efficiency, the complexity of the pension, and whether additional checks or advice are needed.

Every pension transfer involves trade-offs. While transferring may offer greater flexibility or simplicity, it can also involve risks that need to be carefully considered.

Key risks to be aware of

• Investment risk – once transferred, pension values can rise or fall depending on market performance
• Loss of guarantees and benefits – particularly with defined benefit pensions or older schemes
• Charges – including advice fees and ongoing pension charges
• Timing risk – market movements during the transfer process may affect outcomes
• Pension scams – transfers are a common target for fraudulent activity

Taking time to understand these risks helps ensure pension transfers are considered carefully and for the right reasons.

My Pension Expert helps people understand pension transfers clearly and confidently, providing support throughout the decision-making process.

My Pension Expert supports you by:

• Reviewing your existing pensions in detail
• Explaining pension transfer rules and requirements in plain English
• Helping you compare and understand pension transfer options
• Providing regulated financial advice where required
• Supporting you through the transfer process from start to finish

We aim to help you make informed decisions that support your long-term retirement plans by understanding your available options and what they could mean for you. Please note that My Pension Expert does not provide advice on defined benefit (final salary) pensions, as these are structured differently from other pension types.