Transfer a Company Pension to a Personal Pension

When discussing what to do with your old company pension, the most popular thought among clients is to transfer into their own personal pension scheme. This is perceived by many as a way of setting up your own private pot of money, away from the prying eyes of your old employer and any financial problems that the company may run in to.

Although it is true that a private pension allows you to move your money away from your employer's pension scheme, it is important to note that the employer pension scheme is a separate entity to your employer. If your employer becomes insolvent they cannot reduce your benefits to prop up their company profits.

Problems in company pension schemes typically relate to the ever increasing cost of funding future benefits to employees, particularly with Final Salary Schemes since benefits to members are fixed and any underperformance of the underlying investments or increase in cost has to be bourne by the employer.

As a result, transferring from Money Purchase and Final Salary Company Pensions to personal or stakeholder pensions is almost impossible without taking advice from a pension transfer specialist. Pension providers don't want to be caught with the liability and typically insist you take advice. Similarly, advice companies will typically insist the adviser holds specialist qualifications to transact transfers from a company scheme.

Stakeholder versus a Personal Pension

Although very similar in their structure and benefits, there are pros and cons to both products, typically discussions surround whether you are willing to give up the guarantee of a low annual management fee with stakeholder (1.5% for the 1st 10 years, 1% thereafter) for the benefit of accessing a wider range of funds or better performing funds that may be charging in excess of the cap. This is a very personal decision and varies massively from one person to the next.

Stakeholder legislation had also, in theory, made it easier to transfer from a company pension as they have to accept the money regardless of advice from any other registered pension scheme. The reality is that although most providers will agree that they have to accept the money, the hurdles they put up make it almost impossible for you to do this alone, perhaps indicating what a big mistake this could potentially be without advice.