Moving your pension

Complete guide to switching your pension pot


John Fitzsimons

Investing and pensions

John Fitzsimons
Updated on 24 January 2023

Complete guide to switching your pension pot

If you want to get the best possible return from the money you save in your pension, then you may need to switch where it’s held.

What is pension switching?

If you’re saving into a pension right now, chances are it’s what’s known as a defined contribution pension.

With a defined contribution pension, the size of your pension pot when you retire is reliant on the performance of the assets your money has been invested into.

Obviously, this performance can vary hugely depending on what your money has been used for ‒ and what you’ve been charged in order to make those investments.

As a result, there may be occasions when you decide that you want to move between pension providers, taking your pension away from one and moving to a rival provider.

This is called pension switching.

It’s distinct from pension transfers, which is when a pension saver moves from a defined benefit pension (also known as a final salary pension scheme) into a defined contribution pension.

For more, check out our guide to the pros and cons of pension transfers.

Why would I switch my pension?

There are plenty of reasons you might want to switch your pension provider.

A big one is the appeal of consolidating if you happen to have more than one pension.

This can easily happen if you switch employers a couple of times, thanks to the workplace pension scheme which forces bosses to open pensions and contribute to them. 

It’s not easy to keep track of a handful of different pensions ‒ in fact, you could end up losing details for one, leaving you with less money in retirement than you should have.

Should you consolidate? Read more here.

Another important consideration here are the charges that you pay your pension provider.

These firms don’t just look after your cash out of the goodness of their hearts ‒ they will charge you a host of different fees, based on the size of your pension pot and where it is invested.

If you feel that you are paying too much for your pension, you might want to switch to a different provider with a cheaper fee structure. After all, the less of your pension pot that goes towards paying fees, the more there is left for you once you actually reach retirement.

Read more: full list of pension charges to watch out for

And finally, there’s performance.

While fees are very important to what your pension pot looks like by the time you give up work, ultimately it’s the performance of the investments which will have the biggest bearing on the size of your pot. 

So if you aren’t that impressed with how your pension is performing then a pension switch might be worth considering.

The downsides of switching a pension

It’s important to bear in mind that there are some potential downsides that come from switching out of a particular pension scheme.

The biggest is that you will lose any attached benefits that come from being a member of that scheme. For example, the scheme may include life cover for members, which you will be sacrificing by moving your money out of the scheme.

There may also be costs associated with the switch that you should take into consideration as these costs may erode the potential benefits that come from your switch.

Do I have to get advice?

Some savers are required to get proper independent advice before carrying out a switch.

Some pensions include what are called ‘safeguarded benefits’, which according to the Pensions Advisory Service are “special valuable features attached to a pension which guarantees its holder benefits which may be better than what they could receive on the open market”.

A good example is guaranteed annuity rates, which would mean you could cash your pension pot in for a more significant income for life than you might get by purchasing an annuity through the market.

And rules state that if the value of those safeguarded benefits is above £30,000, then you will have to get advice before you can switch your pension.

However, even if your benefits are less substantial it may be worth a chat with a financial adviser to see if the switch is really worth it.

Read more: what to expect when you pay for pension advice

Key annuities (Image: loveMONEY - Shutterstock)

How does a pension switch work?

The first stage will be contacting your current pension provider. Pension Wise, the Government’s free pension guidance service, suggests asking them the following questions:

  1. Can I transfer? There can be restrictions on which pensions you can transfer.

  2. What is the ‘transfer value’ of my pension? If it’s the same as your pot value, it’s unlikely you’ll be charged a fee when you transfer.

  3. What fees will I have to pay?

  4. Will I lose the right to take out my money at a certain age? This is called a ‘protected pension age’.

  5. Will I lose any special features, e.g. a guaranteed annuity rate?

  6. Will I lose the right to take a tax-free lump sum of more than 25% of my pension? This is called a ‘protected tax-free sum’.

Once you have then selected a different provider to switch to, there are particular questions you will need to get them to answer too.

  1. Do I apply to transfer through you or my current provider?

  2. Are there any fees for transferring in, e.g. set-up fees?

  3. Do I have to make regular payments into the new pension?

  4. What investment funds and levels of risk do you offer? You may need help from a financial adviser with this.

  5. What options do you have for when I want to take my money out?

Once you’re happy, you will need to fill out application forms from the new provider in order to get the switch moving.

How long will a pension switch take?

Of course, the time taken to switch between pension schemes can vary sharply depending on the pension firms involved.

While some are pretty quick and can get the switch sorted quickly, others are more likely to drag their heels.

Pensions tech firm Origo carried out a survey to break down the typical times taken by each of the main providers, with the results of the report below. 

Overall it found that the average time to carry out a transfer was 10.7 calendar days ‒ up from 10 days recorded the year before ‒ though this drops to 8.1 calendar days for simple cases. This is also up from last year when it stood at 7.6 days.

Pension switching times (Image: Origo)