23 Nov Lessons learned when trying to transfer a pension
Anne-Marie Winton relates her experience of trying to transfer a pension pot.
Recently I challenged myself to transfer a small pot of pension savings from Scheme A into an existing larger pension pot in Scheme B: (i) without taking independent financial advice; and (ii) without using any external sources of information, so just relying on the materials provided by Schemes A and B to guide me – simples!
I was expecting to write about how tricky and time consuming the process has been. However, it wasn’t that bad.
However, there were a few significant stumbling blocks along the way and the punchline is that Scheme B refused to accept the transfer on a non-advised basis, so my experiment in consolidation of personal pension savings failed.
Here are some of the things that I learned.
Firstly, Scheme A might describe your pension entitlement in a way that Scheme B doesn’t understand.
The problem here is the phrases “cash balance” and “with-profits” being used in the transfer out pack from Scheme A. When I was asked by Scheme B’s helpline whether I had any “defined benefits”, it turns out that the phrase defined benefits was not used at all in Scheme A’s materials.
Remember, my experimental approach was only to use the information provided to me. So, I read out a number of sections of Scheme A’s materials to the transfer-in specialist from Scheme B and left it to them to decide what sort of benefits I was trying to transfer.
I was not asked by Scheme B at any time if I had any “with-profits” benefits in Scheme A – and the existence of these benefits turned out to be the key reason why Scheme B would not accept the transfer in without me having taken independent financial advice.
Second stumbling block: trying to use online services for a process that could only be done on paper. It appears that most of the time, you can sort out a transfer online – except when an exception applies; and unless you are an expert (or presumably read all the small print in various attachments) it is very difficult to work out if an exception applies.
It didn’t leap out at me online that trying to transfer savings into an existing pension pot was something out of the ordinary. In fact I thought it was clear that this could be done. However, this particular exception kicked me out of the online system as trying to consolidate my personal pensions savings into one place was too much for Scheme B’s online process to cope with.
Third stumbling block: I was asked more than once if I was being coerced to make the transfer by an employer or otherwise. I was told on more than one occasion by Schemes A and B that they were not giving me advice. But interestingly, I was never asked why I did not want to take independent financial advice.
So if I was being scammed or encouraged to transfer by a cold caller, for example, neither Scheme A nor B would have been able to identify this from any questions they asked me. The protections for members seemed quite flimsy at this point of the process. In effect I was asked to self-certify that I was not being scammed, which could simply mean that I was being scammed incredibly well.
I was never told until the end of my experiment that my failure (deliberate or otherwise) to seek advice would mean that Scheme B would refuse to accept the transfer. Perhaps if its helpline had understood the nature of my benefits in the first place, then the experiment would have ended there.
This article was also published in Professional Pensions and can be viewed here.