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The Dos and Don’ts: when it is right to transfer and when it is madness.


Do go to a specially licensed independent financial adviser.

Do demand a transfer value analysis. This is a computerised calculation which allows you to compare the benefits of your frozen pension with the alternatives. It also gives a “critical yield”, a figure usually in the range of 7 to 11 per cent, which indicates how fast an alternative scheme will have to grow to match the benefits in your old pension. If the critical yield is 8 per cent or less, then a transfer may be worth considering.

Do consider your retirement options. Are you intending to retire early? Check if the scheme to which you are switching has the flexibility to handle your requirements.

Do check on the financial position of your old scheme. If it is in surplus (it has more assets than pension liabilities) it may be advisable to stay with the scheme.


Don’t transfer from your existing occupational pension scheme into which both you and your employer are currently making contributions. No private pension scheme can match the benefits provided by your employer. A transfer should only be considered if you have left your employer.

Don’t transfer from a public sector pension scheme, such as the nurses’ or the teachers’ scheme, even if you left their employment several years ago. They are the Rolls-Royce of pension schemes and are guaranteed against inflation no matter how much it rises in future. Unlike other schemes they also allow “linking” of different service years if someone returns to teaching or nursing after several years’ absence. Some companies place a blanket ban on accepting transfers from these schemes, in the knowledge that the benefits cannot be matched.

Don’t transfer from a pseudo-public sector scheme, such as the Mineworkers’ or Water schemes. As these offer an extremely generous range of benefits which are difficult to match elsewhere.

Don’t transfer if you are averse to risk. Money placed in a personal pension will be subject to the rises – and falls – of the stock market, whereas a “defined benefit” final salary scheme offers guaranteed benefits.

Don’t transfer without checking the death benefits of the former scheme, which may not be matched in a personal pension without having to buy a life insurance policy.

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