While you decide to transfer your pension, you need to take an account of several things related to it. As there are many risks involved along with the benefits, transferring pension may help you gain or lose the benefits of your current pension. Therefore, it is very essential to take time and figure out both merits and demerits to make a right decision.

If you are thinking of transferring your pension, you need to consider some important factors seriously before you make the move.

Cost of new pension

The first thing that needs to hit your mind is whether your new pension plan is expensive as that of compared to your existing pension plan or not. This is why you need to ensure if there is any charge applied to your pension transfer that exceeds the benefits from your new pension plan or not. In case of transferring Direct Benefit pension plan to Direct Contribution plan, you are liable for tax when withdrawing higher than 25% of your funds.

Guaranteed benefits

You might lose important benefits of your existing pension plan if it has a benefit like Guaranteed Annuity Rates (GARS). It is the amount paid by your pension provider at a particular rate after your retirement throughout your life. The amount paid may be of higher value than that of market value at the time of your retirement. So, it is important to know whether your provider offers it or not.

Duration of transfer

Sometimes, pension transfer may take time to execute. As we know that the market is dynamic, the value of your pension may keep on fluctuating. During that period, you may lose the benefits of your pension as your transfer is in progress and not invested in any schemes. Thus, you need to determine the time that suits you best with respect to your circumstances.

Final salary schemes

Final salary scheme is a guaranteed, pre agreed amount that you will receive upon your retirement. It is based on the amount that you were paid when you retire and the duration of your payment in the scheme. The benefit of this scheme is that the income is sure to rise which will keep up with the rising prices in future. So, if your current pension is in the final salary scheme, stick to it.

With Profits fund

If you are thinking of transferring With Profits fund to another one, you might lose the attractive bonus rates. Along with bonuses, your pension fund’s value is also subjected to reduce. As a result, you will lose both the benefits which make it obvious not to take this step.

These major factors needs to be considered the most before deciding whether to transfer pension or not. However, it is advisable to seek help from professional advisers for making the best decision.