Transferring a pension can be a suitable strategy for various reasons. You may want to consolidate several pension pots into a single, more manageable plan, gain greater control over how your funds are invested, or move your pension to a jurisdiction with more favourable tax treatment—particularly if you’re an expat or planning to retire abroad.
But how much does it cost to transfer a pension? In this article, we break down the typical costs involved, from upfront charges to long-term considerations. We also explain why seeking regulated, professional advice is essential before making any decisions about a pension transfer.
What You Will Learn
- What pension transfer fees are typically involved in the process.
- What additional tax implications may apply depending on the type of pension transfer.
- How immediate and long-term charges can affect the overall value of your pension.
- Why seeking regulated financial advice is essential before proceeding with any pension transfer.
Cost of Transferring a Pension: What Pension Transfer Charges Exist?
A professional pension transfer specialist can identify all relevant fees and charges associated with your pension transfer. Having this level of support is essential – ensuring you fully understand the true cost of your options before making any decisions.
Transferring a pension includes several charges that you should be aware of. These can be fixed or percentage-based and may add up by the time your transfer is complete.
These are the most common pension transfer fees in the UK when transferring a UK pension:
- Exit fees.
- Setup fees.
- Administration fees.
- Financial advice fees.
Exit Fees
An exit fee is a fee your current provider may charge to move your pension. It can be a fixed fee or a percentage of your total fund. The details depend on your pension type:
- Defined Benefit (DB) pensions: There are typically no exit fees when transferring this type of pension, but the process is often complex and requires financial advice.
- Defined Contribution (DC) pensions: Older DC pensions (set up before 2001) may include early exit fees when transferring or accessing funds before a specified age. Newer schemes typically do not include exit fees, and the Financial Conduct Authority (FCA) capped exit fees at 1% of the pension’s value in 2017 for those over 55. If you’re under 55, you may be charged around 2–3% of your total fund value.
- Personal and stakeholder pensions: Some older personal and stakeholder pensions may charge exit fees, though most modern schemes have removed them.
- Self-Invested Personal Pensions (SIPPs): Modern SIPPs typically don’t include exit charges, but administrative or transfer charges may apply.
- Qualifying Recognised Overseas Pension Scheme (QROPS): You may encounter exit or transfer fees when moving your pension to another provider or transferring it back to the UK. The fees vary by provider and jurisdiction.
- Qualifying Non-UK Pension Scheme (QNUPS): QNUPS are mainly used for estate planning and tax flexibility, so they usually don’t have exit fees.
- Section 40ee Scheme (International Private Pension Plan): Minimal exit fees may apply, but the exact amounts depend on specific terms defined by individual providers.
Setup Fees
Similarly to exit fees, your new provider might charge a fixed fee for setting up your account. Even though setup fees are uncommon nowadays, it’s best to double-check all the terms with your new provider before moving your pension.
Administrative Fees
Some providers may charge administrative fees for processing the pension transfer. The exact cost will depend on both the provider and the value of your pension.
Like setup fees, separate administrative charges are uncommon today, and providers often combine them with annual management fees. Still, you should ask both your current and future provider about the exact terms to be aware of all the potential costs.
Financial Advice Fees
Professional financial advice is invaluable for understanding all the charges and defining the accurate cost of transferring a pension. There are two specific situations when you’ll be required to get financial advice by law:
- If you want to transfer a final salary pension with a CETV of more than £30,000.
- If you want to transfer a defined contribution pension with a guaranteed annuity rate (or other valuable benefits) of more than £30,000.
Financial adviser fees vary—some will charge a fixed fee, while others may charge a percentage of your pension transfer value, typically up to 5%. This depends on the complexity of the transfer and the level of advice required.
The transfer process can be time-consuming and complex, which means that consulting a pension transfer adviser is a must if you’re unsure whether a transfer is the right choice. At Titan Wealth International, we offer tailored pension transfer advice, helping streamline the process and avoid hidden costs.
Potential Tax Charges for Overseas Pension Transfers
If you’re an expat, you might decide to transfer your pension overseas, which may incur specific tax fees. The most common overseas pension schemes include:
- Qualifying Recognised Overseas Pension Scheme (QROPS)
- Recognised Overseas Pension Scheme (ROPS)
- Qualifying Non-UK Pension Scheme (QNUPS)
- International Private Pension Plan (Section 40ee scheme)
- QROPS Self-Managed Superannuation Fund
Pension transfers to a QROPS or ROPS are available. However, transferring to a ROP may trigger a 40% tax charge if the scheme does not meet the qualifying criteria.
When transferring to a QROPS, the following may apply:
| Transfer | Details |
|---|---|
| Overseas Transfer Charge (OTC) | The OTC is a 25% tax imposed on transfers from UK pensions to QROPS schemes unless you reside in the same country where the QROPS is registered. If this condition is not met, the 25% OTC applies, but you can request a refund if you move to the country where your QROPS is based within five years from the transfer date. |
| Overseas Transfer Allowance (OTA) | If you’re transferring a pension worth more than £1,073,100, which is your OTA, you’ll have to pay a 25% tax on the excess amount above the allowance. |
The current OTA came into effect on April 6 2024. If you transferred your pension overseas before that, your OTA may differ. Also, if you’re older than 75 and transferring your pension from a QROPS into a UK-registered scheme, your OTA will typically be higher.
Potential Long-Term Costs of Transferring a Pension
Your new pension scheme may have different ongoing costs than your current plan. The most common fees include:
- Annual management fees: Pension providers may charge an annual management fee, paid as either a fixed sum or as a percentage of your pension’s value. It’s important to understand the exact charge, as higher fees can erode long-term investment returns and, in some cases, outweigh the benefits of transferring your pension.
- Transaction fees: Your new pension provider might charge fees on investments and withdrawals, which can add up over time.
- Trading costs: Your provider may impose trading fees when you buy and sell investments.
- Performance fees: Certain pension schemes charge performance fees when your investments outperform the expected returns.
Financial Risks That Could Lead to Money Loss
Besides ongoing costs, transferring a defined benefit pension usually carries more risk because of:
- Investment performance: Private pension schemes provide more investment freedom than defined benefit schemes but have higher risks. Poor investment decisions could erode your pension funds and impact your future financial stability.
- Inflation risks: Final salary pensions are adjusted for inflation, protecting your retirement funds from regular and unexpectedly high inflation rates. Private pension schemes do not offer this perk, so you’ll lose a valuable layer of protection.
- Loss of guaranteed benefits: Many final salary pension schemes and older defined contribution schemes offer additional benefits, such as guaranteed annuity rates, life insurance, and additional death benefits. If your current scheme provides these benefits, transferring it may not be the best solution.
- Exhaustible funds: Final salary pensions provide income for life, which is not the case with private pension plans. Depending on your investments and spending habits, you may exhaust the funds you keep in a private pension.
A key point to consider is the irreversibility of your decision—once you transfer out of a defined benefit scheme, you cannot transfer back. That’s why you should consult with a Pension Transfer Specialist to help ensure you make the right decision based on your long-term financial goals and personal circumstances.
Benefits of Transferring a Pension: Could It Save You Money?
Depending on your current situation and future plans, there are several benefits of transferring a pension that could save you money over time.
The most significant ones include:
| Benefits | Details |
|---|---|
| Inheritance Flexibility | Many private pension schemes allow your spouse or family to inherit your pension fund after your death, which can make a transfer worth considering. |
| Better Investment Performance | Your old pension scheme may be invested poorly or offer limited investment opportunities. Transferring to a new scheme with a better investment portfolio could result in more financial stability once you retire. |
| Tax Benefits | Switching to a private pension scheme can provide you with tax advantages, such as the ability to withdraw up to 25% of your pension pot tax-free. |
| Lower Fees and Penalties | Your new provider may have lower management and transaction fees and penalties, which can save you money in the long run. |
| Combining Multiple Pension Pots | Combining multiple pension pots into one can allow you to manage and invest your pension more easily. Many providers also offer lower management fees on higher-value pensions, making it more beneficial to have one large pot instead of several smaller ones. |
Key Takeaway
In this guide, we’ve answered the important question: how much does it cost to transfer a pension? We’ve outlined the typical pension transfer fees you may encounter, including exit charges, setup fees, advice costs, and ongoing administration charges.
We’ve also explored the longer-term financial considerations, such as annual management fees and the potential impact of high costs on your investment performance.
Where relevant, we’ve highlighted tax implications that may apply to certain types of transfers, including international schemes such as QROPS, and stressed the importance of understanding your residency status and applicable tax rules before proceeding.
Finally, we’ve explained why regulated financial advice is not only valuable but essential, particularly if you’re considering transferring out of a defined benefit scheme or moving your pension overseas.
To help you understand your options, we recommend speaking with a Titan Wealth International Pension Transfer Specialist. Our advisers can assess your current arrangements, explore your long-term objectives, and guide you through the transfer process with care, accuracy, and full regulatory compliance.
