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Transfer fees capped for over 55s – time to consider bringing your pensions together?

Transferring a pension might be cheaper than you think. We discuss why considering transferring and combining your pensions could make your retirement income easier to manage.

Important notes

This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.

There are a number of reasons why people transfer pensions from one provider to another, and a few reasons why you might be better off where you are. One potential blocker could be the high exit fees your pension provider charges?

Well the good news for those that don’t know is that there’s a cap on early exit fees for those over 55. This rule puts a cap on the extra charges that companies can make for taking or transferring your pension before your expected retirement age.

In this article we explore what this rule means for pension savers and why you could consider bringing all of your pension pots together in the run up to retirement.

This article isn’t personal advice. Pension and tax rules can change and any benefits depend on your circumstances. If you’re not sure what the best course of action is for your circumstances, please ask for advice. You can’t normally access money in a pension until age 55 (57 from 2028).

A high price for pension flexibility

Early exit fees often penalised those who had reached age 55, but not the ‘retirement age’ agreed with their pension provider. This meant that it could cost more for pension savers to transfer or take out their pension.

The cost of early exit fees varied wildly, with some charges reaching as high as 24% of the pension value. Charges could wipe out a big chunk of a retiree’s hard earned pension savings.

This had a knock on effect for people not being able to access their pensions in a way they wanted, and with a company that allowed them to.

Fortunately in 2017, the government stepped in and capped early exit fees for over 55s at 1%. It now means that a company can’t slap on additional charges just because someone over 55 hasn’t reached their retirement age. If they did, the entire charge for leaving now has to be capped at 1%.

As George Osbourne put it at the time, “[we’re not] prepared to stand by and see people either ripped off or blocked from accessing their own money by excessive charges.”

Want to learn more about how to access your pension?

Discover your options at retirement

Time to double check the cost of transferring?

If you’ve got it in your head that transferring a pension is expensive, it’s probably worth double-checking. Over the years, some providers have actually decided to scrap exit charges altogether, so it might not cost you anything.

If your pension provider does charge for transferring, it’s worth thinking carefully before going ahead. For example, even though the charge is capped at 1%, £1,000 of a £100,000 pension pot is still significant.

You’ll also need to check whether you’ll lose any valuable guarantees or benefits by transferring your pension. If your pensions offer you a guaranteed income or protected tax-free cash, it could be best to leave them where they are. Pensions are usually transferred as cash meaning while you’re out of the market, you won’t benefit from any rises or suffer any falls.

Learn more about transferring

Why it could be worth bringing your pensions together?

When retirement is on the horizon, it’s a good idea to review your pensions to see which you can combine. Having a number of pension pots scattered around might make planning for your retirement harder than it should be. Bringing them all together means you’ll have just one account and only need to deal with one provider.

With everything in one place, you can easily keep an eye on your investments and check what you’ve saved so far. This is essential on the run up to retirement as you’ll need to know whether you’re on track to reach your goals. It could also make life easier at retirement, as you can get the income you need without having to juggle different accounts.

More on combining your pensions

Take control with a SIPP (Self-Invested Personal Pension)

If you want all of your retirement savings under one roof, you could think about transferring to the HL SIPP. It’s a flexible pension account that lets you take control and decide where to invest.

By transferring into the HL SIPP, you can:

  • Easily see what your pension is worth online or by using the HL app
  • Choose investments suited to your own values and retirement plans
  • Get support 6 days a week and speak to our retirement service.

While our retirement service won’t give you financial advice, if you feel that you need it then you can always speak to our advisory team about what they can offer and the charges involved. Remember, all investments fall as well as rise in value, so you could get back less than you invest.

Discover the HL SIPP

Get cashback on investments, pensions and savings

Transfer your investments or pensions to HL, or open an Active Savings account, and you could qualify for cashback. You can even qualify for multiple cashback offers as long as you meet the criteria outlined in each set of terms. The more you transfer, the more you could receive. Terms apply.

Find out more


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    Important notes

    This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.

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