Tracking down your lost pension pots and consolidating them into one place is a good financial admin task to tick off your list – if it suits your circumstances.

A £100,000 pension pot switched from a product with total charges of 1.5% to a platform where charges total 0.75% could be worth £11,000 more in 10 years’ time or £32,000 more after 20 years.

Finding those old pensions can be a lucrative exercise. Estimates vary but tens of billions of pounds are believed to be held in lost pension pots. The Pension Policy Institute calculated last year that over £26 billion of UK savers’ money is stranded in lost pension accounts.

There’s an admin benefit to tracking down and transferring pensions, as the money is all in one place – so you just have one log-in to remember.

You could also transfer to a pension account with cheaper charges, which would boost your long-term wealth.

WHAT TO CONSIDER BEFORE YOU TRANSFER

Before deciding to move your pension, you should check out the charges and investment options for both the pension company you want to move from and the one you want to move to.

You’ll want to check the annual costs, as well as any trading costs or admin charges. And check the range of investments you can put your money into – to make sure there is sufficient choice for you.

If you’re nearing retirement, you’ll also want to consider the options for retirement income that the pension providers offer.

If you’ve got smaller pension pots worth £10,000 or less it might be a good idea to leave them where they are – as you would be able to withdraw the entire pot as a ‘small pot lump sum’ without affecting your future pension contributions.

WHAT ARE THE BENEFITS OF TRANSFERRING A PENSION?

Opportunity to switch to a lower cost scheme

Opportunity to access a greater range of investments

Less paperwork if you put all your pensions into a single pot

More convenient if you only need one log-in to monitor your pension (as a result of consolidating your pots to a single place)

WATCH OUT FOR SCAMS

Above all else when transferring your pension, you need to make sure you’re moving to a reputable pension provider and that the money is staying inside a pension.

So-called ‘pension liberation’ schemes may offer the option of accessing your pension pot before the age of 55 – but it’s likely to be a scam and could mean you lose all your money – and face a 55% tax charge for taking your money out of a pension early.

Also be wary of any pension provider promising high returns – these are likely to be scams too.

Check the provider, and any adviser who has contacted you about transferring, is registered with the FCA (you can check on the FCA’s register online) and check their contact details match what you’re using. If you’ve been contacted out of the blue about the transfer it’s likely to be a scam.

THE TRANSFER PROCESS

If you do decide to transfer, what does transferring your pension involve, how long does it take and how can you get started?

The provider to whom you’re moving should take care of much of the work for you. You can transfer most types of pension into a SIPP, including a pension you’re already taking money from.

Your first step is to find the paperwork for the pension you want to transfer, including its valuation and details of any guarantees it includes. These guarantees might range from a higher tax-free lump sum or a guaranteed annuity rate – and you could lose them if you transfer.

You’ll also want to check that you’re not going to face any penalties for moving – some providers will charge you for transferring out, but equally your new provider may offer to cover some (or all) of those costs. You’ll need all this information to fill out a pension transfer form to get the process started.

It’s also a good idea to check out the Government’s MoneyHelper service, which offers free, impartial guidance, to make sure you’re making the right move. Alternatively, you could get financial advice, if you want to get an adviser to check your financial situation.

If you are hoping to transfer a defined benefit pension, you’ll need a financial adviser to recommend the move if the pension is worth £30,000 or more – so bear that in mind before you start the paperwork. Another thing to consider is that if you’re in poor financial health it’s a good idea to get financial advice, as there may be tax implications if you die within two years of the transfer.

TWO WAYS TO TRANSFER A PENSION

Instruct your existing pension provider to sell your investments and then transfer the money as cash to your new pension provider, where you can build a new portfolio

Transfer all your existing investments to your new pension provider – this is called an ‘in-specie’ transfer

FILLING OUT THE TRANSFER FORM

Once you’ve ticked all those boxes you should be ready to fill in your transfer form. You’ll need to already have a SIPP account open with the provider you want to transfer to – so they can pay the money into that account. For some providers transfer forms can be done online, while for others it will be a case of filling out paperwork and posting it off.

Sometimes the process to transfer a pension can be very quick and other times it can drag on – but the pension you’re moving from must carry out the transfer within six months. In reality it should be much quicker.

Pension transfers often take longer than ISAs, but it depends on what your pension is invested in and whether you want to keep it invested.

It also depends how quickly both the pension company you’re leaving and the one you’re transferring to act. Often you might be asked for additional information, so if you want the process to go quickly you should reply to these requests quickly.

CAN YOU KEEP YOUR INVESTMENTS WHEN TRANSFERRING?

You can choose to keep your pension invested (often called an ‘in specie’ transfer) – the benefit of this is that you don’t miss out on any days in the market, but the downside is that it can take longer to move the money over.

Your new pension provider will need to check they offer the same investments and may need to move them to a different share class. Alternatively, you can choose to move your existing pension into cash and then transfer the cash over, before making new investments once the transfer has happened. This means that if markets soar in the days or weeks when you’re out of the market you won’t benefit (but equally if markets fall, you won’t be hit).

HOW LONG DOES IT TAKE TO TRANSFER?

As an example, a transfer in cash usually takes between two and four weeks, while one involving shares takes four to six weeks, and funds take six to eight weeks, while international shares take 10 to 12 weeks. These are only a guide and you should be prepared for it to take longer.

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