What Happens When You Transfer a Pension?

Pension transfers are becoming more common, especially as more people take control of their retirement planning. But many still wonder:

“What actually happens when you transfer a pension?”

In this article, we break down exactly what happens step-by-step when you move your pension from one scheme to another.

Whether you’re consolidating pensions, moving from a defined benefit to a defined contribution scheme, or simply switching providers for better performance, understanding the process is essential to making confident financial decisions.

What Is a Pension Transfer?

A pension transfer is the process of moving your pension savings from one provider or scheme to another. You’re not withdrawing the money or spending it, you’re simply changing where it’s held, usually to benefit from:

• Lower fees

• Better investment options

• Greater retirement flexibility

• Simpler management of multiple pensions

It can apply to both personal and workplace pensions, and can even involve moving funds from a defined benefit (DB) scheme to a defined contribution (DC) plan.

What Actually Happens During a Pension Transfer?

Let’s break down the process into clear steps.

1. You Request a Transfer Value

The first step is to ask your current pension provider for a transfer value. This shows how much your pension is worth today if you moved it.

• For a DC pension, this is simply your fund’s current market value.

• For a DB pension, you’ll receive a Cash Equivalent Transfer Value (CETV)—a lump sum that represents the value of your guaranteed future income.

CETVs are usually valid for 3 months and calculated based on your age, life expectancy, interest rates, and scheme rules.

2. You Choose a New Provider or Scheme

You’ll need to decide where to move your pension. This could be:

• A new personal pension

• A Self-Invested Personal Pension (SIPP)

• Your current workplace pension provider (if they accept transfers)

• A flexible-access drawdown scheme

The goal is to find a scheme that aligns with your retirement goals, risk tolerance, and investment preferences.

3. You Complete a Transfer Application

Once you’ve chosen your new provider, you’ll fill out a transfer request form, authorising the movement of your pension from the old scheme to the new one.

If your DB pension is worth more than £30,000, you are legally required to receive FCA-regulated financial advice before proceeding.

4. The Two Providers Coordinate the Transfer

Your new provider will contact your existing provider to request the transfer. This typically involves:

• Validating your identity

• Verifying scheme details

• Agreeing on the transfer method (cash or in-specie)

• Processing the fund movement

You won’t normally need to do anything during this phase unless additional documentation is requested.

5. The Funds Are Transferred

Once everything is verified, your funds are transferred:

• For DC pensions, your provider sells your investments and sends cash to the new scheme.

• For DB pensions, your CETV is paid into your chosen DC scheme as a lump sum.

Some providers offer in-specie transfers, where your investments are moved without being sold, though this is less common.

6. Your Pension Becomes Active in the New Scheme

After the funds are received, your new pension provider will:

• Confirm receipt of the transfer

• Reinvest the funds based on your chosen portfolio (or hold them in cash until you decide)

• Begin managing your pension under the new scheme’s rules

At this point, the old pension is effectively closed, and your new pension becomes the official holder of your retirement savings.

How Long Does a Pension Transfer Take?

The transfer time depends on the type of pension and the responsiveness of both providers.

• DC to DC transfers: Usually take 2 to 6 weeks.

• DB to DC transfers: Often take 8 to 12 weeks due to the need for advice and complex verification.

• Multiple pot consolidations: May take longer depending on how many schemes are involved.

Delays can also occur if:

• Additional documentation is required

• The old scheme has outdated contact details

• The providers use different platforms or transfer protocols

Is the Pension Transfer Taxable?

In most UK cases, pension transfers are not taxable, provided the transfer is:

• Made between UK-registered pension schemes

• A direct transfer (not withdrawn as cash first)

• Done before or without accessing taxable benefits

If you withdraw money and then reinvest it into a new pension scheme, you may incur tax liabilities, especially beyond the 25% tax-free lump sum allowance.

Transfers should always be handled directly between providers to avoid tax charges.

What Happens to Your Investments When You Transfer?

This depends on how your transfer is carried out:

Cash Transfers

Your existing investments are sold and the proceeds transferred as cash to the new scheme. You can then choose how to reinvest in your new pension.

This is the most common method.

In-Specie Transfers

In this case, the actual assets (such as shares or funds) are moved directly from one provider to another, without being sold.

This is useful if:

• You want to avoid selling and repurchasing the same assets

• You’re worried about market timing

• You hold specific investments in a SIPP

However, not all providers support in-specie transfers, and they can take longer to process.

What Happens to Your Old Pension?

Once your pension has been transferred:

• The old pension is closed

• You will no longer receive statements or updates from the previous provider

• Any associated benefits (e.g. protected tax-free cash or guaranteed annuity rates) are lost if not preserved before transfer

It’s vital to confirm what benefits you’re giving up before you transfer, especially for older or DB pensions.

What Happens with a Pension Transfer If You’re Already Drawing Income?

You may still be able to transfer, depending on how you’re taking income:

• Flexi-access drawdown: Usually transferable to another provider that offers drawdown.

• Annuities: Generally not transferable. Once purchased, an annuity is a lifetime product.

• DB pensions in payment: Cannot be transferred once income has started.

What Are the Risks when Transferring a Pension?

While pension transfers can provide flexibility and control, they do come with risks:

1. Investment Risk

Once you move to a DC scheme, you bear the risk of poor market performance affecting your retirement fund.

2. Loss of Benefits

Older pensions may offer:

• Guaranteed annuity rates (GARs)

• Protected tax-free lump sums

• Early retirement provisions

• Generous spouse pensions

These can be lost upon transfer.

3. Fraud and Scams

Pension scams are on the rise. Only work with FCA regulated firms, and never transfer your pension due to cold calls, time pressure, or unsolicited emails.

What If You Change Your Mind whilst Transferring your Pension?

Once the transfer is complete, you typically can’t reverse it. That’s why due diligence is essential beforehand.

However, if you initiate a transfer and change your mind before completion, you may be able to cancel, especially if you’re still within the statutory 30-day cooling-off period with the new provider.

How to Make a Successful Pension Transfer

Understand Your Transfer Value

Know what your pension is worth today and what you’re giving up.

Compare New Providers

Don’t transfer blindly, ensure the new scheme is suitable, efficient, and reputable.

Seek Professional Advice

Especially critical for:

• DB pensions

• Large pension pots

• Legacy pensions with special terms

Document Everything

Keep copies of all transfer documents, valuation letters, and provider communications.

How Belgravia Capital Wealth Management Supports You with Pension Transfers

At Belgravia Capital, we specialise in helping individuals navigate complex pension decisions with confidence. We provide:

• Full pension reviews to assess your transfer value

• FCA-regulated financial advice

• Guidance on investment selection and drawdown planning

• Clear communication with both old and new providers

• Ongoing support post-transfer

We help you move your pension with clarity and purpose, not confusion and risk.

So, what happens when you transfer a pension?

In short, your pension funds move from one provider to another. But behind that seemingly simple transaction lies a critical financial decision.

Transfers can offer flexibility, efficiency, and opportunity - but only when done for the right reasons and with the right guidance.

Understanding the process allows you to approach it with confidence.

Done correctly, a pension transfer can enhance your retirement plan. Done incorrectly, it could lead to lost benefits or exposure to unnecessary risks.

Speak to a Pension Transfer Expert Today

Thinking about transferring your pension? Let Belgravia Capital Wealth Management guide you through every step, from evaluation to execution.

Email us at contact@belgraviacapital.co.uk

We’ll help you make a secure, strategic, and successful pension transfer that supports your retirement goals.