Pension transfers warning: How Britons can reduce the risk of losing benefits

PENSION rules are constantly changing, for state and private pensions, so it can be daunting to stay on top of lots of complicated details.

More than 20% of people have lost a pension pot says expert

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But for those who pay attention, there are many opportunities to get ahead of the game and make sure they can hold on to benefits which many others are losing.

Claire Trott, divisional director of retirement and holistic planning at St. James’s Place, told exclusively: “There are many types of schemes, all with different benefit structures which makes deciding if you should move your funds difficult.”

She said that with the increasing complexity of pensions: “Understanding all the details of your current scheme can be difficult.

“Many old schemes have additional benefits such as more than 25 percent tax free cash, protected pension ages and even guaranteed benefits at retirement.”

By transferring one’s pension to a scheme with different rules, they may be able to realise new benefits they hadn’t known were available.

The protected pension age change is a perfect example of an area where people who are clued in will be able to retain benefits which others are set to lose out on.

Pension benefits

How you can make sure you’re not losing benefits (Image: Getty)

The normal minimum pension age (NMPA) is currently 55 but is set to rise to 57 in 2028.

This is the age at which people can withdraw funds from their pension without incurring a penalty.

When the Government announced this rule change, many were dismayed at facing a delayed retirement, but the eagle eyed amongst them will have noticed that they were given a chance to lock in their NMPA at 55, rather than waiting another two years.

The rule change meant that those who shift their pension to certain providers by 2023 will avoid the age change, so remain unaffected.


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Furthermore, the option to withdraw 25 percent of a pension as a tax-free lump sum is coveted by many and remains one of the most widely touted benefits of a pension.

So if this 25 percent figure can be increased, that will naturally be an important consideration for pension planners.

Ms Trott added: “However, these benefits need to be weighed up against things like investment options, charges and restrictions of retirement and death benefits.”

With people living longer and longer in retirement, they are having to think harder about creating a pension which will have the same longevity they do.

Pension holders may also look at the speculation surrounding the triple lock and worry about relying on the state pension as it can change depending on the political party in Government.

This is not to mention that the UK’s state pension is already the meanest in the developed world, replacing only around 22 percent of pre-retirement wages on average, a paltry living.

Pension benefits

Private pensions can be worth far more to people in retirement than the state pension (Image: Getty)

This only adds to the urgency of making sure people’s retirement plans are in place so they aren’t losing out financially where they could be making gains.

But, as Ms Trott said, these decisions will need to be weighed up against charges and investment returns, which are the most important aspects of a pension scheme when it comes to creating a comfortable and lasting retirement income.

Ms Trott finished by reflecting on how complicated pensions have become and said: “Enlisting the help of a professional can avoid the risk of losing these benefits unnecessarily.”

William Murphy

William Murphy

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