Pension Transfer: A Slow Adventure with Potential for Added Value

Like many others, I have a small corporate pension account that has been sitting around for many years – and it's high time to figure out what to do with it. The temptation to save it for a nice vacation at the start of retirement is great, but the high fees could reduce the amount over time. So maybe not such a nice vacation after all? I have now begun the process of transferring it into a larger pension fund, carefully selected for its low costs and good investment opportunities. Your pension is likely your largest asset besides your home, so switching to a better offer should be a priority. However, many people reviewing their finances in January may not focus on pension transfers or consolidations. This is at least partly because it is much easier to choose better savings rates, optimize household budgets, or rebalance investments. All these tasks can be completed within a few hours. But the timeline for a pension transfer is daunting – in some cases, it can extend to outrageous lengths. However, there are some indications of improvements. The Origo Transfer Service handles 95 percent of defined contribution pension transfers. New legal regulations could slow this progress, though. November 30 marked the third anniversary of the introduction of the pension transfer regulations by the Department for Work and Pensions. These rules allow pension providers to raise concerns about your transfer. Thousands of people have been saved from fraudsters, yet many transfers have been unnecessarily interrupted. A guaranteed timeframe for pension transfers is urgently needed. Investors do not like the risk of long delays, as they are either excluded from the stock market with cash or cannot trade their investments until the transfer is complete. Despite the delays, I believe a transfer is worthwhile as you have control over lower fees as an investor. If my savings were larger or I were further from retirement, there would be much more to lose. It is worth considering, for example, whether the provider charges exit fees. Some might be so eager to get your pension that they cover the exit fees for you. A smoother transfer is more likely if you sell off unusual investments and conduct the transition as a cash transfer. Until then, the goal remains to have less paperwork and fewer passwords – an underestimated soft advantage.