Establish the costs involved, if any, in transferring your money from your existing pots to your new platform
Some pension schemes may charge fees to move money to another firm, such as the new one (also known as a ‘platform’) that you have chosen for your amalgamated pension pot.
Some charges depend on the exact circumstances, such as those that apply if the policy has not yet matured, while others are simply administrative fees.
The fees may come by various names and may not be immediately obvious for what they are. For example, with-profits policies may apply a ‘market value adjustment’ (MVA) if you want your money before maturity.
A market value adjustment is a roundabout way of telling you that your investment has gone down in value. It’s a classic case of investment firms – insurers, in this case – using unnecessary jargon to hide the bad news.
Your policy value will appear as usual on your regular statement. This won’t necessarily show any fall in the underlying investments. Such falls will become apparent only if you want to cash out of your policy or transfer it, in which case the MVA will suddenly apply. Thankfully these types of with-profits policies are disappearing.
Weigh up whether an MVA is worth paying, or whether it’s better, in view of the policy’s prospects, to wait until you can transfer without cost. It’s not possible to give hard and fast guidance about how to do this, but if a lot of money is at stake it may be worth getting advice (see our page about financial advice for more).
Otherwise, it may be best to leave the plan alone if there is a large MVA and wait for the policy to mature before transferring the money.
Company pensions and the more modern personal pensions, which tend not to be of the with-profits type, are unlikely to impose charges large enough to make moving your money unwise. They may charge some kind of administrative or other fee for exiting.
What about fees imposed by your new pension company for joining? While a few firms charge for setting up a new pension plan, most do not. Some even encourage you to switch to them by covering the transfer fees imposed by your previous pension firm, so it is worth asking about that.
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