Why can't I transfer out of employer's pension into Vanguard consolidated pot? 11 January at 2:00PM in Pensions, annuities & retirement planning 26 replies 1.1K views

KirstenNeilson

Hello

I'm 40 so a few years to go yet before retirement!

A few years ago, I consolidated my old pots into a Vanguard pension. 

I have been told I can't transfer money out of my current employer's pension into this Vanguard pension.  I'd need to wait until I moved employer and it was no longer receiving contributions.  Why is this?  

Thanks

dunstonh

 I'd need to wait until I moved employer and it was no longer receiving contributions.  Why is this?  

Not all pension schemes support partial transfers (in particular older schemes).

penners324

Employers will only submit to 1 pension account. They have to tell the Prensions Regulator who that is.

Most pension companies won't let you transfer out while contributions are still being made

dunstonh

Most pension companies won't let you transfer out while contributions are still being made

Indeed, under auto-enrolment rules, they cannot transfer fully until the person is no longer classed as an active member.

KirstenNeilson

Thanks all. 
Why though?  What is the reason behind this rule?  Who benefits from it?

dunstonh

Why though?   What is the reason behind this rule?

Group schemes or occupational pensions are not run the same way as individual schemes.   A lot of individual providers don't allow partial transfers either.

Partial transfer functionality is a relatively modern thing.  Many pension schemes are running on decades old software.  It costs a lot of money to bring in functionality on a legacy scheme.   So, a balance has to be had on the costs of bringing in functionality for something that most employers will never be asked to provide.

On a more modern plan, that was built more recently, that functionality will be in place by default in many cases and not require paying for.

Who benefits from it?

99.9% of pension holders who never use partial transfers.

Marcon

KirstenNeilson said:

Thanks all. 
Why though?  What is the reason behind this rule?  Who benefits from it?

Pension scheme administration is massively more complex than, say, a normal savings account with a bank or building society. Add in the prescriptive rigours of auto-enrolment and things get even more complicated. As dunstonh points out above, many schemes are running very old software, and the cost of updating to meet the needs of a tiny minority would mean increased costs for everyone.

Not sure why you want to transfer your current pension scheme to Vanguard. I can understand consolidating previous pensions into the same pot (does help to keep track!), but give you are still paying in to this one, you know where it is... Maybe look at changing your fund choices within your current scheme if that's also a driver behind wanting to transfer? 

KirstenNeilson

Thanks guys. 
Interesting, so things may change in the future. 
I'm just a big fan of Vanguard and it has more choice re funds than my employer's provider. 

Pat38493

KirstenNeilson said:

Thanks guys. 
Interesting, so things may change in the future. 
I'm just a big fan of Vanguard and it has more choice re funds than my employer's provider. 

Have you checked whether you can move the funds in your employer scheme into Vanguard funds without transferring?  Many employer pensions allow you to control which funds your pension is actually invested in and so you might still be able to invest your money in a vanguard fund (or something very similar) without transferring out.

dunstonh

I'm just a big fan of Vanguard and it has more choice re funds than my employer's provider. 

And I am a big fan of whole of market platforms that have tens of thousands more investment options than Vanguard.   However, that doesn't mean you are going to use them all and most half decent workplace pensions have sufficient investment options that are comparable to what you are likely to use.

Even if you could do a partial transfer, the time out of the market could cause you a loss that you never recover in the alternative.   

So, look at what your scheme has and look for comparable options.

artyboy

dunstonh said:

I'm just a big fan of Vanguard and it has more choice re funds than my employer's provider. 

And I am a big fan of whole of market platforms that had tens of thousands more investment options than Vanguard.   However, that doesn't mean you are going to use them all and most half decent workplace pensions have sufficient investment options that are comparable to what you are likely to use.

Even if you could do a partial transfer, the time out of the market could cause you a loss that you never recover in the alternative.   

So, look at what your scheme has and look for comparable options.

To be fair, my own current employer's scheme has a very narrow set of funds to choose from, which is a bit ironic given it's one of the world's biggest banks. And despite the fact that they cover all fund/administration charges themselves, I'd still rather transfer to Vanguard, if it was a straight choice between the two of them...