Whether it was Alan from Accounts’ awkward small talk, or your dream role elsewhere; we’ve all had our reasons for leaving a job.
But when you do, you might be left wondering the following: can I transfer my old workplace pension to a SIPP (or, to give it its full name, a Self-Invested Personal Pension)?
Well, the answer to that is a simple ‘yes’.
What might not seem quite so straightforward, however, is the question that usually follows: ok, but how do I transfer my old workplace pension to a SIPP?
Thankfully, moving all your old workplace pensions into one place doesn’t have to be as daunting as it sounds.
And, in this article, we’re going to show you how!
Please note that Wealthify does not offer workplace pensions. As a result, you cannot transfer an active workplace pension to us, but you can transfer previous workplace pensions (i.e., those from past employers).
To jump to a specific section just click the links below:
- Can I transfer my workplace pension to a SIPP?
- What are the benefits of transferring an old workplace pension to a SIPP?
- How do I find all my old workplace pensions?
- How do I transfer my workplace pension?
- Pension transfer rules and considerations
- Summary
Can I transfer my workplace pension to a SIPP?
Before going any further into the benefits of transferring, let’s remind ourselves what the difference is between a workplace pension and SIPP.
What is a workplace pension?
A workplace pension is a type of private pension set up by your employer, allowing you to save for retirement by contributing a minimum of 5% of your salary; this amount is deducted from your paycheck before tax each month. By law, your employer also has to pay a minimum of 3% into it — making the total monthly contribution at least 8% of your salary.
In the UK, workplace pensions are ‘opt-out’. If you’re an employee, this means you’ll likely be automatically enrolled into a workplace pension scheme when you start a new job.
And, even though there are lots of pension providers (each investing your money differently), workplace pensions typically fall into the following three categories:
- A defined contribution pension is the most common type, where your pension’s worth is determined by how much you and your employer put in — and how the investments perform.
- A defined benefit pension is where your retirement benefits are based on your earnings and how long you’ve been a member of the scheme.
- Cash balance plans are then a mixture of defined contribution and benefit schemes.
The type of pension scheme you’re enrolled in will depend on your employer. This is because defined benefit and cash balance plans aren’t often available through personal pensions.
What is a SIPP?
Also a type of private pension, a SIPP is different to a workplace pension because it relies solely on contributions you make. With a SIPP, you choose how much and where your money’s invested — with a large range of investments on offer such as shares, bonds, and property. As an added bonus, SIPPs provide an instant 25% government tax relief top-up on all personal contributions (with more on this benefit below).
What are the benefits of transferring an old workplace pension to a SIPP?
Whether you’re looking for flexibility, tax-efficiency, or just a bit more control over your retirement; transferring an old workplace pension to a SIPP comes with many benefits.
Control
By letting you choose and adjust the exact amount you want to contribute, a SIPP lets you save for retirement on your terms. This is also the case with how you want your money to be invested. Because, whether you're picking your own or letting a company like Wealthify choose them on your behalf, a SIPP gives you access to a wide range of investments such as shares, bonds, and property.
Tax benefits
One of the good things about a SIPP is that you don’t pay capital gains or income tax on your investments as they grow. And, just in case that wasn't enough, you also get a government tax relief top-up of 25% on personal contributions. If, for example, you paid £80 into a SIPP, the government would add another £20 — taking your total investment to £100!
Flexibility
If you’re looking to have more than just the money from a workplace and State Pension for retirement, then a SIPP gives you added flexibility over your options. You can start withdrawing from a SIPP when you turn 55, with the option to take up to 25% of your money as a tax-free lump sum. Many SIPPs – including Wealthify's – let you choose how to take your funds out. This is known as a defined contributions scheme, meaning you'll be able to either:
- Withdraw your entire pension as a lump sum in one go.
- Take out lump sums when you need them.
- Or get paid a regular income based on your pot size.
How do I find all my old workplace pensions?
Before exploring the answer to “how do I transfer my old workplace pension?”, you need to know how to find one — starting with the category you fall into:
Finding a pension when you know the provider
In this instance, you’ll need to find your policy number — usually on an annual statement from the pension provider (even if it’s one you no longer pay into). If you can’t find a statement, then you may still be able to find the pension by getting in contact with the provider and sharing some basic personal details.
Finding a pension when you don’t know the provider
For those of you in this category, the government’s Pension Tracing Service should be your first port of call.
Finding a workplace pension when you don’t know the provider
If you find yourself in this situation, start by contacting your old employer, as they should have a record of your pension on file. Once you have the policy provider’s name, you should be able to find the pension by contacting them.
For more information, please read our article on how to find old pensions.
How do I transfer my workplace pension?
Ok, let’s get into the nitty gritty of how you actually transfer money between an old workplace pension and SIPP.
With Wealthify, it’s a simple, three-step process:
Step 1: Account setup
Using our app or website, setting up a Wealthify account is just a matter of providing some basic details about yourself (including a few suitability questions).
Step 2: Pension details
Whether you're transferring a single or multiple pensions, we'll need their approximate value, the provider’s name, and your account reference number with them.
Step 3: Authorise the transfer
Once you've authorised the pension transfer, we’ll contact your existing pension provider(s) to move its current cash value to Wealthify. This transfer process usually takes 2-6 weeks.
Partial transfer of an old workplace pension to SIPP
If you’re looking to transfer a partial amount between a workplace pension and SIPP, you’ll need to check whether your provider allows them first (at Wealthify, we do).
As ever, if you’re looking to transfer a defined benefit pension, you’ll need to make sure you don’t lose features such as loyalty bonuses.
When it comes to partial transfers to Wealthify, please also be aware that we can't accept pensions with safeguarded benefits, such as defined benefit ones (or those with a guaranteed income, or where you can get more than your 25% tax-free cash).
Pension transfer rules and considerations
At this point, you might feel that transferring between a workplace pension and SIPP is the right move for you.
Before getting started, however, consider this one final checklist of things to be aware of:
Exit costs and penalties: If your current provider is going to charge you an exit fee or penalty for transferring, does it still make financial sense for you to do so?
Provider fees: Always remember to compare your current provider’s fees with the company you’re looking to transfer to.
Loyalty bonuses: These could be worth a fair bit, so you’ll need to weigh up whether you’re going to be better off in the long run, if you do decide to transfer.
Summary
Having made it this far, we’re hoping you feel confident enough to answer the most important questions surrounding:
- What’s the difference between a workplace pension and SIPP?
- How do I transfer my old workplace pension?
- Can I transfer my old workplace pension to a SIPP?
If, however, you feel as though you still need a bit more information and reassurance (it’s a big decision, after all), why not check out our dedicated pension transfer page?
Alternatively, you could use Wealthify’s Help Centre to contact our award-winning Customer Care Team. Even though they won’t be able to provide any financial advice, they might be able to answer any outstanding questions you might have!
With investing, your capital is at risk, so the value of your investments can go down as well as up, which means you could get back less than you initially invested.
Your tax treatment will depend on your individual circumstances, and it may be subject to change in the future.
Wealthify does not provide financial advice. Seek financial advice if you are unsure about investing.
