What are the risks of transferring my pension?

A pension transfer moves the money in an existing pension to a different scheme or provider, often in the hope of a better deal¹. The main risk is simple: a transfer usually cannot be undone, so the decision is close to permanent¹. MoneyHelper's own framing of the choice is blunt, that you "could save money or lose valuable benefits"².

The benefits that disappear are specific. Guaranteed annuity rates, protected tax-free cash, guaranteed income and additional death benefits can all be lost when pots are moved, and they sit mostly in older plans, final salary schemes and career average schemes³. A final salary transfer is the biggest decision of the lot: anyone moving benefits worth more than £30,000 must take financial advice first, and that advice can cost thousands of pounds³.

There are also risks that have nothing to do with the destination. Your money stays invested while the paperwork moves, so it can fall in value mid-transfer⁵. Scammers target exactly this moment, and the fraud minister has said trustees should use every contact point to protect savers⁶. This page sets out each risk in turn, what it costs, and where to get free, impartial help.

What a pension transfer involves

The mechanics are straightforward, and the Financial Conduct Authority lists the steps: check your current scheme allows transfers out, make sure you will not lose benefits, decide which scheme to move into, check whether you need to pay for financial advice, ask your current provider for a transfer value, then ask the new scheme to start the transfer¹. You can usually transfer or consolidate at any point unless the scheme rules list restrictions, and in some cases you can transfer after you have started drawing retirement benefits¹.

Not everything can be moved. You might not be able to transfer if you hold a share of an ex-partner's pension following a divorce, or a scheme with special features or guarantees such as a Guaranteed Minimum Pension¹¹. Transferring overseas brings tax implications that depend on your circumstances and the type of scheme you move to¹⁰.

The risk that runs through the whole process is that the two sides are not symmetrical. The old scheme may hold guarantees, a protected right to take more than 25% of the pot as tax-free cash, or a right to retire at a set age, and none of that travels with the money¹⁰. The Pensions Regulator's own guidance to trustees notes that scams cluster around exactly these events: transfers, early retirement and taking benefits¹².

Market movements while your pension is being transferred

A transfer is not a pause. During the transfer period you may be exposed to fluctuations in the value of your pension because of market volatility, and the value of your investments may not stay the same while the process runs⁵. Markets move every day, so the figure that arrives at the new scheme can differ from the one quoted at the start¹³.

That matters more than it sounds, because a transfer value is normally only valid for three months⁷. If a transfer drags on, the old scheme can recalculate, and the amount you were working from is no longer the amount on offer. The Pensions Ombudsman has noted that advisers were already reporting difficulty dealing with schemes within that three-month window⁷.

Once the money is in a defined contribution arrangement, the same exposure continues. Providers state plainly that a pension is invested, so its value can go down as well as up and you could get back less than was invested¹⁴. Drawdown carries the same warning, with market movements affecting retirement income¹⁶. Leaving savings where they are does not remove the risk either: investments can fall, so pension savings can lose value in place¹⁷.

The practical point is that a transfer does not protect you from markets, it changes which markets and which charges you are exposed to. If the destination is a similar investment to the one you left, the transfer has bought you nothing except the costs of moving.

Losing guarantees and benefits from your old scheme

This is where most of the permanent damage happens. Defined benefits such as guaranteed annuity rates or protected tax-free cash can be lost when pots are moved³. Older plans may carry safeguarded benefits including guaranteed income, a guaranteed investment return or annual bonus, guaranteed annuity rates, additional death benefits and protected tax-free cash, and these are potentially valuable benefits that may be lost on transfer⁴.

There is no guarantee that retirement income will be better after transferring, and existing plans may hold benefits, guarantees, charges or investment choices the new plan does not offer¹⁸. With-profits funds are a particular case: you may lose out on investment returns or have money taken from your fund when you transfer¹⁹.

Partial transfers have their own trap. Transferring only part of a pension means losing entitlement on the amount transferred out, and a full transfer can mean losing protected tax-free cash²⁰. The same logic applies across the market: certain pensions, such as defined benefit schemes, offer special benefits you might lose if you transfer²¹.

Final salary transfers: what you give up

A final salary, or defined benefit, pension promises an income based on your salary and service. Transferring means giving that up for a pot of money whose future is not guaranteed. The Pensions Ombudsman's casework shows the pattern of complaints that follows: advisers failing to disclose higher charges, loss of guarantees such as guaranteed annuity rates, market value adjustments on with-profits funds, unsuitable risk checks or investments, and loss of workplace pension benefits²².

The advice rule is the gate. Anyone considering transferring a final salary pension worth more than £30,000 must seek financial advice, and some schemes will not accept a transfer without advice whatever the value³. The legal requirement bites at a transfer value of £30,000 or more²³. You will usually have to pay for that advice yourself, and it can often cost thousands of pounds¹⁰.

The deadline structure is worth knowing before you start. You have six months from the start of the process to confirm you want to transfer and provide proof of the financial advice, and the deadline for the scheme trustee to complete the transfer is nine months²⁴. If you are weighing up whether to move at all, the comparison between defined benefit and defined contribution schemes sets out how differently the two behave, and transferring out of a final salary pension covers the process in full.

One question comes up constantly: whether a final salary pot can be moved into a money purchase scheme to get at the fund²⁵. The answer sits behind the advice requirement and the loss of guaranteed benefits, which is why the threshold exists.

Fees and charges on both sides of a transfer

Costs appear on the way out, on the way in, and in the advice. On the way out, some providers charge exit fees for transferring, and some old pensions charge high fees if you transfer them out³. Those exit fees can cancel out the benefits of consolidating altogether²⁶. On the way in, fees typically include exit fees from the current provider, set-up fees, adviser fees, annual management charges and transaction costs²⁷.

The advice itself is a cost. Financial advice on a transfer can often cost thousands of pounds¹, and you will usually have to pay for it¹⁰. Personal pensions also carry an annual management fee and a switching charge if you change funds²⁸.

There is a subtler charge risk: your current plan's charges might not be transferable, so you could pay more on the new plan²⁸. A workplace scheme with a charge cap can be cheaper than anything you can buy as an individual, and moving out of it can raise your ongoing costs permanently. The workplace pension charges and charge cap page explains how that cap works.

Pension scams: warning signs to look for

Pension scams can occur when members seek to transfer their benefits to a different arrangement, take early retirement or take their benefits¹². Typically a scam involves a scammer persuading you to transfer your pension savings to a new pension scheme²⁹. Since the pension freedoms were introduced in 2015, retirees able to access large sums from pension pots have been targeted, with contact normally made by telephone³⁰.

The warning signs are consistent across regulators and providers: unexpected offers, promises of early access to pensions, or guaranteed high returns⁶. Providers add a guarantee of higher returns, access to your pension before 55, an unusual, complicated or long-term investment, and higher than normal fees³¹. The Financial Conduct Authority and The Pensions Regulator recommend four steps: do not be rushed or pressured, reject unexpected pension offers, check who you are dealing with, and consider getting impartial information and advice³².

The consequences are severe. You could lose your pension and in some cases also be left with a tax bill³³, and you could even end up owing tax on the money you have transferred³⁵. The threat assessment also flags cloned firms and recovery fraud, where victims are targeted again with false promises of help retrieving lost funds, and a trend of transfer requests into international self-invested personal pensions³⁶.

If you have already agreed to a transfer and now suspect a scam, contact your pension provider straight away, because they may be able to stop a transfer that has not taken place yet³⁷. You can also contact your scheme and ask them not to permit anyone to access your funds without your written permission²⁹. The pension scams page covers reporting and recovery in more detail.

Where to check a transfer and get help

Free, impartial information about transferring your pension is available, and you do not have to pay for it¹⁰. Pension Wise offers free guidance on your options, including taking a whole pot and taking an adjustable income¹¹, and the Pension Wise guidance service explains what a session covers. MoneyHelper covers the wider question of whether transferring or combining is a good idea at all².

Your scheme has duties too. Trustees must carry out certain checks and processes when dealing with pension transfer requests, and they must send the pension scams leaflet to any member who requests a transfer³⁹. Since the Pension Schemes Act 2021, regulations stipulate destinations and circumstances for transfers, protecting members from scams by helping trustees ensure transfers go to safe and not fraudulent schemes⁴⁰. Restrictions now apply to overseas transfers, transfers that might not be in the saver's best interest, and transfers showing signs of a scam⁴¹.

If something goes wrong, the Pensions Ombudsman can look at complaints about transfers from personal pension arrangements²², and the Pensions Ombudsman and complaining about a pension page sets out how to bring a case. The regulator has also acted on poor transfer advice, and there is a route to compensation where advice was unsuitable⁴².

Two more things are worth checking before you commit. First, whether the transfer is even necessary: combining pension pots or keeping them separate weighs the trade-offs, and transferring pensions and investments to another provider covers the mechanics. Second, whether you can still change your mind. Some pension transfers can be cancelled within a cancellation period, but once a transfer has been completed it usually cannot be reversed⁹. One source puts the cancellation window at 30 days³. There is no right to cancel a contract funded wholly or partly from a pension transfer, although a pre-contract right to withdraw your offer of at least 14 calendar days replaces it⁴³.

If a transfer is dragging, the what to do if a transfer is delayed page explains the timescales and the six-month limit on your existing company³.