Brokers And Service Providers | ISA & Pension Transfers - Explained

24th Apr '23 by Chris Brown

6 comments 516 reads

I’ve noticed a few comments about pension transfers on Stockopedia recently. With the majority of posters suggesting they are painful & protracted processes that are best avoided.

In my line of work, we transfer our clients’ ISAs, Pensions and General Investment Accounts all the time. I was even involved in a project last year, where we transferred more than 1,000 in the space of six months, from one investment platform to another.

So I thought I would give an overview of how they work, for those who may have questions.

Firstly – it doesn’t need to be a painful process. But there are a few factors that can affect how they are done.

Where to Start?

Usually, if you wish to transfer a fairly modern Pension or ISA account to a new investment platform, you can simply:

go to the new platform’s website
open up a new Pension or ISA account with them
submit a transfer-in request
- giving them details of the existing account you wish to transfer – little more than the current platform’s name, your account number and the approximate value.

I say ‘fairly modern’, because if you have a legacy pension or investment account which was first opened say 15 years ago or more, the existing provider may require paper transfer forms to complete a transfer-out.

Anyway, let’s assume you’re transferring from somewhere like Hargreaves Lansdown or AJ Bell to Interactive Investor. Or the other way round.

Once you submit your online transfer-in request, the transfer instruction will usually be sent electronically by the new platform to the old platform, through a system called Origo Options.

Transfer Methods

This is important. You have two options when you ask the new platform to transfer-in your old Pension or ISA: a Cash Transfer or In-Specie (Asset Re-Registration) Transfer.

1. Cash Transfer

This is by far the simplest and quickest, overall. The assets in your existing account are sold to cash, the cash balance is transferred directly by the old platform to the new platform (through BACS or Faster Payment), and you can then invest the cash in the new Pension or ISA, as you see fit.

On average, this takes 3 weeks from start to finish. Plus or minus a week or so. Bear in mind that when the current platform receives the cash transfer-out request,…

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Snowbum

24th Apr '23

Thanks for taking the time to post this. I am currently frustrated with the available investment options within my workplace DC pension scheme with Legal & General (LON:LGEN) and have been considering initiating a transfer out of it into my SIPP. This helps explain the most efficient way to do so.

Also, just received my annual statement for a small value DB scheme (8 years contribution only) and was shocked to see that the stewards of the funds managed to lose 40% of the total holdings in the LDI debacle last year! How they can argue this is a ‘low risk’ investment strategy I just can’t understand…. They are also persisting with 51% of the remaining funds in LDI despite a massive actuarial deficit now being present. Possibly time to seek a CETV for that too as I’m one of the last entrants to the scheme!

Understand you can’t give advice, just venting my frustration!

Chris Brown

Thanks Snowbum. I've often thought that DB schemes get away with relatively little external scrutiny over their investment decisions. Needless to say, for any CETV above £30k you'd need financial advice from a DB pension transfer specialist, to transfer-out. But the number of advisers offering DB transfer advice has plummeted in the last few years. My firm used to do it up until 12-18 months ago, but the private indemnity insurance premiums skyrocketed on the back of British Steel and other such cases, so it became uneconomic for many firms. I imagine CETV values will have come down quite a lot as interest rates have risen.

Rusty2

Sounds good in theory but it did not work for me transferring 2 different cash transfers from ISA, one a share ISA and the other a cash ISA, both took around 3 months with a lot of hassle. It seemed both wanted to delay the transfer as long as possible.

Yes, I wish I’d done it a while ago as i know the values have declined due to change of interest rate cycle, the way the scheme looks now though i feel it’s heading for the PPF! My company is also about to merge with another to form a newco, so rather than hope the 90% guarantee from the PPF holds until I reach retirement age in >20 years from now, I think I’ll make an enquiry to try and get some money from it while I still can! The opportunity cost could still make it worthwhile overall, but yes, advice will need to be taken. The company provide a set of recommended advisors who will facilitate it if needed, they clearly want people to do it to reduce their long term liabilities! Thanks for your reply.

shipoffrogs

I'd make sure you have a good record (screen shot) of what you're transferring, and check it when the process is complete.

Indie

Chris, that was v interesting and useful, especially the implications of the different asset types. Thank you for taking the time to write it.

ISA & Pension Transfers - Explained

Where to Start?

Transfer Methods

1. Cash Transfer

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Chris Brown

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