If you have pension benefits in other pension arrangements, these can usually be transferred into a SIPP. If you are funding a SIPP purely by one or more transfer payments, you do not need to meet any of the eligibility rules which apply to contributions.
Transfers can be made from:
However, before deciding on any transfer you should take professional advice.
Transfer from an Occupational Scheme
You might have preserved benefits from a former employment or still be a member of a continuing occupational scheme. The benefits might be "final salary" based or 'money purchase' based. These are also known as 'defined benefit' and 'defined contribution' schemes. Ask the scheme administrator for a calculation of your transfer value: this is the amount that represents the accumulated value of your benefits.
Transfers from occupational schemes may mean that you could be giving up valuable guaranteed benefits. You should seek advice before making any decision to transfer to a SIPP. The transfer value might include a number of different elements. For example, it might include an element relating to 'protected rights' if you have been contracted out of the State Earnings Related Pension Scheme (SERPS). The "main" transfer value can usually be transferred into a Sipp, but any protected rights must either stay within the original scheme or transferred into a traditional insured plan. Protected rights funds do not provide the opportunity for tax free cash and income cannot be taken until age 60 at the earliest.
Transferring from an occupational scheme may mean that you can draw a higher tax free lump sum at retirement. However, if you are a "higher earner" aged over 45 or a 'controlling director' at the date of transfer, the maximum 25% tax free lump sum may be restricted.
Transfers from a Personal Pension
Accumulated funds in a personal pension can usually be transferred into a Sipp. However, protected rights cannot be transferred. If your funds are invested in traditional insured plans, the insurance company may levy a surrender penalty, so consider carefully whether a transfer is right for you.
Transfer from Retirement Annuities
Funds in old-style retirement annuity contracts (also known as s226 arrangements) can be transferred into a Sipp. Points to consider include:
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tax free cash: Depending on annuity rates and your age at retirement, transferring to a Sipp might mean that you could draw a higher tax free lump sum at retirement. However, if annuity rates rise, tax free cash might be higher under a retirement annuity.
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contributions: Because contributions to a retirement annuity are not caught by the 'earnings cap', higher earners may be able to make higher contributions into a retirement annuity.
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some retirement annuities offer a guaranteed annuity rate - check whether this is worthwhile for you.
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once you close your retirement annuity you will not be able to take out another.
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some older retirement annuities offer limited benefits in the event of death before retirement. These benefits may be; return of contributions made with or without interest instead of the return of the full value of your pension fund.
Risk Warnings
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The investment growth in your new pension plan might not be sufficient to provide the same level of benefits that you would have received from your company pension scheme. The growth of your investment will largely depend on the performance of your chosen investments. The value of your investments is not guaranteed and may go down as well as up.
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The amount of your pension also depends on annuity rates at the time you convert your pension fund into an annuity
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If investment growth and interest rates at the time you start taking a pension are lower that those illustrated, your planned benefits may be lower that you hoped and perhaps significantly so.
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Capita SIP Services charges may be increased in the future.
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The tax situation affecting the payment and investment of your contributions and the receipt of benefits could be altered to your disadvantage. Some investments, such as property may take longer to sell than others and you may not be able to realise your investment when you choose. The value of any property investment may be based on a valuer's estimate rather than an actual market price
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