Transferring a public sector pension

Most public sector pensions in the UK cannot be transferred into a private or personal pension. The NHS, teachers’, Civil Service, armed forces, police and firefighters’ schemes are unfunded, and the law stops members moving their benefits from these schemes into a defined contribution pot. You can move between public sector schemes, and the Local Government Pension Scheme (LGPS), which is funded, does allow transfers out, subject to strict conditions.

Funded and unfunded schemes

An unfunded scheme has no investment fund behind it. Contributions from you and your employer go to the Treasury, and pensions are paid out of public money each year as they fall due. The NHS Pension Scheme, the Teachers’ Pension Scheme and the Civil Service schemes all work this way.

If members of these schemes could cash in their benefits and take a transfer value to a private pension, the government would have to pay out large sums now for pensions that would otherwise be paid over decades. Legislation passed alongside the pension freedoms closed that route. In one of these schemes, you cannot transfer to a defined contribution scheme, a self-invested personal pension or any arrangement that would let you take flexible withdrawals.

The LGPS is different. Each local fund holds real investments, so a transfer value can be paid. Moving out of the LGPS into a private pension is legally possible, but a large transfer out of a defined benefit scheme requires advice from an FCA-authorised financial adviser first, and the scheme will check this before paying.

Moving between public sector schemes

The Public Sector Transfer Club is an arrangement between many public sector schemes, including the NHS, teachers’, Civil Service and LGPS schemes, plus a number of others such as some university and research council schemes. If you move from one member scheme to another and ask for a Club transfer within the time limit, your service is moved on terms that broadly keep its value in the new scheme. Outside the time limit, a transfer may still be possible but on less generous non-Club terms.

The time limit is short, usually counted from the date you join the new scheme. Ask the new scheme about a Club transfer as soon as you start and check the deadline with them, because the window can close before your first benefit statement arrives.

A Club transfer is not always the right call. If your old service is in a final salary section with an earlier pension age, moving it into a career average scheme can change what you get and when. Each scheme can give you figures showing what the transfer would buy, so you can compare.

Leaving your pension where it is

If you leave a public sector job, the pension you have built stays in the scheme as a deferred pension. (The leaving the NHS guide covers the rest of the process for NHS staff.) In the NHS, teachers’, Civil Service and LGPS schemes, deferred pensions rise each year in line with inflation until they are paid. You can take it from the scheme’s normal pension age, or earlier with a reduction (see retiring early). For the reformed schemes that pension age is your State Pension age.

For most people, doing nothing is perfectly reasonable. You keep a guaranteed income for life, linked to prices, with a pension for a surviving partner. If you move jobs often, keep a list of your schemes and member numbers, and keep each scheme informed of your address. The government’s free pension tracing service can help find old pensions if you lose track.

If you come back to the same scheme after a break, you may be able to link the old and new membership. The rules on how long a break can be vary by scheme, so ask when you rejoin.

Moving abroad

Some people leaving the UK ask about transferring to an overseas pension scheme. From unfunded public sector schemes, transfers to overseas schemes are restricted in the same way as transfers to UK defined contribution schemes. From the LGPS, a transfer to a qualifying recognised overseas pension scheme can be possible, but a tax charge can apply in some cases and the rules are complicated.

A UK public sector pension can usually be paid to you abroad. Contact the scheme before you move to set up overseas payment and to check how tax will be dealt with.

Transferring pension into a public sector scheme

New members can sometimes transfer in pension rights from a previous employer’s scheme or from a personal pension. Each scheme sets its own rules on what it accepts and the deadline for asking, which is usually tied to when you joined. The transferred value buys extra pension or service in the new scheme, and the scheme will tell you how much before you agree.

Before moving a private pot into a public sector scheme, compare what you give up (flexible access, investment growth, death benefits under the old scheme) with what you get. The decision is personal, so get guidance before you sign.

Scams and cold calls

Pension scams often target people with public sector pensions. Be wary of anyone who contacts you out of the blue offering a free pension review, early access to cash before pension age, or high guaranteed returns from overseas investments. A genuine public sector scheme will never ask you to transfer through a cold call.

MoneyHelper gives free, impartial guidance on transfers. To check an adviser is regulated, use the FCA register. If you think you have been targeted by a scam, report it to Action Fraud.