28 Jun 2024

Should you transfer your pension for points?

We explain a new pension-switching offer from Virgin Money and outline five questions to ask yourself first

Switching your bank account for cash or an incentive is no new phenomenon, but what about your pension?

Virgin Money is offering up to 125,000 Virgin points to new customers who transfer or combine their retirement pots with them.

However, the stakes are a lot higher when transferring a pension than simply switching a current account, and there are several factors you should consider.

Here, we explain the Virgin Money pension deal and the five questions you should ask yourself first.

Virgin Money pension transfer deal

It will reward new customers with up to 125,000 Virgin Points if you transfer or combine your existing pension into a Virgin Money pension.

Points can be spent on a variety of things, including food, flights, gifts and days out via Virgin Red, its rewards club.

The amount of Points awarded will depend on the total amount of money transferred into the Virgin Money pension, and varies between 10,000 and 125,000 points.

Total amount transferred in	Virgin Points rewarded
£1,000-£9,999	10,000
£10,000-£24,999	20,000
£25,000-£49,999	45,000
£50,000-£99,999	100,000
£100,000-plus	125,000

According to the Virgin Red website, 20,000 points is enough to get you a £100 Eurostar voucher, a £100 Virgin Wines gift voucher, a £100 Theatre Token voucher or New York Economy flights with Virgin Atlantic (although you'd have to pay £286 in taxes, fees and charges).

Find out more: transferring your personal pension.

What's in the small print?

To qualify for the deal, you'll already need to be a member of Virgin Red and transfer a pension worth at least £1,000 to a Virgin Money pension by 23 August and keep it open until at least December 2024.

Customers who already have a Virgin Money pension and have transferred one or more pensions to Virgin Money online since 8 January 2024 will also automatically benefit from the bonus Virgin Points reward.

It won't accept the following pensions for transfer:

Pensions with a guaranteed annuity rate
Pensions with safeguarded benefits or guarantees, such as Guaranteed Minimum Pensions
Pensions you've already taken money from
Defined benefit pensions (for example, final salary schemes).

What does the Virgin Money pension offer?

Virgin Money said that its pension includes two choices:

Navigator Described as a ‘straightforward, hands-off way’ to manage a pension which automatically adjusts your pension based on your stage of life, focusing on growth if you’re younger and stability as you age.
Self-Drive For those who want to ‘steer their own route into retirement’, with four different investment approaches to suit different risk appetites.

Virgin Money has advice on its website and calculators for customers to choose which pension is right for them.

Find out more: how much will you need to retire.

How pension transfers work

As a starting point, contact your current pension provider to get confirmation of how much your pension is worth, including its ‘transfer value’, the terms and conditions of your scheme and any exit fees.

Make sure you check whether there are any benefits you would lose by transferring away (more on this below).

If you decide to go ahead, you’ll need to contact the provider you want to move to. It will give you an application form to fill in and will manage the transfer on your behalf.

Your existing company must move your pension within six months of the start of the transfer process. The clock starts ticking once your provider receives all the correct documentation.

While transfers can sometimes take quite a while to take place – particularly if your provider uses paper forms and manual processes, which is still fairly common – the average is much quicker at 13.6 days in the year to June 2023, according to pension transfer service Origo.

Find out more: should you combine your pension pots?

Is this a good idea?

If you have multiple pension pots that you struggle to keep track of, consolidating them can save you time and money, and make it easier to see whether you’re meeting your retirement savings goals.

But there are potential downsides, too, particularly if your existing pension includes valuable benefits or guarantees that you’d lose by transferring.

When weighing up whether you should switch a financial product, it’s always worth considering the product on its own merits, rather than just focusing on the incentive offered.

Research by the workplace pension provider People’s Partnership and the Behavioural Insights Team found that cash incentive offers make savers more likely to ignore the fine print and switch their pension to a worse option.

A survey of 5,500 UK pension savers found that participants were 20% more likely to say they would transfer their pension after seeing a cashback offer of £100, despite the fact that higher fees charged by the new pension would have left them more than £1,000 worse off after just five years.

People’s Partnership is calling on the government to ban pension switch incentives.

Find out more: what can you do with your pension pot?

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5 questions to ask yourself before transferring your pension

1. What type of pension do you have?

Virgin Money won't accept defined benefit (also known as final salary pensions) into its scheme.

The Financial Conduct Authority and The Pensions Regulator believe it’s in most people’s best interests to keep their DB pension. That’s because, unlike a defined contribution (DC) pension, a DB pension gives you a guaranteed income for life that usually increases each year.

Find out more: 5 investment questions to ask about your pension.

2. How much will you have to pay in charges?

Moving your pensions can be a good way to reduce charges and ultimately boost the value of your pot.

Start by checking the charges you’re currently paying: if you aren’t able to find these figures from your annual statement or via an online portal, contact your scheme administrator or pension provider directly.

Under auto-enrolment rules, annual management charges are capped at 0.75%, although average charges are around 0.5% and can be as low as 0.2-0.3% in some workplace schemes. But if you have a pension that predates auto-enrolment, charges can be higher than 0.75%.

Virgin Money charges up to 0.75% each year based on the value of your account. This is made up of an account charge of 0.30% for managing your account and an annual management charge of up to 0.45% for managing your investment.

Find out more: the investment paths that can drain your pension.

3. Is there an exit fee?

Some older pensions still apply exit charges. This may be charged as either a percentage of your pension pot's value or a fixed amount.

If you have a big pension and the exit fee is set as a percentage, you may end up paying more than with a fixed amount.

The size of exit fee can vary from one provider to another, but some can charge as much as 10%.

You'll need to weigh up these charges against the potential savings you'll make from moving to a lower-cost scheme.

Find out more: pension calculator – how much will I have?

4. Is your annuity rate guaranteed?

Some DC pensions from the 1980s and 1990s had a guaranteed annuity rate (GAR), which will be higher – sometimes around double – than what’s available on the rest of the annuity market.

The GAR will have been set in the terms and conditions of your pension when you took out the policy.

If you have an older pension, check with your provider to see if it includes a GAR. If so, you’re likely to be better off leaving your money where it is.

Virgin Money doesn't accept pensions with a guaranteed annuity rate, or other safeguarded benefits or guarantees, into its scheme.

Find out more: what is an annuity?

5. Should you get financial advice?

If you're unsure what to do, it might be worth getting some regulated financial advice.

If your pension has a safeguarded benefit and is worth £30,000 or more, government rules say that you must seek independent financial advice before you can transfer it.

If you’re over the age of 50 and have a defined contribution pension, the government’s Pension Wise service provides a free 45 to 60-minute guidance session with a specialist. You can book an appointment with them online or by phoning 0800 138 3944 – they’re open Monday to Friday, 8am to 8pm.