Value transfer of your pension is 'transferring' your pension accrual - and the associated pension rights - from your ex-employer and ex-pension provider to a new employer and pension provider. If you continue to work in the same sector, the pension provider, the pension fund, may remain the same. Value transfer is then not an issue.
In the past, it was quite normal to stay with the same employer for thirty years, so that there was little value transfer. But nowadays people often do not work for an employer for that long, so that much more use is made of value transfer. You always have the choice to make use of value transfer: do you leave the accrued pension with your old employer, or do you choose to transfer your accrued pension with your old employer to your new employer?
You are now naturally curious about what happens when you opt for value transfer. First of all, it is important to know that statutory calculation rules apply when transferring your pension. If you opt for value transfer, you will no longer receive a pension from your old pension scheme in the future. Instead, you will receive extra pension from your new pension scheme.
If you do not opt for value transfer, your old accrued pension will remain with your old pension fund or insurer. Whether this has a positive or negative effect for you depends on the rules that are used. But keep in mind that if you change jobs every few years but do not use the value transfer, your pension will fragment enormously.
Is value transfer sensible?
Whether value transfer is sensible depends on a number of factors. It is important to make a comparison between the old and the new pension scheme. If your new scheme is a final pay scheme, value transfer may be sensible. Especially if you expect to make a career with your new employer. If your new employer has a pension scheme based on defined contribution, transfer may be unwise. Transfer can cost you or your next of kin a lot of money.
It is also important to pay attention to the survivor's pension, also called partner's pension. It's not a fun topic, but chances are you will encounter it. In many schemes, when you die, your partner will receive about 70% of your pension. This does not apply to every pension scheme. There are funds that pay out a percentage lower than 70%. You may even lose your old survivor's pension altogether.
Because there are many different pension schemes, a good comparison is complicated. It is therefore wise to engage a pension expert. If the funding ratio of the transferring or receiving pension fund is too low, it is not permitted to have a value transfer carried out.