Can your pension provider force you to move your pot?

Hi,

Can pension administrators force a scheme member to move some pension benefits to another pension provider or can I refuse and ask them to continue holding/managing my money?

They have confirmed that I cannot move some benefits to either an ISA or into Premium Bonds. They are tax-free so I want to park money there. PA said I can only move to another pension which is ridiculous?!

How do you move money into a premium bond account?

Thanks.

No, transferring pension funds directly to an ISA or premium bonds is not permitted. However, a personal pension is usually a defined contribution pension and the pension freedoms do allow you to withdraw your pension at the age of 55. You’re free to invest this in an ISA at this point if you wish.

However, think very carefully before you do this. Withdrawing a big lump sum from your pension could land you with an unexpected Income Tax bill and it’s not likely to be the best course of action, as the pensions administrator is likely trying to act in your best interests by refusing to do this unless you get advice (although as a financial adviser myself, I would not recommend this).

Taking money out of your pension will leave you with less income in retirement, whereas if you leave the money invested in your pension it can still grow in a tax-efficient environment.

It’s also worth mentioning that there’s usually no Inheritance Tax due on an inherited pension, as a pension fund is usually classed as being outside your estate when HMRC values it on your death. Moving your pension to an ISA will bring it into the value of your estate on death.

Given the risks of withdrawing pension funds to invest in ISAs or premium bonds, there are few circumstances where this is appropriate - so seeking advice is a necessity to make sure all the consequences of this action are known before doing anything, as well as your full financial position, as all the actions will have impacts elsewhere I am sure.