Features and benefits

Transferring your pension into one plan might not be right for everyone and there are a number of things you need to consider

Things to consider.

It is important you know and compare the features and benefits of the plan you are thinking of transferring to your Scottish Widows pension.

In a defined benefit, also known as a final salary scheme, your pension is based on your salary at retirement and the number of years you have been in the scheme. Your pension entitlement doesn’t depend on the performance of the stock market or other investments.

Keith, 55

"I'd accumulated six different pension plans over the years. After reading up about pension consolidation I decided to consolidate five of them. As one is a final salary scheme with a guaranteed pension which is linked to my salary and length of service and all the guidance said to leave that one alone. So now I've only got two pensions to manage rather than six!"

Examples of where you might have a defined benefit/final salary pension:

  • Public sector
  • NHS
  • Teacher
  • Civil servant

Unfortunately if you wish to transfer a defined benefit scheme you cannot use our online transfer process. We strongly recommend you speak to a financial adviser about your options.

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Guaranteed Annuity Rate

Some older-style pensions (most commonly individual pensions started before July 1988 but also some policies sold since then) provide a far higher retirement income than can currently be bought on the annuity open market. These policies have what are commonly called ‘guaranteed annuity rates’ (GARs) but you may also find them referred to as ‘guaranteed annuity options’, ‘guaranteed minimum annuity rates’ or variations of this. GARs can be very valuable but they might also have restrictions, for instance the guaranteed rates may only apply on a set date such as your 65th or 75th birthday.

Debbie, 39

"I have a pension plan from a previous employment. I looked into moving that pension into my current workplace pension plan but as it turns out, I would lose the guarantee of a potentially higher annuity rate at retirement. So for now, I will keep both pension plans."


Guaranteed Conversion Option

Where your pension carries a Guaranteed Conversion Option your plan provides an amount of pension when you retire. It also allows you to give up this pension by converting it into a pension fund using a guaranteed conversion rate. You can then use this pension fund to:

  • buy a different type of pension
  • buy a pension that would be payable to your spouse or partner after your death
  • buy a pension with another provider
  • take a lump sum (you need only give up part of your pension to do this)

It is important to bear in mind that in current financial conditions, with low interest rates, the pension fund provided under the guaranteed conversion option will normally not be enough to replace the pension you’d be giving up. This means you could lose up to half of your pension.

Guaranteed Minimum Pension

A Guaranteed Minimum Pension (GMP) is a benefit that has accrued within a defined benefit (‘final salary’) scheme for any period that the member was ‘contracted out’ of the State Earnings Related Pension Scheme (SERPS) in that scheme between 6 April 1978 and 5 April 1997. You may have a GMP if you were a member of such a scheme, or if you left the scheme and the GMP was transferred to your new stand-alone ‘buy-out’ (S32) policy. Essentially the GMP is a right to a level of pension income calculated by reference to your earnings in that employment.

Section 9(2B) Rights

Section 9(2B) rights are similar to GMP (see above) in that they arise from membership of a defined benefit (‘final salary’) scheme but in this case for any period that the member was contracted out of the State Earnings Related Pension Scheme (SERPS) and subsequently the State Second Pension (S2P) in that scheme after 5 April 1997. You may have S9(2B) Rights if you were a member of such a scheme, or if you left the scheme and the Section 9(2B) rights were transferred to your new stand-alone ‘buy-out’ (S32) policy.

Essentially S9(2B) rights are a right to a level of pension income calculated by reference to your earnings in that employment.


If you have any of the above guarantees

If the policy you propose to transfer has any of the above guarantees, this means you cannot use our online transfer process.

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When you take your benefits you can normally take up to 25% of the value of your Scottish Widows plan as a tax-free cash sum.

If you were a member of your employer’s scheme prior to 6 April 2006, you may be entitled to a higher amount of tax-free cash, or a protected pension age lower than the usual minimum of 55. Any entitlement to a higher amount, or a protected pension age will normally be lost if you transfer.

In addition, if you have applied to HMRC for enhanced or fixed protection from any lifetime allowance tax charge, such protection could also be lost on transfer.

This is a complex area and if you are unsure how it affects you we strongly recommend you speak to a financial adviser about your options.

Please note if you want to transfer an existing Scottish Widows / Lloyds Banking Group pension plan that has a Protected Tax Free Cash and / or Protected Retirement Age which you will lose on transfer, we will contact you after you have completed your application to confirm whether you are happy to proceed. Your instruction will not be processed until we receive this confirmation. Please note that the value of your transfer will be determined by the date you confirm you are happy to proceed.


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Your existing plan may have other guaranteed benefits which you would lose if you decided to transfer such as a Guaranteed Growth or Bonus Rate, a Loyalty Bonus or Reward or a Large Fund Bonus.

It is really important you consider the consequences of transferring your plan if you might lose the guarantees associated with it.


There is not normally a penalty for transferring your benefits but this will depend on the particular charging structure of your existing policy. Speak to the existing policy provider or scheme trustees for more information on any penalties or charges that may apply.

If you are invested in a with-profits fund and you transfer your pension pot away from your existing plan before your selected retirement date, the transfer value may be reduced. The amount of any final bonus included in the amount transferred may, at the discretion of your existing provider, be set at a level that would not represent the fair value of your existing policy at the date of transfer. In addition, there may be some form of reduction in the value of the with-profits fund if you transfer the value of your benefits away from your existing policy before your selected retirement date. This is usually referred to as a market value reduction (MVR).

Find out more about exit penalties.


If you die before taking benefits, we will normally pay the value of your Scottish Widows pension plan as a lump sum. These benefits may be lower (or less suitable for your circumstances) than the death benefits available from your existing policy. For instance, in addition to paying out the value of the fund, your existing policy may also pay an additional death-in-service lump sum, which would be lost on transfer.


You may also have benefits such as life cover, critical illness cover and waiver of premium which you will lose if you transfer. You might only be able to replace these benefits at a higher cost and it may not be possible to replace them at all. If you are unsure how this affects you, please seek financial advice.


A block transfer is where two or more people transfer all the money they have invested in one pension scheme to another scheme at the same time. A block transfer allows a pension plan member to keep any entitlement to:

  • a tax free cash entitlement of more than 25% (often called protected tax free cash), and/or
  • protected pension age where benefits can be taken before the normal minimum pension age of 55

Normally you cannot have been a member of a Scottish Widows Workplace Pension for more than 12 months if you wish to do a block transfer.

Unfortunately if you wish to transfer as part of a block transfer you cannot use our online transfer process. We strongly recommend you speak to a financial adviser about your options.


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Unfortunately if you are part of a pension sharing order and wish to transfer you cannot use our online transfer process. We strongly recommend you speak to a financial adviser about your options.


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Don't know if you have any features or benefits?

If you don’t have the above information to hand or filed away at home, you should contact either the pension provider or the employer who you got the pension through. We’ve made it easy for you to do this with some templates that ask exactly the right questions so you don’t have to.

Don’t have the right information?

If you don’t have the above information to hand or filed away at home, please contact either:

Do you need more help?

You can also visit the Money Advice Service and Pensions Advisory Service which provides free and impartial advice about transferring pensions.

If you are still unsure please speak to a financial adviser. They will be able to help you understand your situation and what is best for you. If you don't have an adviser, we can help you find one in your area.


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