- Pension basics
- Scheme benefits
Understanding your Pension Investment Plan (PIP)
Your PIP explained
Under the Scheme rules, you are entitled to a certain level of income from your PIP. This is a regular and predictable income payable for life. When you come to use your PIP account, we work out what this level of income is. If your PIP isn’t big enough to provide this income, the Scheme tops up your PIP so that it can. This arrangement is called an underpin.
Whatever funds you choose to invest in and however they perform, the value of your PIP account when you come to use it will not be below the amount needed to provide that minimum level of income, even if you choose to invest in riskier funds. However, if the value of your PIP account is already higher than that minimum level, the amount above the minimum level is at risk if your investments do not perform well.
When you come to use your PIP account, you may be able to take up to a quarter of its value as tax-free cash if you want to. See Retirement Benefits for more information.
If you are considering taking early retirement, it’s important to know that you will only be allowed to retire early if your PIP is big enough to cover the minimum level of income you’re entitled to under the Scheme rules.
If you’re considering transferring out, it’s important to check the benefits your new pension provider will give you, as they won’t be the same as the benefits you’ll be giving up in the Scheme. You also can’t change your mind once you’ve transferred out of the Scheme.
If you transfer your PIP to another pension arrangement, you’ll lose the option of receiving a regular and predictable retirement income for life from the Scheme. You would also lose any spouse or dependants’ benefits that could be payable from the Scheme. Instead, if you transfer to an external pension arrangement, subject to the terms of that arrangement, you’ll have a pot of money that you’ll need to invest in order to provide the future benefits you and your family require. You’ll need to select and manage your investments, and consider the initial and ongoing fees the new provider and adviser (if you use one) may charge you.
See the Transfers Out section of this website for more information, including how to reduce the risk of being scammed.
Getting advice if you want to transfer away from the Scheme
We strongly recommend that you consider taking impartial regulated financial advice before deciding to transfer out your PIP. If the underpin is required to top-up your PIP benefits, as explained above, and your transfer value is more than £30,000, then the law says you must take advice. In other cases, it's your choice, but we would recommend it. Please remember that once you’ve transferred out you can’t transfer back in, so you need to understand your options fully.
This advice needs to come from an authorised financial adviser who is qualified to advise people on pension transfers. Visit Unbiased to find a financial adviser in your area and use the Financial Conduct Authority (FCA) register to check your adviser is suitably registered and authorised to advise on pension transfers.