If you’re paying into a workplace pension every month, there’s a good chance you’re focused on the amount coming out of your payslip, rather than where that money is actually going – but your workplace pension isn’t simply a savings account. Your contributions, together with contributions from your employer and tax relief, are invested on your behalf.
That means an important question to ask is:
Do you know what your pension is invested in, and does it reflect what matters to you?
If you want your investments to follow Islamic principles, the question becomes even more important. A workplace pension may be invested across a range of assets that aren’t necessarily Sharia-compliant.
However, something many people don’t realise is depending on the rules of your workplace pension scheme, you may be able to transfer your accumulated pension savings elsewhere from time to time, while continuing to contribute to your employer’s scheme.
That could potentially give you the best of both worlds: continuing to receive employer contributions while having the option to manage your accumulated pension savings differently.
Your workplace pension is an investment
With a defined contribution pension, the money in your pot is invested. The value you eventually receive will be influenced by the contributions going in, investment performance and the charges you pay.
Your employer will normally have selected a pension provider and scheme for employees, which will then offer one or more investment funds – often with a default fund that most employees are automatically placed into. However, a fund being the default option does not necessarily mean it is the most suitable option for you.
The default fund will likely be designed to cater to a broad range of employees at different stages of life. While it may do the job for many, it may not match your particular attitude to risk, and if you have specific investment requirements – particularly if you require your pension to be Sharia-compliant – it is worth taking a closer look at what you are investing your retirement funds in.
Start by finding out where your money is invested
The first step doesn’t involve transferring anything – just log in to your workplace pension account or look at your latest pension statement.
Find out the following:
- Which pension provider your employer uses
- Which fund or funds you are invested in
- What those funds invest in specifically
- Whether the funds have any ethical, faith-based or other investment restrictions
- Whether your scheme allows you to transfer your accumulated pension elsewhere while you remain an active member
That last point could be particularly interesting.
You don’t necessarily have to choose between employer contributions and investment choice
One of the biggest reasons people hesitate to move away from a workplace pension is understandable: they don’t want to lose their employer’s contributions.
There is an alternative, however: rather than stopping your workplace pension altogether, your scheme may allow you to continue contributing through payroll, while transferring the pension savings you’ve already built up.
If it does, you could potentially continue receiving your employer’s contributions into the workplace scheme while periodically transferring an eligible accumulated pot to another pension provider.
Imagine you join an employer and begin paying 5% of your salary into its workplace pension, with your employer adding a further contribution. After a period of time, you’ve built up £10,000. You discover that the workplace scheme doesn’t offer a Sharia-compliant investment option that meets your requirements, but Simply Ethical offers diversified Sharia-compliant portfolios.
If your workplace scheme permits transfers while you remain an active member, may be able to transfer that £10,000 to Simply Ethical while continuing to contribute to the workplace pension through your employer’s payroll. A few months later down the line, you could then set up another transfer.
Could you transfer your pension every so often?
Potentially: this is not available under every scheme, but where it is permitted, it creates an interesting option for people who want to take greater control over their long-term pension investments.
There is no universal rule saying that an active workplace pension member can transfer their pension out whenever they want – the rules vary by provider and, importantly, by the specific employer scheme.
For example, NEST states that members cannot transfer out while they are still making contributions. To transfer, they first have to stop contributing.
Legal & General takes a different approach: its current guidance says that if you’re still paying into your pension, you should check whether your employer allows transfers out and speak to your employer before proceeding, as some schemes have different processes.
The question, therefore, is not “Can I transfer my pension?”, but rather, for an active workplace pension member, is “Can I transfer the pension savings I’ve already built up, while continuing to contribute to this workplace scheme and receive my employer’s contributions?”
What about some of the UK’s biggest workplace pension providers?
Rules can vary between individual employer schemes, so the following should be treated as a starting point rather than a definitive statement about every scheme operated by each provider.
| Provider | What to know if you’re actively contributing |
| NEST | You cannot transfer out while still making contributions. You would need to stop contributions before transferring. |
| The People’s Pension | To transfer out, you must typically transfer your full pension pot. The specific rules for an active member should be checked with the scheme. |
| NOW: Pensions | Active members must stop contributing to be able to transfer out, and members must fully transfer out – partial transfers are not supported. |
| Legal & General | If your specific scheme allows transfers, you can make partial transfers (minimum £2,000) while retaining at least £100 in your pension. |
| Aviva | You may be able to transfer a workplace pension while your employer is paying in, but speak to your employer – a transfer could affect employer contributions. |
| Smart Pension | Members must cease membership before transferring out. |
| Royal London | Active members should consult directly with their employers and Royal London. |
| Fidelity Workplace Pension | Fidelity appears to support partial transfers out, but check your scheme rules and with your employer. |
| Scottish Widows | Transfer options depend on the specific workplace arrangement. Members should check the scheme’s transfer provisions and whether any guarantees or safeguarded benefits could be lost. |
| Aegon | Transfer rights and conditions depend on the particular pension arrangement. Members should check their scheme documentation before proceeding. |
The important takeaway is that the provider name alone isn’t enough, as your employer’s particular pension scheme may have its own rules governing transfers.
How Simply Ethical can help
If you are looking to transfer your pension(s)and build your wealth in a Sharia-compliant manner, Simply Ethical offers a suitable Personal Pension with no fees for incoming and outgoing transfers.
Simply Ethical’s Simplified Advice Online service offers 7 model portfolios to invest in, with competitive fees of just 0.75% per annum.
You will have 24/7 access via your online account, with your investments actively managed by our experienced investment team.
Start your investment journey with Simply Ethical today. Sign up here.
For more information, visit https://simplyethical.com/ or book a free 15-minute consultation with a member of our team here.
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