At any time (except within 12 months of normal pension age) you are entitled to apply for your USS benefits to be transferred to any other pension arrangement whose administrator or managers are permitted by law, and willing, to accept the transfer.
The transfer payment is worked out by converting the value of your USS pension rights to a current cash equivalent using age and longevity related factors.
The calculation also takes into account fluctuations in the stock market but includes no allowance for the value of discretionary benefits. Any AVCs you have paid into the money purchase AVC fund would also be transferred at their value at the time of transfer.
Full details are in the USS booklet Leaving the scheme.
Less than 2 years’ membership
You can still have a transfer value if you have less than 2 years’ membership in USS. You might want to think about this if you are considering the alternative refund. The refund is simply your own contributions, less deductions for tax and to the state pension system.
The transfer value would be the full value of your benefits, based on the normal formula of 1/80th of each years’ salary. Remember this also includes the contributions your employer paid to USS.
How do I request a transfer value?
If you are considering a transfer value to another scheme it is usually easier to ask that scheme to contact USS for the transfer value quotation-they will usually ask you to sign a form so they have your authority to act on your behalf. You can of course request a transfer value quotation by writing to USS.
Transferring benefits outside of the UK
You may be able to, on the assumption that the scheme in the overseas country is willing and able to accept it and also that the tax authorities in that country are willing for a transfer to be made.
Please note that certain countries may also tax any incoming pension transfer; please check with the tax authorities in that country.
Additionally, Her Majesty's Revenue & Customs in the UK have requirements, which state that a transfer value can be paid only to a qualifying recognised overseas pension scheme (QROPS).
In order to be considered as a QROPS, a scheme must first meet the requirements of an overseas pension scheme and must further meet the criteria for being a recognised overseas pension scheme. The testing of whether a scheme meets these conditions is the responsibility of HM Revenue & Customs (HMRC).
To be an overseas pension scheme, it must be regulated as a pension scheme and be recognised for tax purposes in its home country.
To be recognised for tax purposes, the scheme must have tax relief for employees' and employers' contributions or tax relief for the benefits paid, but it cannot have tax relief for both. The scheme must also:
- be approved, recognised or registered with the local tax authorities; or
- if there is no tax approval scheme, the scheme must be registered as a pension scheme.
To qualify as a recognised overseas pension scheme, a scheme must fall into one of the following categories:
- It must be based in an EEA state or an EC member state.
- It must be from a country that has an Order of Council under section 788 of the Income and Corporation Taxes Act (ICTA) 88, or under section 815C of ICTA 88. The Order of Council must contain provisions for exchange of information between the parties and for non-discrimination.
- The scheme can be from any country if the pension scheme guarantees:
- that 70% of the transferred benefits will be used to provide a pension benefit payable for life for the benefit of the member. This must not be provided before age 55.
- that the scheme must agree not to pay benefits to the member except where they meet pension rule 1 of section 165 of the Act (requiring no payment of benefits before age 55 unless on health grounds);
- that it will be open to membership for persons resident in its country.
To become a QROPS, the scheme's manager must:
- give HMRC notification that it is a recognised overseas pension scheme (as described above) and have provided HMRC with suitable evidence of this fact;
- agree to inform HMRC should the scheme cease to be a recognised overseas pension scheme;
- agree to be bound by prescribed information requirements. At the time of application to become a QROPS these are:
1. the country name;
2. evidence of fulfilment of the requirements if seeking approval as a recognised pension scheme under option 3 above
Financial advice
Making the right decision can be hard. If you need financial advice please go to the financial advice pages of this site, but remember good advice is seldom free.