The amount of risk involved in transferring your pension depends on a range of factors that are usually personal to your own circumstances. The first of these is understanding what kind of pension you have and what alternatives you have to transfer into.
A Defined Contribution pension, the most common type of pension, where you pay part and your employer pays part, can usually be moved at any time to another contributory pension or a PRSA or PPP (see below).
A Defined Benefit pension is based on paying you a fixed amount when you retire. These are more complicated to transfer because if you have been with a provider for a long time you will have built up benefits that you might lose by transferring. Always seek independent financial advice before you move a Defined Benefit pension.
Some companies with defined benefit pensions are offering employees very high transfer values, known as an Enhanced Transfer Value. However, when deciding if you should transfer your defined benefit (DB) pension you need to understand the pros and cons of doing so. You can learn about the pros and cons of transferring your DB pension here.
You may wish to move your defined contribution or defined benefit pension to a Personal Retirement Savings Account (PRSA). This is often an option taken by someone moving from being employed by a company to being self-employed and want to take on the management of their pension planning themselves. A PRSA is an off-the-shelf pension plan that can be started or stopped as required and can take lump sum payments as well as monthly contributions. It is considered flexible enough to match the more precarious income fluctuations of self-employment.
Another option for newly self-employed people is to transfer your company pension to a start a personal Pension or PPP. This type of pension can take both personal contributions as well as contributions from your own company. This will then receive tax relief at the marginal rate of 20% or 40%, depending on the amount. In some cases you will be required to make minimum payments to the fund but there are many fund types available and you will be assessed to determine how risk averse you want to be in terms of the funds that your pension is invested in. Once this is completed you will be offered funds that match the risk level you wish to take on.