Gathering your pensions in
If you’ve worked at different places in the past, it’s likely that you’ve built up some workplace pension entitlement while you were there. Have you remembered them all and do you look after them? Or would it be easier and better for you to pull them all together and put them all in the same place?
Of course, as with most things, there are some pros and cons of doing this:
The possible benefits:
Ease of access: having all of your pensions in one place can make it easier to keep track of your retirement savings and cuts down on the paperwork and log on details.
Easier to plan: a combined view should make the picture of your retirement savings clearer and make it easier to plan how you’ll use your retirement account when you come to retire.
Save money: it may be that you can take advantage of lower fees, as some older policies may have high fees in comparison to today’s plans.
More investment choice: you might want to invest in a wider range of funds than you have with your older plans; ones that offer you more variety or suit your approach to risk better.
Potential for better investment returns: we all want to boost our retirement savings and maybe you feel you can get better investment returns elsewhere or that your savings would be better managed by moving them. Remember though, returns are never guaranteed, and past performance isn’t necessarily indicative of future results.
Potentially more options: your previous plans might not give you access to all of the current retirement options, such as flexible withdrawals. So moving these into a current retirement account would open up your choices.
What to look out for:
All ‘eggs in one basket’: with all of the money in the same place, you may not have the same spread of risk or variety as keeping them all separate. This might be an issue if the funds don’t perform well, or something happens to the provider itself.
Exit fees: be careful, as some providers may impose an exit penalty. So make sure you find out if there is one and how much it will cost you to move the money.
Loss of guarantees: some old plans have built-in guarantees around annuity rates, which might be important to you if you plan to buy an annuity when you retire. These will be lost if you transfer them to another plan.
Higher fees: the plan you move to might actually have higher charges, but you may be happy to accept these based on other factors, such as hope of a better return or more choice and flexibility on offer.
Time it may take to transfer: your money will be dis-invested when you decide to transfer, and may not reach the new plan to be re-invested for a while. This means that there is the potential you could lose out on any investment gains in this interim period
If you’re not sure what to do, it’s a good idea to get financial advice (there will be a cost for this). You’ll need to do this anyway if you’re thinking of moving from a defined benefit (final salary) scheme with a transfer value over £30,000, as there are then even more things to think about, such as giving up a guaranteed income and future increases, as well as certain death and dependant benefits.
