Consolidating pensions.

[dhutch]

I understand you can transfer funds between pension providers.

I have three pensions from previous employers, plus a fourth due to start shortly with the current employer, having been in full time employment for around ten years, but moved job every couple of years after the first five.

Obviously to an extent I potentially have the choice about which one(s) I keep and which I merge. How do you go about selecting this?

Largest is with Royal London, other two with Peoples Pension and Aegon.

Thanks

Daniel

[alistair1234]

I've just had this situation myself. One with Scottish Widows, one each with MyAviva and Aviva My Money, all decent sizes.

Then one with True Potential of a couple of grand and a couple of really small ones with Peoples Pension and Smart Pension which were a few hundred each.

I just took the view that 6 was too much to manage. Apparently the two Aviva ones will have the logins merged one day and I'm still contributing to one of them. I think Aviva and SW have the best benefits so i've just transferred the 3 smaller ones in to the SW account.

[mikeiow]

I had several smallish ones (over £10k) which I moved into my main Aviva work one.
I did that because the Aviva one has a decent choice of funds at low costs and is very easy for me to 'manage'.

Be aware that there is a "small pension pot" rule that essentially says this:

If you’re over the age of 55 and your pension pot is £10,000 or less, it may be classed as a ‘small pension pot’.
You can take the full amount as cash and this won’t reduce your annual allowance. 25% is tax free and we’ll deduct 20% income tax from the other 75%.
If you exceed the 40p or 45p rate, you’ll have to pay any additional tax you incur on your lump sum via a Self-Assessment tax return.

So there can be a potential benefit to having one or two small pots come the age of 55

Of course, these things can change over the years, and if you are young, I would be tempted to consolidate them.

You do need to do your own research into which one is easier to manage.
I would *personally* prefer one without requiring use of a financial advisor - their fees over many years add up (effects of compounding!), but of course if you are not confident, maybe you need on. Perhaps post on the IM sticky thread and get some free guidance (not advice!!) from Nik - you may even find a decent IM pension suiting that consolidation ;-)

[The Leaper]

I think you will find that the small pension pot limit of £10,000 is the aggregate of all pots ,so if you have several under £10,000 but the aggregate exceeds that amount you do not have the relief at all.

R.

[chip*]

See attached relevant article with an useful high level checklist on pension consolidation.



Link found here
https://moneytothemasses.com/saving-for-your-futur...

Yes, It will involve some legwork with your pension scheme administrator, but it will be worth the financial benefits over the long term.

[dhutch]

Right,

So I guess the first thing to do is work out how much I have where, and which if any of the pension pots are 'any good' as a pension pot, presumably return on investment. I have not done any management of any of them at all as yet.

I am 32 yo for what it matters.


Daniel

[C0ffin D0dger]

As above really, are there fees or penalties to exit / transfer. What are the management fees like on the ones you want to move vs. the scheme you want to move it into. Finally how well are the funds performing?

I had quite big pot in a Aviva work pension but we got took over and enrolled into a company scheme. The company scheme had much lower fees, allowed transfers in, seems to perform really well (50% growth over 5 years!), and there were no transfer penalties on the Aviva one. Bit of a no brainer for me.

[Enut]

Transferring pensions is quite complex. You should make sure you check/consider the following for a start:-

Charging structure of schemes - ideally get comparison quotes for all the schemes involved, with and without the propsed transfers.
Transfer penalties - some old schemes can have quite large penalties and it's probably not worth transferring those.
Range of funds - the more the merrier, with more funds offered you are more likely to be able to select suitable, good funds.
Any guaranteed benefits that may be lost on transfer such as guaranteed annuity rates or enhanced tax free cash.
Death benefits and flexibility options

Oh and all this assumes the pensions are defined contribution ('money purchase'), if they are defined benefit ('final salary') then things get a lot more complicated and in most cases, if the pot is worth more than £30,000, you will need to get advice from a suitably qualified independent financial adviser.

By the way in response to a previous comment the small pots rules applies to a maximum of 3 pots each valued at under £10,000. They can each be taken as a lump sum (25% tax free, 75% taxable) without being counted against the lifetime allowance.

[mikeiow]

C0ffin D0dger said:

As above really, are there fees or penalties to exit / transfer. What are the management fees like on the ones you want to move vs. the scheme you want to move it into. Finally how well are the funds performing?

I had quite big pot in a Aviva work pension but we got took over and enrolled into a company scheme. The company scheme had much lower fees, allowed transfers in, seems to perform really well (50% growth over 5 years!), and there were no transfer penalties on the Aviva one. Bit of a no brainer for me.

Others might want to be aware that Aviva actually has MANY funds: a legacy of multiple takeovers!
Ours was taken over from Friends (formerly Friends Life!): the default fund there (BlackRock (50:50) Global Equity Index Tracker) shows a similar return (over 50%) over 5 years, with a total charge of 0.23%.

It is tough to figure out...but there is plenty of data available help people