Prioritising a pension
Discussion
I currently have three pension pots which are all a bit pathetic so I need to up my contributions. My current pension gets 4% from my employer and 4% from me so I'm going to increase my contribution to 8%. It's currently worth not a lot.
I have a pension from a previous employer which is worth a little over twice my current pot but I've not put anything into that for a good while. I'm wondering whether I should keep my current employer pension at 4% contributions and instead start putting a regular amount into the larger pot instead?
The third pot has just £6000 in it so I'll probably combine it with one of the others but again, the large pot or my current employer pot?
I have a pension from a previous employer which is worth a little over twice my current pot but I've not put anything into that for a good while. I'm wondering whether I should keep my current employer pension at 4% contributions and instead start putting a regular amount into the larger pot instead?
The third pot has just £6000 in it so I'll probably combine it with one of the others but again, the large pot or my current employer pot?
It usually comes down to charges, performance & benefits. If your employer will match your increased contributions then that's usually a valuable benefit so find out about that. Salary sacrifice is another advantageous route if your employer gives you the option.
As for the other two you don't say if they are Defined Benefit or Defined Contribution pensions as it can make a big difference as to what you can do with them. Are there any valuable benefits attached to them - check before moving them elsewhere. After that look at charges & performance. If they are performing well (after charges) then there's no real drive to move them. If they are dawdling then consider moving them out into a SIPP or private pension.
You need the numbers though to make a considered decision.
As for the other two you don't say if they are Defined Benefit or Defined Contribution pensions as it can make a big difference as to what you can do with them. Are there any valuable benefits attached to them - check before moving them elsewhere. After that look at charges & performance. If they are performing well (after charges) then there's no real drive to move them. If they are dawdling then consider moving them out into a SIPP or private pension.
You need the numbers though to make a considered decision.
Op I was in a similar boat to you a few years back, not sure if you have DC or DB pensions but Mr Pointy's post above is worth taking note of..esp abt the benefits point. It's not always a simple case of assuming that pensions should be merged or taken out of the current scheme..the answer usually = it depends....on charges, benefits, what age can you access the pensions in the context of how the government is gradually raising the age pensions can be accessed.
This is my current approach:
I had 3 DC pensions and initially made some impulsive decisions without doing the sensible due diligence approach and at least doing research first so you are already winning!
DC pension 1 and 3 - Transferred to a SIPP, invested into VLS 80 for a few yrs then transferred out and into my current employer DC pension, so effectively merged the two pensions into a single fund. The SIPP and choosing VLS 80 was my 'impulsive' move ..was fortunate it worked out ok but was luck rather than anything(Equities bull market etc). After merging the pensions, switched from the default fund to 100% Passive Equities 'Developed World' only. The total charges are v competitive.
DC pension 2 - My previous employer offered funds that are not available in my current employer scheme so I made a conscious decision to leave that pension pot intact, it's a smaller amount Vs my current active scheme so have taken more risk, the fund has a higher EM exposure and is an active fund hence rather expensive but performance has been v good...that may not last but I will take the risk as am happy to do so. This fund with the higher EM exposure nicely complements my passive developed world fund in the current active scheme.
For now I am happy with the current funds and trying to avoid tinkering too much but will continue to review and tweak as needed.
I am 40 and a higher rate tax payer, at present am salary sacrificing and been pushing as much as I can in as it's effectively free money and a 40% tax dodge...on average my recent total monthly contributions (Inc employer matching) are circa 30% of my gross monthly salary.
If your current employer offers salary sacrifice and you are a higher rate tax payer then I would prioritise that first by increasing your contributions.
As part of a broader review of your pensions, worth checking what funds the other pensions are invested into....my older pensions were in Default 'Lifestyling' funds that tend to dial down your risk( lower equities exposure) as you get older. Nothing wrong with those funds as such but for my age and risk tolerance they weren't 'risky' enough and were poor performers relatively hence my reason for switching funds.
Finally the boring disclaimer bit, I'm not qualified to advise, a random bloke on the internet innit and respectfully admit I am still learning about investing so if needed take proper advice to optimise your approach
This is my current approach:
I had 3 DC pensions and initially made some impulsive decisions without doing the sensible due diligence approach and at least doing research first so you are already winning!
DC pension 1 and 3 - Transferred to a SIPP, invested into VLS 80 for a few yrs then transferred out and into my current employer DC pension, so effectively merged the two pensions into a single fund. The SIPP and choosing VLS 80 was my 'impulsive' move ..was fortunate it worked out ok but was luck rather than anything(Equities bull market etc). After merging the pensions, switched from the default fund to 100% Passive Equities 'Developed World' only. The total charges are v competitive.
DC pension 2 - My previous employer offered funds that are not available in my current employer scheme so I made a conscious decision to leave that pension pot intact, it's a smaller amount Vs my current active scheme so have taken more risk, the fund has a higher EM exposure and is an active fund hence rather expensive but performance has been v good...that may not last but I will take the risk as am happy to do so. This fund with the higher EM exposure nicely complements my passive developed world fund in the current active scheme.
For now I am happy with the current funds and trying to avoid tinkering too much but will continue to review and tweak as needed.
I am 40 and a higher rate tax payer, at present am salary sacrificing and been pushing as much as I can in as it's effectively free money and a 40% tax dodge...on average my recent total monthly contributions (Inc employer matching) are circa 30% of my gross monthly salary.
If your current employer offers salary sacrifice and you are a higher rate tax payer then I would prioritise that first by increasing your contributions.
As part of a broader review of your pensions, worth checking what funds the other pensions are invested into....my older pensions were in Default 'Lifestyling' funds that tend to dial down your risk( lower equities exposure) as you get older. Nothing wrong with those funds as such but for my age and risk tolerance they weren't 'risky' enough and were poor performers relatively hence my reason for switching funds.
Finally the boring disclaimer bit, I'm not qualified to advise, a random bloke on the internet innit and respectfully admit I am still learning about investing so if needed take proper advice to optimise your approach
Edited by VR99 on Sunday 31st October 11:47
jurbie said:
Interesting stuff, thanks. I've no idea if they are Defined Benefit or Defined Contribution, I've looked and it doesn't seem to say so I'll need to find out.
Does the paperwork talk about an amount in the pension (defined contribution) or an annual payment, probably with a lump sum at the start (defined benefit)?Gassing Station | Finance | Top of Page | What's New | My Stuff