Consolidating pensions
Discussion
I've managed to accrue three separate private pension pots - one is with Legal and General and hasn't been paid into for about 10 years, one is with standard life and is what i am currently paying a chunk of my salary into, the last is the new compulsory pension scheme that has been organised by my employers, which takes a small amount from my wages and adds an even smaller amount from my employer.
Is it worth combining these in to one bigger pension scheme, or are there downsides to having the money all in one place? I'm a standard rate taxpayer, and the pensions are unlikely to be massive by the time i retire
Is it worth combining these in to one bigger pension scheme, or are there downsides to having the money all in one place? I'm a standard rate taxpayer, and the pensions are unlikely to be massive by the time i retire
Crucial question: What types of pension are they?
If any of them are defined benefits schemes, like final salary, then the question of whether to transfer is more difficult to answer. In this case you’d need to request a “cash equivalent transfer value” from the scheme and take that to an IFA who could work out whether the value offered is good enough to justify transferring. I doubt any pension scheme would accept an instruction to transfer a defined benefit pension without the instruction coming from an IFA.
In the case of defined contribution schemes (which yours sound like), the question should be relatively straightforward. But I confess I don’t know whether schemes will accept an instruction direct from you. I am in this boat at the moment, considering consolidating two defined contribution pensions, and I’d like to do it myself to avoid the £3,000+ that my IFA wants to charge.
You would need to decide whether the receiving scheme provides a wide enough choice of investment options so that you can find some funds that fit your personal criteria, and whether the scheme offers the features you’ll want when you retire (e.g. flexible drawdown etc).
An advantage of consolidating is the administrative simplicity. Will you still be able to find the contact details for all three pensions (assuming phone numbers etc haven’t changed) in 10/20/30 years?
If any of them are defined benefits schemes, like final salary, then the question of whether to transfer is more difficult to answer. In this case you’d need to request a “cash equivalent transfer value” from the scheme and take that to an IFA who could work out whether the value offered is good enough to justify transferring. I doubt any pension scheme would accept an instruction to transfer a defined benefit pension without the instruction coming from an IFA.
In the case of defined contribution schemes (which yours sound like), the question should be relatively straightforward. But I confess I don’t know whether schemes will accept an instruction direct from you. I am in this boat at the moment, considering consolidating two defined contribution pensions, and I’d like to do it myself to avoid the £3,000+ that my IFA wants to charge.
You would need to decide whether the receiving scheme provides a wide enough choice of investment options so that you can find some funds that fit your personal criteria, and whether the scheme offers the features you’ll want when you retire (e.g. flexible drawdown etc).
An advantage of consolidating is the administrative simplicity. Will you still be able to find the contact details for all three pensions (assuming phone numbers etc haven’t changed) in 10/20/30 years?
Edited by Dr Mike Oxgreen on Thursday 26th April 16:54
There are a few things to consider:
1) How is the fund performing
2) What are the charges
3) Are there any penalties for moving or bonuses for staying
If the funds are not performing well compared to the other similar funds then consider moving to another platform eg a SIPP. If there is a reason to stay (terminal bonus or guaranteed sum) then consider staying. If the charges are high definately consider moving. As you can see it's usually not a simple decision.
1) How is the fund performing
2) What are the charges
3) Are there any penalties for moving or bonuses for staying
If the funds are not performing well compared to the other similar funds then consider moving to another platform eg a SIPP. If there is a reason to stay (terminal bonus or guaranteed sum) then consider staying. If the charges are high definately consider moving. As you can see it's usually not a simple decision.
Dr Mike Oxgreen said:
In the case of defined contribution schemes (which yours sound like), the question should be relatively straightforward. But I confess I don’t know whether schemes will accept an instruction direct from you. I am in this boat at the moment, considering consolidating two defined contribution pensions, and I’d like to do it myself to avoid the £3,000+ that my IFA wants to charge.
Surely HL will happily take your instruction to open up a SIPP & transfer your pension in? They won't be the only ones either.As you'll discover, I know little about pensions 
Two of them are personal defined contribution pensions that I set up years ago. I pay a set amount into them each month. My employer makes no contributions to them.
I've no idea on the charges levied or any bonuses payable. I don't really know what the money is invested in either.
I do know that when i asked the directors' financial advisor (it a small company and he comes in once every three months or so to talk to them all) he said that his minimum charge would be £750 to look at what I had, plus more if i wanted to actually transfer/move anything.
Two of them are personal defined contribution pensions that I set up years ago. I pay a set amount into them each month. My employer makes no contributions to them.
I've no idea on the charges levied or any bonuses payable. I don't really know what the money is invested in either.
I do know that when i asked the directors' financial advisor (it a small company and he comes in once every three months or so to talk to them all) he said that his minimum charge would be £750 to look at what I had, plus more if i wanted to actually transfer/move anything.
Mr Pointy said:
Surely HL will happily take your instruction to open up a SIPP & transfer your pension in? They won't be the only ones either.
Yeah, probably. I just need to get off my arse and give the two schemes a call to check that they’d accept an instruction from me. I’d be wanting to move a Reuters DC pension into an L&G scheme, both of which are deferred pensions from past employers. It really shouldn’t be a problem transferring from one DC scheme to another, I’d have thought.Final Salary pensions schemes with a CETV (Cash Equivalent Transfer Value) greater that £30,000 require financial advice in order to be moved. If the value is lower than £30,000 an adviser is not required.
Money Purchase pensions do not require the involvement of a financial adviser and can be moved freely by you OP.
As Mr Pointy has said, check there are no penalties or valuable benefits you would lose, such as terminal bonuses on with profit funds, guaranteed annuity rates, pension term insurance (life insurance) before moving.
You can also ask your current providers to provide you with an illustration to retirement. The figures are next to useless as they are assumed growth rates, but this will give you a very important figure, the Reduction in Yield.
This will let you know the full effect of charges, so if, for example, a 7% assumed growth rate has a RIY to 5% you are paying 2% a year in charges.
Money Purchase pensions do not require the involvement of a financial adviser and can be moved freely by you OP.
As Mr Pointy has said, check there are no penalties or valuable benefits you would lose, such as terminal bonuses on with profit funds, guaranteed annuity rates, pension term insurance (life insurance) before moving.
You can also ask your current providers to provide you with an illustration to retirement. The figures are next to useless as they are assumed growth rates, but this will give you a very important figure, the Reduction in Yield.
This will let you know the full effect of charges, so if, for example, a 7% assumed growth rate has a RIY to 5% you are paying 2% a year in charges.
JulianPH said:
Final Salary pensions schemes with a CETV (Cash Equivalent Transfer Value) greater that £30,000 require financial advice in order to be moved. If the value is lower than £30,000 an adviser is not required.
Every day's a school day! I didn't know that there's a threshold below which a CETV can be moved without advice. Sadly both of my old DB pensions have given CETVs above that threshold, but the calculations done by my IFA did not indicate a compelling reason to move them.JulianPH said:
Money Purchase pensions do not require the involvement of a financial adviser and can be moved freely by you OP.
That's what I was hoping to hear. Something tells me my IFA isn't going to be seeing the £3k+ he's asking for to do the job of consolidating my DC pensions!Dr Mike Oxgreen said:
Something tells me my IFA isn't going to be seeing the £3k+ he's asking for to do the job of consolidating my DC pensions!
Good stuff.Almost anyone who asks a sensible question in this Finance Forum ought to receive enough hints and tips to reach that same conclusion. The basics in this field not hard to grasp for those who are willing to listen and then apply a bit of common sense. Happy hunting!
Interesting to know as I have several small pots strewn around from different jobs over the years
Have to admit that I find it difficult to determine yields/fees in order to work out what is for the best. Is there anything specific to look for in the paperwork that will help to work out the best route? They are not final salary schemes or the like, just simple ones with employer/employee contributions
Have to admit that I find it difficult to determine yields/fees in order to work out what is for the best. Is there anything specific to look for in the paperwork that will help to work out the best route? They are not final salary schemes or the like, just simple ones with employer/employee contributions
Get advice from an IFA. Then consider setting up an SIPP and transferring in those pensions which are in limbo.
The upside with the SIPP is that any other contributions you make enables you to claim tax relief plus the government will add 20%. The downside is that you cannot get at the money until you are 55.
The upside with the SIPP is that any other contributions you make enables you to claim tax relief plus the government will add 20%. The downside is that you cannot get at the money until you are 55.
Glaston said:
Get advice from an IFA. Then consider setting up an SIPP and transferring in those pensions which are in limbo.
What do you mean by ‘in limbo’? Why do you need an IFA to work out the charges being paid - just ask the company directly?!
Glaston said:
The upside with the SIPP is that any other contributions you make enables you to claim tax relief plus the government will add 20%. The downside is that you cannot get at the money until you are 55.
Eh? You get tax relief AND the government will add 20%?Gassing Station | Finance | Top of Page | What's New | My Stuff