Consolidating various pensions - what to consider?

sarah_elton

I've mentioned this in a previous thread, but need a little more help now...

I'm 27 and about to start with a new employer, and as a result open a third pension account with yet another provider.

I currently have two pensions, with no payments currently being made into either, from previous jobs:

1. A Legal and General group SIPP - valuation today £2,507

2. An Axa group stakeholder - valuation today £2,298 (ouch that one's lost value since I last looked :eek: thank god this is a long term investment lol)

On Monday I start a new job and I'm not sure yet who the new firm's pension provider is.

I'm trying to work out whether I should consolidate these three into one or two, and if so which one/two to put them into.

I spoke to Legal and General this morning and they said that since it's a SIPP I can make personal payments into that one if I want via direct debit. I believe (?) that since the Axa one is a group stakeholder I can't make payments in like that. Is that correct?

Having only one would be simpler, but on the other hand I like the diversification of using at least two. I work in the City but don't trust these finance companies to keep up their good names for the next 40 years. :rotfl:

On the other hand of course I wasn't in either of the two previous jobs long, so those pension accounts are so small they're not going to be worth much at all in 40 years, so is it really worth bothering to keep them open just to spread the risk a little?

I know no one will be able to advise on which product I should consolidate into (if that's the best route) without the full detail of each. I just need some tips on what I should look at and consider to make the decision.

Am I correct that with Axa being a group stakeholder I can't make payments into it personally? If so, L&G seems preferable. I'm wondering if it might be good to keep L&G open and make personal payments into that, and only have my employer contributions at the new job go into their provider, again to grow two pensions and spread the risk. At my new company, the employer contribution is 10% with no contributions required from me.

EDIT: One more question while I'm at it, after seeing a comment in another thread about the amount someone had in their pension. At my age (27), how bad is it that I only have about £4.8k? What should I be aiming for by 30 for a "reasonable" retirement income, and what's reasonable in these examples?

dunstonh

I believe (?) that since the Axa one is a group stakeholder I can't make payments in like that. Is that correct?

It reverts to individual status when you leave the employer so you should be able to continue it if you want.

Having only one would be simpler, but on the other hand I like the diversification of using at least two.

There is no diversifiction in using two providers. You just double your admin. Diversification comes within your investments within the pensions.

I work in the City but don't trust these finance companies to keep up their good names for the next 40 years.

Doesnt matter if they do or not. Both are flexible enough to allow funds to be moved at no cost. No-one knows what is going to happen in the next 40 years with any company.

is it really worth bothering to keep them open just to spread the risk a little?

You are not spreading the risk by having multiple providers.

At my age (27), how bad is it that I only have about £4.8k? What should I be aiming for by 30 for a "reasonable" retirement income, and what's reasonable in these examples?

If you want £20k income per year then you need a pot of around £400,000 in todays terms. So, at the moment you have a very small pot to where you need to be if you want a half decent income (depending on what you call decent). You really ought to be through the £10k mark by now but it really depends on your monthly contributions. (i.e. late starter but higher monthly payments).

Until you find out what the new employer offers, you cannot really make any decision on what to do with the pensions.

sarah_elton

Thanks. With regard to diversification/risk spreading, I wasn't referring to diversification of the investments themselves (I work for asset management firms - that part of it I understand - but I deal with institutional clients so it's the wrapping of it into personal pensions where I struggle). I was referring to the risk of Axa or L&G going bust and losing my money. I know that there's no precedent, and there is some govt protection, but I'd be nervous having £400k if I ever get to that level with one financial company. But I take the point about how much I'm wasting on fees and that with my pitiful sums it's not really a big deal.

I know I need to get hold of the new employer's pension plan details before I can decide, but any general views on whether it is better to just use one plan? If so, I'll have to transfer L&G and Axa into the new firm's provider.

I didn't start having a pension till age 25. If I make no contributions myself, and assuming I stay with my next employer, at age 30 my balance will be up to about £14k (simple and hopefully unrealistic case of 0% growth - just today's balance plus contributions). Am I starting to catch up or do I need to seriously consider making additional contributions myself?

dunstonh

I was referring to the risk of Axa or L&G going bust and losing my money.

If you are using unit linked investments then does it really matter?

But I take the point about how much I'm wasting on fees and that with my pitiful sums it's not really a big deal.

You are not wasting any more on charges having 1 pension of £10k or 10 pensions of £1k each. Its just time consuming and unnecessary.

Am I starting to catch up or do I need to seriously consider making additional contributions myself?

You really want to be around the £50k mark by age 35. So, 14k at 30 is a bit light. As I said, it depends on what you want to get back in retirement. Like any investment option, what you get back is mostly governed by what you pay in to begin with.

sarah_elton

dunstonh wrote: »

If you are using unit linked investments then does it really matter?

Ok true, I've only just started getting my head round where I stand with my pensions and yes, I was looking at it too simplistically.

dunstonh wrote: »

You are not wasting any more on charges having 1 pension of £10k or 10 pensions of £1k each. Its just time consuming and unnecessary.

Ok, I haven't looked at the detail of my charges yet and I didn't know if the fees became less % wise with fund size (e.g. for our customers, they'll pay a lower % on a $500m investment than a $50m investment), or whether there was a base charge plus a % charge. I agree though re admin effort, and given my penchant for changing jobs I think I'd end up making a lot of use of the pension tracing service!

dunstonh wrote: »

You really want to be around the £50k mark by age 35. So, 14k at 30 is a bit light. As I said, it depends on what you want to get back in retirement. Like any investment option, what you get back is mostly governed by what you pay in to begin with.

Thank you - that figure is useful as something to plan towards. I seem to have lost my 'thanks' buttons on the site but when they reappear I'll be clicking.

dunstonh

Ok, I haven't looked at the detail of my charges yet and I didn't know if the fees became less % wise with fund size (e.g. for our customers, they'll pay a lower % on a $500m investment than a $50m investment), or whether there was a base charge plus a % charge. I agree though re admin effort, and given my penchant for changing jobs I think I'd end up making a lot of use of the pension tracing service!

Modern mono charged pensions are percentage based. Some do have fund based discounts though. AXA dont I think (I dont rate their stakeholder) and L&G do on their PPP and stakeholder but not the SIPP (unless you are using pension funds). I dont rate their SIPP either! Although having that availble as an employer scheme was pretty good.

sarah_elton

LOL, I'll post when I find out what the new one is and see if you rate that.

Have to double check my contract - not sure if the pension starts right away or after the probation period.

sean_larner

I have three pensions with a surrender value of around 350,000 with a small Police pension I am trying to find out about. Should I consolidate firstly, and if I do what fees will I have to pay? When I read the potential numbers for future pension payouts in years to come, I can't see how the numbers add up. Even at 20,000 p.a that's 17years covered, and that number seems to be conservative. Do you have any advice or suggestions please so I can maximise on where my money should be invested
Thanks

EdInvestor

Please post much more detail about the pensions - provider, type of pension, where invested etc.