Transfer pension in current climate?

techno12

Hi

I've had docs through today from my employer's new pension provider offering to transfer the funds from our old scheme into the new one. The yearly admin charge goes down from 1.5% to 0.7% so that's a plus, but, in the current climate of crumbling share prices, is it worth it?

To my mind, if I transfer now, then it'll make no difference. Yes, the cash value will be down by 1/4 or whatever (due to it being largely shares, and the FTSE collapsing), but when it's transferred to the new scheme I'll get more for my money as the shares the new scheme will purchase will also be 1/4 cheaper. I could wait till things recover and transfer then, but although more cash will be in the new scheme, shares will be that much more expensive so there'll be no difference.

Am I right in this?

Cheers!

Day_Trader

Hi Techno 12,

With the information you've given it's difficult to say although both schemes seem to suggest they are Stakeholder schemes. Could you confirm this?
In terms of transfers then you would benefit from reducing your management charges for the year by 50% based on the figures you give so this would make a difference.
In terms of the purchasing part it depends what the holdings are....

EdInvestor

You need to compare the fund choices in the two schemes.The lower AMC is a plus point but if the funds are duff, there's no real advantage.

techno12

Thanks for those quick replies!

I think both are Stakeholder schemes yes, and I think they're both largely default "managed" type option, though I think I biased my existing one towards "new emerging markets" slightly, but as everywhere's down at the moment by a similar % that ought to not make a difference..?

I'd prefer to have everything in one place you see, so that when I do get more proactive and chop and change the holdings it's all there in front of me on one website.. plus as you say, the management charge halving has got to be beneficial.

Just checking that I wasn't doing anything silly by transferring now in this mad bear market..!

Day_Trader

Managed will be 'managed balanced' which aims to meet a generic risk profile (i.e. average) so will be a widely diversified fund. The emerging market one will more likely be of a higher risk rating with the prospect of greater potential returns. The pensions themselves are tax wrappers so you only need worry about comparing fund choice and charges and then weigh both schemes up. In terms of your concerns surrounding performance in the bear market this will be relevant to the underlying funds.Transferring isn't mad provided you've compared both schemes.