Good time to combine my pensions together?

tidgy

I am in my mid twenties (i.e. not retiring anytime soon) and have a small ~£3000 pension through my previous employer's group stakeholder pension scheme - I'm no longer paying any contributions into this fund. When I moved to my new job 6 months ago I set up a similar pension with them (currently ~£1000). I'm considering transferring the value of the old pension into the new pension to make things simpler long-term, cut down on paper work, etc.

However, it seems that the stock market falls have reduced the value of my old pension to below the contributions I've paid in, it's lost about 33% of its value. Should I wait until it's picked back up in a few years time or should I just transfer the current value of it now and let it grow in my new pension?

Thanks in advance,

T

tidgy

I should probably add that I'm keen on breaking my ties with Scottish Equitable (administrators of the old pension) as they recently changed my address to somebody elses accidentally, and then wouldn't let me talk to anyone on the phone because I couldn't pass their 'security' questions!

chriswatts

I transferred one of my pensions when the market last took a nose dive, as you mentioned the value of your pension has lost 33% but on the other hand transfer values are worked out on pension value so it will be cheaper to transfer.

tidgy

Sorry, I don't quite understand what you mean by transfer value?

chriswatts

Obviously your previous employers pension provider would have taken part of the pensions funds profits as commission and when transferring a pension a lot will charge you to transfer fee for this lost income. This is whats called the transfer value, it will be slightly less than the pension's value and you have to decide if in the long run your new pension provider will perform better and overcome this transfer fee.

dunstonh

It doesnt matter what market conditions are when you transfer.

this is whats called the transfer value, it will be slightly less than the pension's value

It would be unusual to see a transfer penalty on an employer/group scheme. Most modern schemes (post 2001) dont have them either and many legacy schemes have removed them. Its certainly worth checking current value and transfer value are the same but dont assume it will be lower.

chriswatts

The company I worked for, their group scheme had a penalty clause, they wanted to close the current pension scheme and transfer it to something called a Transplan policy, but checking the terms I saw it had an even worse penalty clause in it, so taking into account the poor performance of my previous providers funds and the costs to transfer I moved it elsewhere.

Certainly worth comparing performance of the two providers and checking to see if transfer value and pension value are the same.

dunstonh

The company I worked for, their group scheme had a penalty clause, they wanted to close the current pension scheme and transfer it to something called a Transplan policy, but checking the terms I saw it had an even worse penalty clause in it, so taking into account the poor performance of my previous providers funds and the costs to transfer I moved it elsewhere.

Transplan is the marketing name of a section 32 buy out bond from Friends Provident rather than a provider/product type. Section 32s are very often the best option to take when a final salary pension scheme closes.

so taking into account the poor performance of my previous providers funds and the costs to transfer I moved it elsewhere.

The transplan offered unit linked funds and a choice of investment areas very similar to that of a good stakeholder pension. Most S32s come from final salary schemes. It is possible to transfer from a money purchase sceheme winding up for example but they are not as common.

Performance doesnt apply to final salary schemes. With money purchase occupational schemes you tend to find most of the fund choices are relatively generic and perform in line with sector average. So, you dont get bad or good performance. You get the performance that is in line with the sectors you are invested in. Very much like many stakeholder pensions. So, deciding to opt out of the Section 32 based on performance of a previous scheme would not have been good justification.

The OP has a stakeholder scheme so the options are very different to trustee buy outs. Plus, stakeholders cannot have transfer penalties.

chriswatts

dunstonh wrote: »

Performance doesnt apply to final salary schemes. With money purchase occupational schemes you tend to find most of the fund choices are relatively generic and perform in line with sector average. So, you dont get bad or good performance. You get the performance that is in line with the sectors you are invested in. Very much like many stakeholder pensions. So, deciding to opt out of the Section 32 based on performance of a previous scheme would not have been good justification.

Well that doesn't make sense, I certainly didn't have a final salary scheme and as for generic surely some of the performance is down to the managers since I didn't have a very high opinion of the Friends Provident scheme since it seemed to lose money every year. (even when the markets was good) If all stakeholder pensions perform the same how come some are recommended over others?

dunstonh

Well that doesn't make sense, I certainly didn't have a final salary scheme

Trustee buy outs on money purchase is possible. Just not as common.

as for generic surely some of the performance is down to the managers since I didn't have a very high opinion of the Friends Provident scheme since it seemed to lose money every year.

The FP scheme doesnt make or lose money. The investments you choose give the returns and FP are not bad to be honest.

(even when the markets was good)

Were you actually invested in the funds that were in the markets?

If all stakeholder pensions perform the same how come some are recommended over others?

The pensions dont perform the same. The only different on stakeholder pensions is the charges and the funds they offer. Its the funds that give the performance. Generally, internal funds tend to be weak on equities but better on fixed interest and property (generalisation there with exceptions). So, trackers are often best in a stakeholder if you go down that route in which case, trackers will typically perform in line with their sector.

You need to separate the pension and performance. They are two things.

chriswatts

Yes they were invested in funds that were in the markets.

With hindsight I always thought the pension advise we got was duff, the pension was started when there was a lot of talk of mis-selling and basically the adviser didn't seem to want to say much, only advise we got was tick boxes for secure growth and balanced growth.

Now comparing the performance of these FP funds with similar funds of other providers they didn't seem to compare very well.