Pension merging - Do I do it? Is it worth it?

ajtrader100

Hi all,

I will just give you some background as to my situation then hopefully someone will be able to give me some advice. I have spoken to a pension adviser, but I am a little confused.

I've just turned 29 and around 2 years ago changed jobs. My previous company had a private pension scheme, which I paid into for around 4 years. My new company has a pension scheme that I have just qualified for, that I am also now paying into.

The first scheme was an 'Avivia PP', which as well as my contributions it also had the company constributions and the "opt out" (I think that is the phrase) government contributions. It's current transfer value at the start of 2012 was £20K.

The new scheme with my current employer is a Standard Life 'Managed Pension Fund' which has a few grand in, but not a lot at the moment. I basicaly signed up to an 'off the shelf' investestment at the beginning which I am looking to tailor to me personally.

My questions are as follows:

1) Is it worth me combining the two schemes together? Theory would say that a bigger lump at the beginning should accumulate to a larger sum at the end.

2) If it is worth combining how do I go about taking the money from one fund and placing it in the new pension scheme? (I did ask the pension advisor, and he mentioned Friends Life - which I examined the website and it seemed they didn't have anything there to do this?)

3) I am willing, due to my age, to be a little more risky than the existing 'off the shelf' investment scheme I am currently in. I know a little about investments but wouldn't want to risk my entire pension on it! Do I go half hands on/half hands off? If so what Funds are suited to me? I would want say 40% in cautious funds, 30% in balanced funds and then 30% in the more volatile end of the market.

If anyone has any ideas or answers it would be greatly appreciated.

A slightly confused moneysaver!

dunstonh

and the "opt out" (I think that is the phrase) government contributions.

opt out means not joining an occupational scheme. Contracted out is what you mean. Opt out is frequently used in error. So, you are not alone in your thinking.

1) Is it worth me combining the two schemes together? Theory would say that a bigger lump at the beginning should accumulate to a larger sum at the end.

It wont make any difference to your final pension fund value other than charges and investment returns. If it is better to consolidate them then you should. If it isnt then you shouldnt

2) If it is worth combining how do I go about taking the money from one fund and placing it in the new pension scheme? (I did ask the pension advisor, and he mentioned Friends Life - which I examined the website and it seemed they didn't have anything there to do this?)

Friends Life is a good traditional pension scheme with low charges and good fund range. It is one of the providers you expect to be near top in most cases. You dont do the paperwork. The adviser does the paperwork. Although transferring the paid up plan to Friends Life wont consolidate your pensions. It will still keep you with two schemes.

3) I am willing, due to my age, to be a little more risky than the existing 'off the shelf' investment scheme I am currently in. I know a little about investments but wouldn't want to risk my entire pension on it! Do I go half hands on/half hands off? If so what Funds are suited to me? I would want say 40% in cautious funds, 30% in balanced funds and then 30% in the more volatile end of the market.

The mention of balanced managed and cautious managed means you are looking at portfolio funds. It isnt really worth splitting these as they will use the same funds (e.g. the cautious index fund of funds uses the blackrock trackers with a cautious allocation. The balanced index fund of funds uses the same blackrock trackers with a balanced allocation. Splitting between the two doesnt really achieve anything).

We cant tell you what funds are right for you as we dont know what investment strategy you would follow, whether you would be an active or lazy investor (i.e. would you review and rebalance or invest and forget) and what your knowledge is (no point in investing in things you dont understand enough about).

The adviser (assuming IFA) is required to tell you which funds to use.

ajtrader100

dunstonh,

Thanks for your help. Really appreciated.

So is there a way of putting the two pension together, and in your opinion would it be worth doing?

Would I be better repostioning my funds within the Aviva scheme? I did make chnages during the time I was contributing to that scheme, but left it for a couple of years after I changed jobs - so it would definitely be worth revisiting if I don't move that investment into another portfolio.

You said, "If it is better to consolidate them then you should. If it isnt then you shouldnt", How do I evaluate this?

My advisor doesn't have anything to do with my old pension - he works for LEBC who advise our companies employees and obviously works with Standard Life, so can he still move this money around? Surely he will charge a fee?

gadgetmind

ajtrader100 wrote: »

d
You said, "If it is better to consolidate them then you should. If it isnt then you shouldnt", How do I evaluate this?

As dunstonh said, based on the choice of funds available and the fees being charged. I have a FL group pension and there are some good funds there, but Aviva also have a reasonable range and the fees there are usually also fairly low.

Given your age, you can afford the ignore anything overly cautious and go for racier funds with high holdings in equities around the world. I'm using the FL balanced index enhanced fund of funds but have added more global equities and emerging markets to this. Using portfolio funds and then adding to it isn't recommended, but I do keep a close on on what that FofF is holding to make sure I'm happy with the overall picture.

TBH I doubt that there will be a clear case in either direction for merging or leaving separate. I did recently move an old pension across to my FL GPP but in my case the fees on the old pension were MASSIVE.