Potential combining of stakeholder pensions - what do I need to consider?

sweaty_betty

Hi there - just looking for some advice or guidance before I seek out a IFA if necessary

I have approximately 5-6 years worth of my/employer contributions to a work-based stakeholder pension scheme (with legal and general, if that makes any difference). I've now left the company and joined another, also with a work-based stakeholder pension scheme (with Halifax Financial Services).

I'm looking at the possibility of transferring my pension pot from the old employer scheme to the scheme provided by my new employer - mainly because I'm being charged around £15/month fees on the old scheme,whilst not paying anything into it so the value will diminish over time.

To me, this seems like a sensible option, but I'm sure there are other things to take into consideration that I don't know about! Can anyone point me in the direction of some of the other things I need to consider? I'm guessing that this might include a transfer fee (I'm told there's no fee to transfer into the new scheme), but I have no idea what's reasonable/normal.

Thanks

sweaty_betty

BTW - I'm 38 years old so probably have another 30 years to build up my pension - if that makes a difference

Linton

Given the fee improvement and the lack of guarantees as these are not available with modern pensions, the only other major consideration is the choice of investments. Are there funds you want in the old scheme where the same or equivalent are not available in the new scheme? If this is not an issue, then moving would seem to be a good idea. I no not think any transfer fee would be a major issue.

dunstonh

I'm looking at the possibility of transferring my pension pot from the old employer scheme to the scheme provided by my new employer - mainly because I'm being charged around £15/month fees on the old scheme,whilst not paying anything into it so the value will diminish over time.

A stakeholder cannot have an explicit charge like that. It has to be a mono-charged contract (AMC only). In which case, the value cannot diminish over time as the charge can only be a maximum of 1% of the current value.

I'm told there's no fee to transfer into the new scheme

How does the charges on the new plan compared to the old?

sweaty_betty

dunstonh wrote: »

A stakeholder cannot have an explicit charge like that. It has to be a mono-charged contract (AMC only). In which case, the value cannot diminish over time as the charge can only be a maximum of 1% of the current value.

How does the charges on the new plan compared to the old?

Thanks both
Not sure about the charges - looking at my last statement I seem to have been charged a variable fee of between £11-£15 which has generally risen over the past year, which I guess would tie-in with the 1% max of current value? Does that make sense? Either way, they'll keep charging me while I'm not paying in, so my fund will decrease over time.

It looks like the charges on the new scheme are 0.75%/year (up to £299,999 which my fund is well and truly beneath!) and on the old one they're 0.4%. Quite a difference really - what impact is that likely to have in real terms?

dunstonh

Either way, they'll keep charging me while I'm not paying in, so my fund will decrease over time.

No it wont. If the charge rose over the year that means the fund value rose as well. Also, the new scheme will have a similar charge and will work the same way.

The difference in the charge is what you need to look at. The stakeholder pension is capped at 1% but is typically lower on group schemes.

sweaty_betty

dunstonh wrote: »

No it wont. If the charge rose over the year that means the fund value rose as well. Also, the new scheme will have a similar charge and will work the same way.]

I think the charge rose over the year because I was still paying into the fund then. But I guess that the fund might rise again with an increase in the value of the investment?

The difference in the charge is what you need to look at. The stakeholder pension is capped at 1% but is typically lower on group schemes.

So the difference of between 4% (old) and 7.5% (new) - would that make it worth keeping 6 years of contributions in the old scheme? Is there a rule of thumb for this?

Linton

sweaty_betty wrote: »

So the difference of between 4% (old) and 7.5% (new) - would that make it worth keeping 6 years of contributions in the old scheme? Is there a rule of thumb for this?

I think you mean 0.4% and 0.75%!!!! The difference is 0.35%, ie 1/300th of the value of your pot per year.

Bearing in mind that the different investments in the two schemes could easily vary in return by much more than this, I think you are fretting too much about the matter.

sweaty_betty

Linton wrote: »

I think you mean 0.4% and 0.75%!!!! The difference is 0.35%, ie 1/300th of the value of your pot per year.

Bearing in mind that the different investments in the two schemes could easily vary in return by much more than this, I think you are fretting too much about the matter.

Yes I did mean 0.4% and 0.75% (phew!)

OK - thanks very much for your help everyone, I think I have a handle on it now :-)

dunstonh

sweaty_betty wrote: »

So the difference of between 4% (old) and 7.5% (new) - would that make it worth keeping 6 years of contributions in the old scheme? Is there a rule of thumb for this?

How much is the fund?
Which offers the best investment options?

£10,000 would equate to £35 a year difference. About the same as the fund value would change on a daily basis due to investment returns.

Cheaper is better from a cost point of view but if the investment options are not as good, it could cost you more in the long run.