amalgamate small pensions?

shadowdog

I am considering transferring a small pension pot(5k withFriends life) which i have not contributed to for over 15 years to a stakeholder pension plan with Standard life which i pay into each month and would be gratefull if anyone could let me know wether this is a good or bad idea?

dunstonh

It could be a good idea. It could be a bad idea. Without knowing the terms of the existing pension and the one you are transferring it to, its difficult to say. Stakeholder pensions are long in the tooth nowadays. So, it may be the best option is to move both of the existing to a modern personal pension.

Pensions are just like any retail product. Some products age well. Others get obsolete quite quickly.

Broadwood

dunstonh wrote: »

It could be a good idea. It could be a bad idea. Without knowing the terms of the existing pension and the one you are transferring it to, its difficult to say. Stakeholder pensions are long in the tooth nowadays. So, it may be the best option is to move both of the existing to a modern personal pension.

Pensions are just like any retail product. Some products age well. Others get obsolete quite quickly.

This highlights one of the long-term problems with pensions especially nowadays when most jobs are definitely not for life. I have 3 frozen pension pots, a work one from my time (20 years) at Littlewoods, a Prudential one from the period when I contracted out of SERPS for a number of years, and a private personal one with Barclays Life which I paid into during the 1980s.

Maybe it's better to have pensions spread out to avoid being stung by any collapses etc. Then again perhaps I would benefit from combining them. I certainly don't intend starting a 4th pension with my present employer unless the government make it compulsory.

Pensions generally have become a minefield - no wonder many employees haven't got a clue what to do for the best and consequently keep putting off making decisions.

FatherAbraham

Broadwood wrote: »

I certainly don't intend starting a 4th pension with my present employer unless the government make it compulsory.

A pension "with" an employer normally only comes about when the employer offers to pay contributions into it.

Refusing to take that free money would be regarded as "crazy" by many (valid special exceptions do exist, such as not being able to reduce one's current consumption by the amount of rmployee contributions demanded, or where one is affected by the lifetime limit, and so on).

Warmest regards,
FA

FatherAbraham

Broadwood wrote: »

This highlights one of the long-term problems with pensions especially nowadays when most jobs are definitely not for life. I have 3 frozen pension pots, a work one from my time (20 years) at Littlewoods, a Prudential one from the period when I contracted out of SERPS for a number of years, and a private personal one with Barclays Life which I paid into during the 1980s.

What precisely is the "problem" which you think is being highlighted (because it's clearly not as obvious to others as it is to you)? What is it you're trying to solve?

What precisely do you mean by "frozen"? Are you sure that your benefits in those pension schemes aren't still growing?

With modern defined-contribution schemes, as long as there are no special features such as guaranteed annuity rates, then the decision about combining is usually fairly simple -- one moves funds to the cheapest one which offers the investment choices you want, except for the fund which is the only one which one's current employer will contribute to.

Broadwood wrote: »

Maybe it's better to have pensions spread out to avoid being stung by any collapses etc. Then again perhaps I would benefit from combining them

Risk of collapse of provider is generally an issue for defined benefit schemes. For money-purchase schemes, one is far more at risk of making bad investments. It's entirely possible to be invested in the same underlying fund via two distinct pension providers; since the underlying investment assets are owned by the contributing member, collapse of a pension provider is merely inconvenient, not truly dangerous.

Broadwood wrote: »

Pensions generally have become a minefield - no wonder many employees haven't got a clue what to do for the best and consequently keep putting off making decisions.

Pension seem to me to be far less of a minefield that they were in the past. The chance of stepping on a "mine", in terms of picking an expensive, inflexible pension product seem to be far lower today than they used to be.

The issue with employees not making choices has more to do with employers being less "patrician" than they used to, and also wishing to limit their exposure to open-ended risks of guaranteeing benefits. Employees have more freedom today (and far more risk); the problem seems to be that many employees prefer not to do any of the relatively small amount of intellectual work and research necessary to understand the principles of pensions, and the choices open to them,

Warmest regards,
FA

shadowdog

dunstonh wrote: »

It could be a good idea. It could be a bad idea. Without knowing the terms of the existing pension and the one you are transferring it to, its difficult to say. Stakeholder pensions are long in the tooth nowadays. So, it may be the best option is to move both of the existing to a modern personal pension.

Pensions are just like any retail product. Some products age well. Others get obsolete quite quickly.

Very difficult to compare the two schemes.The only thing i know is that the charges on the stakeholder is 0.5% and i think charges on the old scheme are via units offer/bid price?
How would a Modern personal pension scheme fair compared to a stakeholder with 0.5% charges?

dunstonh

This highlights one of the long-term problems with pensions

No it doesnt.

I have 3 frozen pension pots, a work one from my time (20 years) at Littlewoods, a Prudential one from the period when I contracted out of SERPS for a number of years, and a private personal one with Barclays Life which I paid into during the 1980s.

Only one of those is potentially frozen and even them its more likely to be deferred. The other two cannot be frozen. They are also free to move around if there is better or leave where they are if not. not a problem at all.

Maybe it's better to have pensions spread out to avoid being stung by any collapses etc.

Not really.

Broadwood

FatherAbraham wrote: »

A pension "with" an employer normally only comes about when the employer offers to pay contributions into it.

Refusing to take that free money would be regarded as "crazy" by many (valid special exceptions do exist, such as not being able to reduce one's current consumption by the amount of rmployee contributions demanded, or where one is affected by the lifetime limit, and so on).

Warmest regards,
FA

You have a point there, maybe I should have said ".........while I'm with my current employer....".

The main problem as I see it is that pension schemes are entered into at various stages during our working lives which seem a good idea at the time. Speaking to fellow employees when the subject arises where I currently work, it would appear that most of them have very little interest in or knowledge about pensions generally.

I passed "O" levels in Maths and English in 1974 but as I have never worked in the financial services industry I have very little detailed knowledge about pensions and most of what arrives with my yearly statements goes straight over my head. All I know is that all 3 of my pension pots seem to be increasing in value year on year. The whole subject bores me to tears, and I would bet that many millions of other employees are of the same opinion.

At least with savings accounts it is relatively easy to compare like with like. My wife doesn't pay tax on savings so it's just a case of following the highest gross interest rates and remembering to ditch and switch when the introductory bonuses expire. Unfortunately pensions don't seem so simple.

dunstonh

Speaking to fellow employees when the subject arises where I currently work, it would appear that most of them have very little interest in or knowledge about pensions generally.

A very common situation. It is amazing how many people dont care for their provision. Probably spend more time researching their mobile phone contract than their retirement plans.

The whole subject bores me to tears, and I would bet that many millions of other employees are of the same opinion.

It may bore you but that doesnt mean you should ignore it. My heating boiler would bore me. I still get it serviced.

At least with savings accounts it is relatively easy to compare like with like

Not much use for long term retirement provision though.

Unfortunately pensions don't seem so simple.

Why does it have to be simple. A pension is possibly you biggest or second biggest purchase in life. Most other purchases you make are not simple. Why should pensions? A simple pension product was introduced in 2001 (stakeholder pension). However, its neither the cheapest or the best for most people as they had to keep it simple. Simple does not mean best.

Broadwood

Surely the millions of people that were "mis-sold" PPI insurance supports my theory that the understanding of pensions is probably very poor. People generally do not read the small print but then expect compensation for what is often technically their own fault. In fairness to them you would probably need to be a lawyer to understand most of the small print.

Comparing getting a boiler serviced with pension choices is hardly on a similar scale of complexity or long-term consequence. Also bear in mind that many people choose one car over another based on a preference of the colour or look of a particular model. Hardly a good financial or practical choice long term.

Much of what IFAs offer in advice goes straight over the layman's head. The layman just accepts that advice and acts accordingly. That's why there is a need for IFAs. It's the deliberate complexity of financial products that cause advice to be needed in the first place.

Means testing could be said to make pension provision and saving for a rainy day a game for mugs in the long run. Those who've got get nothing.............while those with nothing get given. That's the appeal of the UK welfare system.

xylophone

I certainly don't intend starting a 4th pension with my present employer unless the government make it compulsory.

Does your current employer have a scheme? Does the employer contribute and if so on what terms?

You could be missing out on a valuable benefit.

All I know is that all 3 of my pension pots seem to be increasing in value year on year.

Indeed - see above.

The whole subject bores me to tears, and I would bet that many millions of other employees are of the same opinion.

I am not exactly riveted by insurance and assurance - doesn't prevent my taking out policies....