amalgamate small pensions?

dunstonh

Surely the millions of people that were "mis-sold" PPI insurance supports my theory that the understanding of pensions is probably very poor.

I am in two minds on PPI. Yes the banks and finance companies over sold it but only to people that were largely on the whole too lazy to say no. Yes, it was mis-sold with a good proportion but there is also a lot of opportunistic lies going on with consumers and claims companies too. I dont think banks, finance companies or consumers come out of that one smelling of roses.

Comparing getting a boiler serviced with pension choices is hardly on a similar scale of complexity or long-term consequence.

It isnt on a similar scale but it indicates how people still deal with boring things.

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.

They cannot be much easier though. Every attempt to simplify things has led to lower quality products.

Means testing could be said to make pension provision and saving for a rainy day a game for mugs in the long run.

Means testing is mostly being abolished in 4 years time. Not saving or providing for retirement will be the mugs game. Plus, even when you look at means testing as it is now, its not something to look forward to.

benalder284

My wife is in a similar sort of position - she's 39 and has two PPs, one GPP and is of necessity about to join another GPP. We did look at consolidation and wrote and got all the necessary information but in the end decided to leave things as they were (albeit with some switching of funds within some of the pensions) as the cost differences were marginal. The only immediate drawback is that there is more paper to file and it is harder work to get an overview of total asset allocation. I presume we will consolidate when nearer pension age.

ferox666

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.

I have similar feelings about this but maybe I'm wrong. Using a personal pension/stakeholder where I am relying on fund manager(s) means if they make poor investments I make a loss. Let's say I have £100k in pension funds - surely it'd be better to have £50k with Company 1 and £50k with Company 2, even if have researched & ensured choosing company with good track records, there is a risk one could make disasterous decisions (like right now investing a large % in commercial high street property which I personally believe could nosedive in the future due to decline in high st, internet shopping etc) and the funds would lose value. Surely better to spread risk to at least 1 other company?

Obviously if someone stays actively involved in monitoring the investments or using SIPP this isn't an issue but many have no interest in pension matters as discussed (I'm not one of them) and want to just put the money in and forget about it, trusting the investment managers. In this case surely better to spread risk over several ("good") pension funds? I appreciate it will likely diminish overall return but I'd be willing to pay that in return for diminished chance of substantial loss.

dtaylor84

You can spread your pension over multiple funds without having multiple pensions, though.

dunstonh

I have similar feelings about this but maybe I'm wrong. Using a personal pension/stakeholder where I am relying on fund manager(s) means if they make poor investments I make a loss. Let's say I have £100k in pension funds - surely it'd be better to have £50k with Company 1 and £50k with Company 2

No. That sort of thinking is about 15 years out of date. Modern pension contracts have anything from say 50 to nearly 30,000 investment options. You are not investing in the pension. You are investing in the funds. Many of the pension contracts today have the same funds available. So, its not the pension that matters but the funds.

brasso

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.

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.

I'm sympathetic up to a point. But only up to a point.

You talk about 'not having a clue', but it's really not difficult to find out the basics.

About 10 years ago, I didn't have a clue either. Then I hit my mid-40s and realised that I'd better start thinking about my financial future.

I heard about this new idea - SIPPs (self invested personal pensions) that the government were promoting. Longish story short, I liked the idea of taking responsibility for my own investment choices, rather than allowing some middle man to make those choices for me and charge for the privilege.

So I opened a SIPP with Hargreaves Lansdown (other providers are available) and by completing some forms was able to transfer all my bits of pension from previous jobs into the SIPP. From here I was able to choose from a huge range of investments -- funds, trackers, individual company shares, bonds, ETFs -- you name it.

Some of these things were a bit opaque at first, but it's quick and easy to learn the basic pros and cons. If you are nervous about your lack of knowledge and want someone to choose for you, no problem. You can opt for one or more managed funds -- perhaps covering a range of geographies, industries, whatever.

The nice thing is you can log in and check your balance at any time, just like you can with a bank account.

As for "I certainly don't intend starting a 4th pension with my present employer", do please think again. First of all, you may be able to arrange for the employer to contribute directly to your SIPP account (depends), but more important is that the employer will usually add money to whatever you contribute. A typical arrangement is for the employer to match your contribution up to a certain point, and a variable amount after that. E.g. If you contribute 5% of your salary, the employer adds another 5%. If you contribute 10%, the employer adds 7.5%.

Think about that. You are effectively saving money and getting a 100% interest rate. Compare that with the 3%-ish your savings are getting at the bank.

In addition, anything you personally add to the SIPP, the government will automatically add between 20% and 40% depending on your tax rate. Again, that's an incredibly generous supplement. I'm delighted if the investments in my SIPP increase by 10% in a year. Imagine them increasing by 40%! (I'm working overseas at the moment so unfortunately can't get the 40% addition any more.)

Sorry for the length of this but it's important to understand a) that it's really not that complicated b) you could be losing out on large chunks of free money from your employer and the government.

My c) point is more controversial! Which is that once you start looking after your own pension pot, and can see how much you are accumulating, and get to think about how and where and when to buy and sell funds and shares, it can become a much more fascinating topic than you currently think. That was my experience, anyway. Trouble is, the whole pensions industry has a bad and boring image, but if you think of it as an investment opportunity rather than a pension, it is actually quite absorbing. That was my experience, anyway.

mark55man

Nice post Brasso

Wish I'd seen the light 20 years ago, but am making up for lost time since the company closed our DB scheme 3 years ago and I had to start thinking about it

You will be amazed at how many well educated and clever people share the boredom but when you start explaining to them in the same terms as you use you can see a light going on

redpete

ferox666 wrote: »

Let's say I have £100k in pension funds - surely it'd be better to have £50k with Company 1 and £50k with Company 2, even if have researched & ensured choosing company with good track records, there is a risk one could make disasterous decisions ... Surely better to spread risk to at least 1 other company?

You need to differentiate between the company that is managing your pension and the company that manages the funds in which the pension is invested.

I have one lot of pension money with Fidelity that is invested in funds (that I chose) that are managed by Fidelity, Threadneedle, JPM and L&G; another pot of pension money is with Zurich and invested in funds managed by L&G. One of the funds is held in both pension pots.

Spreading risk is achieved by spreading the money across different funds or other investment vehicles. The choice to spread or combine the pension manager is (for me) down to the charges they impose, how good their on-line facilities are, how flexible they are to manage your funds, and because it is the one my employer offers with discounted charges.