Combining pensions

Stuey1980

Hello all. I have a company pension scheme and my own personal pension which I pay into as well. I have wondered about the wisdom of transferring one to the other. In order to get the most benefit any transfer would happen from my personal pension into my company pension scheme since I do not wish to lose the benefits of employer contributions I currently get.
I will start with the personal pension details. Current value is approx £8K. I contribute £175 net per month and get higher rate tax relief via a tax return also. The charges are 0.55% AFC which I am told is discounted (at least effectively) because I set it up through Cavendish. This pension is with Aviva, and is a 'Series 2 Av With-Profit 2 S2'.
The company pension is as follows. Value is £11.5K approx. L&G passive equity 60:40 lifestyle. Input is approx £6.5K per year and is duducted pre-tax/NI. The fees on this one seem to be a lot lower at 0.16.
Is there an arguement to transfer the aviva pension into the L&G due to lower fees or other reasons, or is there mileage in keeping 2 separate pots for security against loss?
Thanks in advance, Stu

Stuey1980

Age 33. Male. Married. Anything else?

jamesd

The Aviva one is invested in a with profits investment at the moment. That's a good enough reason to change that investment, whether you do it within the Aviva product or by transferring to another one.

The L&G 60:40 is I assume 60% UK and 40% global so it has a very high UK component compared to the 8% or so of the global market that the UK is. 60:40 is OK for some money but I'd be wanting to add more non-UK investments.

If you know how to use other investments or want to learn then I'd be inclined to either use other investments at Aviva or to transfer to a place offering a broader range of investments.

The use of salary sacrifice for the work pension is good. Do you get any benefit from the saved employer NI, maybe some of it also paid into the pension?

I don't think it's worth paying into the Aviva pension when you get NI relief also from the work pension, better to switch to that for the new money. Or to something else, since better investment choice matters more than the 2% employee NI saving from salary sacrifice. A bit more if you're getting some of the employer NI as well.

There's no significant security against loss argument. Pensions of this sort are held in trust apart from the pension company or employer funds and are unlikely to be affected very badly by the fate of either. There's no shortfall possible since the employer discharges all of their liability as soon as they make the monthly payment.

Stuey1980

Thanks for the info. a few questions:

jamesd wrote: »

The Aviva one is invested in a with profits investment at the moment. That's a good enough reason to change that investment, whether you do it within the Aviva product or by transferring to another one.

Why is a with profits investment a bad idea compared to another type of pension?

jamesd wrote: »

The use of salary sacrifice for the work pension is good. Do you get any benefit from the saved employer NI, maybe some of it also paid into the pension?

My contributions are 4% taken pre-deductions. I also have a separate 1% input from an extra benefit package which I can use it to pay for additional stuff like health care, insurance etc... This benefit is all salary sacrifice, and if not allocated to a benefit would not be paid to me if you see what I mean.

Am I missing something or does the difference in management charge not really matter a great deal?

dunstonh

The Aviva one is invested in a with profits investment at the moment. That's a good enough reason to change that investment, whether you do it within the Aviva product or by transferring to another one.

Just a caveat to that. Aviva had an inflation proof with profit fund available for a period that gave you the higher of fund performance or RPI. (they also did a CPI version later on). That is quite a good fund to have for part of your portfolio.

Why is a with profits investment a bad idea compared to another type of pension?

WP is a fund. It can be held in an ISA, pension, bond or directly (theoretically). It is not a type of pension.

WP funds are largely obsolete nowadays. There are probably only two really viable ones left. Some legacy ones may have benefits that make them worth retaining but typically you wouldnt go looking to put new money into them nowadays unless you fit a certain niche.

Am I missing something or does the difference in management charge not really matter a great deal?

Management charges are a secondary consideration behind where and how you invest. Some funds by their very nature will cost more/less compared to others.

Stuey1980

Ok, as I understand it my pension with Aviva is in a with profits fund technically speaking. What does this mean and why is it a good idea to transfer out of this pension or to another fund at least?

Stuey1980

Just checked through my pension details and discovered that its performance has been very poor and only aims to exceed savings rates. Not really what I want to be aiming for. The question then is do I transfer this pension into my existing pension or into a new investment/pension company or whatever? I dont think I can really dedicate enough time and understanding to get it right myself, so what pension investments are good for moderate risk? I dont think too aggressive is right for me, but want about lets say 3/4 out of 5 on the scale. No clue where to start.

dunstonh

Just checked through my pension details and discovered that its performance has been very poor and only aims to exceed savings rates.

That aim does not make the performance low. It is designed to have low volatility with an element of capital security if held until maturity. Not saying it makes it right for you or not. Just that the objective of the fund and its performance has to be relative to others with that objective.

The question then is do I transfer this pension into my existing pension or into a new investment/pension company or whatever?

So, you have eliminated the fund switch within the existing plan option?
How does it compare to your other pension and other new business pensions?

I dont think I can really dedicate enough time and understanding to get it right myself, so what pension investments are good for moderate risk?

Pensions do not carry the risk. The funds you invest in the pension carry the risk. Most pensions have funds across the risk scale.

but want about lets say 3/4 out of 5 on the scale.

On such a small risk scale, that would put you above national average risk. Although not unreasonable for a long term pension. (assuming you are benchmarking 1 = cash and 5 being the highest risk unit linked option with unregulated and advanced investor options now factored into that scale)

I know that hasnt given you answers but in reality we cannot tell you which is best without analysing your scheme and doing a comparison.