Combining pensions

ViktorOnopko

Hi,

I've finally got round to accessing the 3 workplace/salary sacrifice pensions I've paid into during my career to date. I'm 37 and have two pensions from previous workplaces and an active one.

I don't know how I'd decide if I should combine them or not?
My oldest pension doesn't appear to provide any investment options, I'm stuck with what the trustees choose.
The middle pension provides a range of investment options, e.g. there's both an active and passive global equity fund which has been far outperforming the fund I'm part of.
Then there's my current pension, which also has investment options. I'm currently part of an investment fund which is split across equities predominantly in UK, Europe & the US.

Money wise, the sum of the oldest two and my state pension come to £14.5k per year. I cannot access the forecast for my current active pension with Scottish Widows.

I feel like the oldest pension should be moved as I don't feel I have the flexibility to alter investments as with the other two.

I'd welcome any input on whether to combine or leave them alone?

Also, how do you know if you're making poor/ok/good progress in building up a pension pot? How would I assess that?

Thank you.

ermine

Check if your current pension has any employer match, and seek to maximise that. A 1:1 employer match is like doubling your contributions at no cost.


For the other ones, find out how much the fees are for the platform and the funds. You should be able to transfer these to a low-cost SIPP, basically look on this site here

there's both an active and passive global equity fund which has been far outperforming the fund I'm part of.

The wrapper (of which you have three) is separate from the investment performance, ie the specific funds. Do not mindlessly chase recent performance without qualification. It is likely from what you say the second pension investment choices are better than the first, but you can only make an infomed choice when you know what the platform fees are, the fund fees are, and the investment goals are and whether they match your aims. Monevator is a great place to inform yourself about investment choices.

Also, how do you know if you're making poor/ok/good progress in building up a pension pot? How would I assess that?

If you aim to stop work and retire at age x where x > probably 57 (the earliest age from which you can draw from a defined contribution pension, this is currently 55) in your case, you want investment capital of roughly 20 times your desired gross annual income. But you will also get your SP at whenever it is due for you. So you can run down some of your investment capital ahead of that to smooth your income.


You are 37, if you wanted to retire at 57 you have 20 years to make up the difference between what you have now and what you want to have. Although inflation will mean the actual amount you need is more, if you get fund and platform fees down to < 1% you can sort of work in today's figures and expect the investments to track inflation over such a long period if they are sufficiently diversified.


That will get you close enough for a rule of thumb guesstimate. If you don't like the numbers you always have the choice of working longer which makes the numbers easire.

Thrugelmir

ViktorOnopko wrote: »

Also, how do you know if you're making poor/ok/good progress in building up a pension pot? How would I assess that?

Only by saving a decent sum of money over the years. The ultimate return is unquantfiable.

Dox

ViktorOnopko wrote: »

My oldest pension doesn't appear to provide any investment options, I'm stuck with what the trustees choose.

You're 'stuck with what the trustees choose'. Bear in mind the trustees will have taken plenty of expert advice before deciding what funds to make available to members - highly unlikely there is just one, as you believe), so worth checking. Are you sure it's a defined contribution scheme?

ViktorOnopko

Thank you - I've been sat digesting the info this morning and looking at my pensions in more detail.

They are all defined contribution. I'm waiting for my online account to sync so that I can see how its grown over the last few years, then I can see how it might compare with other options.

Ermine you said, "So you can run down some of your investment capital ahead of that to smooth your income." - what does this mean?

It seems my next task is to understand the fees associated with the pensions.

All of them have been employer matched. The first employer matched to 5%, second to 7/8% and current to 4%. I'm thinking of increasing my personal contribution beyond 4% now I'm taking a more active interest in my pension (and separately, investing).

Albermarle

You should be able to transfer these to a low-cost SIPP, basically look on this site here

Another alternative is to move the two older ones into your current workplace pension.
Often the charges for workplace pensions are competitive to setting up a sperate SIPP but you need to check. One point of caution is that whatever you do you will probably have to leave yur current workplace pension open anyway as most employers will only make their contributions to their own workplace pension.

In general only 8% into a pension is rather low If you are a higher rate taxpayer it's a no brainer to increase pension contributions For a basic rate taxpayer it is more arguable between pensions and other savings .

ermine

ViktorOnopko wrote: »

Ermine you said, "So you can run down some of your investment capital ahead of that to smooth your income." - what does this mean?

Say you reach 57 with £200k in the pot (the number is to make the arithmetic easier, you probably need more). At a safe withdrawal rate assumption of 4% you can draw £8k from this without depleting the pot (integrated over many years). It's important to know the SWR is an approximation done by statistically backtesting US stocks and is the simplest estimation method.


Anyway, your income profile will be £8k p.a 57 to 67 and then £16k (less a little bit of tax) 67 onwards. In general people want a bit more to spend in their younger and fitter years, while not making their older selves destitute. As it stands your income profile will be loo little early in retirement and too much later on.

You could draw 18k p.a 57 to 67, burning through an extra 100k, so by the time you get to SPA you have 100k of capital in today's terms. When you get to 67 you back off drawing from your 100k down to 4k (the SWR) from the DC pension, but your SP will top this up by about 8k, giving you 12k from 67. You will have done your travelling and cruising while you are younger and fitter, at the cost of running down some of your investment capital. You can shift the balance as required, and working longer is another variable you can play with. Depends how much you like your job

I'm thinking of increasing my personal contribution beyond 4% now I'm taking a more active interest in my pension (and separately, investing).

if you were to move your other pension(s) into a low cost SIPP then you could contribute the 4% to your employer scheme to get full match and any more you wish to save into the SIPP if the costs or the choice of investments were better for you. There's no law saying you can only contribute to one pension at a time. The regulation is that the total you can contribute per year is the lesser of your entire gross salary or £40k.

ViktorOnopko

Thank you, I hadn't considered that my pot would continue to gain _interest_ whilst receiving a pension.

I'll try and figure out if my money from my first two pensions are better combined in a SIPP or left where they are. If I'm currently paying 8% on my pension, should I consider increasing that? Is there a recommended savings amount for pensions?

I listened to a Meaninful Money podcast where Pete Matthew recommend your age -15 as the % of your wage you should save (save, invest, pension).