Pension transfer advice/options

Ryhs_Moggy

Hi, this is my first post so I apologise if this question has already been asked on more than one occasion. As well as my current employers' DC plan which I pay into, I have 3 'frozen' DC pension plans from previous employment going back to 1997. These 3 pensions have the following fund balances: £19000, £45,000 and £77,000.

My question is this; I am not sure what information I need to obtain from each plan to decide whether it's sensible to consolidate the 3 pensions under one new plan. Other the annual fees, what other factors should I consider in order to make a sensible decision? The main purpose of this possible consolidation is to reduce my admin. Should I see an IFA?

Albermarle

Obviously the charges are a key point as especially some older pensions have much higher charges than you would expect with a pension started today. Normally there is a % charge from the pension company provider/platform & then a charge for the fund(s) the money is actually invested. To confuse things some just charge for the funds and some just charge a flat fee and the funds are no extra, as long as you use their standard funds . The info on charges can be confusing or almost non existent on some older pensions. So you will have to call hem for a full breakdown. Consolidation to cut admin is one issue but probably the older plans do not support recent pensions flexibility on drawdown etc so one day you might have to a completely new pension. Also keep in mind the possibility of transferring all three into your current workplace scheme. Probably it will be more up to date with lower charges

Ryhs_Moggy

Many thanks for the above information, that is very helpful and at least gives me a springboard to start from. I will request the above info from the 3 pension plan companies. I was not aware that older DC pensions may not support current pension flexibility. I thought all non DB pension funds can be accessed at 55 under George Osborne's pension freedoms legislation?

dunstonh

I was not aware that older DC pensions may not support current pension flexibility. I thought all non DB pension funds can be accessed at 55 under George Osborne's pension freedoms legislation?

George osborne didnt change the age of access. Drawdown has been around decades before the pension freedom changes. He tweaked what was already available.

Plans had to support drawdown and most did not. Typically it was SIPPs and top end personal pensions that supported drawdown.

Albermarle

I thought all non DB pension funds can be accessed at 55 under George Osborne's pension freedoms legislation?

They can but often the pension providers have not got the right IT/software in place to enable drawdown etc so you might have to transfer to one who has.
Sometimes it is just a matter of opening a new pension with the same provider and transferring your old pension to that or going to a new provider altogether.

OldMusicGuy

Transferring DC pensions is easy and no IFA needed. You choose the receiving scheme, fill out a form and they do all the work for you. I've transferred several pensions into my main Hargreaves Lansdown SIPP and it was very straightforward.

It's definitely easier to manage everything when it's in one place but you don't necessarily get any benefit. Like others said, you need to consider:

- Any benefits or guarantees you may lose when transferring from the older schemes. They may have things like guaranteed annuity rates that more modern pensions won't have.
- The choice of investment funds available. Some schemes can be quite limited in their choices, but unless you know how to make investment choices in your pension you may not benefit from having access to many thousand fund choices.
- Overall costs.
- Flexibility to access your money. More modern schemes will offer more choices than older ones for the reasons Albermarle stated.

Ryhs_Moggy

Many thanks everyone for your replies.

Because I no longer pay anything into the 3 'frozen' plans, would the consolidation of them into my current employee DC plan mean the uplifted fund balance would grow at a faster pace than if I leave them where they are? At present I have 20% going into my current employer's DC plan each month. Current value of this plan is circa £65k.

OldMusicGuy

Ryhs_Moggy wrote: »

Because I no longer pay anything into the 3 'frozen' plans, would the consolidation of them into my current employee DC plan mean the uplifted fund balance would grow at a faster pace than if I leave them where they are?

No, consolidating them is irrelevant. The funds are not frozen, they are still growing (or falling, depending on the market and how they are invested...).

What matters is how they are invested, and you make that choice. You could transfer the three pensions into one and choose a set of investments that mean the total pot performs worse than if you had left them alone. Or they might do better. It's impossible to say, it depends on how you choose to invest them. But the mere act of consolidating them makes no difference to investment performance (although it could impact the cost of your pensions).

You need to understand more about how pensions work. If you are going to consolidate, part of the reason may be that you have more investment choices available to you. This is a good book that will help if you are unsure about how DC pensions work: "DIY Pensions: A Simple Guide to Pensions, SIPPs & Retirement Planning" by John Edwards

Ryhs_Moggy

^^^ Thanks Music Guy. I'll get that book I think!

Albermarle

Yes some more basic knowledge about investments will help you . As well as the recommended book you can go to some pension providers websites and you will find good simple explanations of how pensions and investments work . Try Standard Life; Aviva; Hargreaves Landsdown or Fidelity websites.
One possible advantage of consolidation is that the providers sometimes lower their charges as you pot gets bigger but this is less important than having the money in the right investments for your personal situation and risk appetite.

Linton

The cheapest and easiest solution may be to consolidate into your current employer's pension. Firstly there may be subsidised charges on an employers pension which may be restricted to current members. And secondly your current employer would be motivated to help you. The converse is that you proabably could not consolidate nto an ex-employers pension scheme.