Employer changing Pension provider

quirkyusername_2

zagfles wrote: »

How many employees? If over 50, they should consult on changes to future arrangements.

Might be worth calling the pensions regulator and see what they say? Or take it up with your union if you're in one.

I did find this myself when doing some research today. Although we have over 100 employees at the company it only affects about 16 people woi have all worked there a considerable amount of time, because as time went on new employees were set up with a different pension provider, the one that we are now being moved to.

bowlhead99

quirkyusername wrote: »

As I'm sure you are aware I don't fully understand much about pensions but I thought one advantage would be the longer you was the same provider then as time goes on the bonuses increase greater. For example in recent years the difference between the contributions I have made and the pension value has increased year on year so was thinking the same would continue as each year goes on.

Imagine you are invested in an investment which goes up by 10% every year.

When you first start out, you might have £5000 in there. It goes up by 10% (£500) and based on your salary, you add another £5000 of new contributions between you and your employer. So in total the pension goes up by £5500 but most of that improvement is your own new money being added.

But some years later, you have amassed £100000 in there. Again it goes up by 10% (£10,000), and based on your salary you add another £5000 of new contributions between you and your employer. So in total the pension goes up by £15000. You and your employer are still adding £5000 a year, but by now most of that improvement is due to the investment growth, not your added money. This is simply because it is a large pot, which will always make more money per year in investment growth than a small pot would make. Just like how £100 in a bank account earns more interest per year than £10 in the same account.

You will observe this mathematical phenomenon and think to yourself, "hmm, each year the difference between what I put in and how much it goes up keeps increasing. This is an awesome pension!"

But it is just the fact that what you have accumulated and growing in the pension is getting larger and larger, relative to the annual contributions you're making. If you transferred that £100000 of investment into a different plan run by someone else which was still going up by 10% a year, you'd still see the same phenomenon.

Although we have over 100 employees at the company it only affects about 16 people woi have all worked there a considerable amount of time, because as time went on new employees were set up with a different pension provider, the one that we are now being moved to

So the employer has 80+ people on their main pension plan, after finding a new provider where they have probably negotiated a decent deal with the provider in terms of annual charges because they have lots of people on it.

And they also have 16 people including you, on the old plan. So they have said that going forward, they are going to simplify it and just put your contributions and their employer contributions into the newer main scheme with the new provider. And they say, "If you wish to transfer existing pension account to new provider we can contact new provider to arrange this but no obligation to do so". So you can keep the £100000 with the old pension company or move it to the new company, whichever you prefer.

You might find that the new one has a slightly better fee for the same quality of investments, if your company has lots of people using them and has negotiated a good deal. You'll almost certainly find that within the new pension being offered, there is a choice of different investment options available to put your existing £100000 into, but you could just leave it where it is and only put your new monthly contributions into the new scheme if you like. Because there isn't an obligation to transfer your old money if you don't want to.

The eventual returns you will get depend on what type of investment you choose to buy (in either the old or ew scheme), and not whether you choose the old or new scheme.

Brynsam

quirkyusername wrote: »

As I'm sure you are aware I don't fully understand much about pensions but I thought one advantage would be the longer you was the same provider then as time goes on the bonuses increase greater. For example in recent years the difference between the contributions I have made and the pension value has increased year on year so was thinking the same would continue as each year goes on.

Indeed - and that was the reason for asking, because it meant that people answering might be able to comment on any misunderstandings/misapprehensions you have about the change.

quirkyusername_2

bowlhead99 wrote: »

Imagine you are invested in an investment which goes up by 10% every year.

When you first start out, you might have £5000 in there. It goes up by 10% (£500) and based on your salary, you add another £5000 of new contributions between you and your employer. So in total the pension goes up by £5500 but most of that improvement is your own new money being added.

But some years later, you have amassed £100000 in there. Again it goes up by 10% (£10,000), and based on your salary you add another £5000 of new contributions between you and your employer. So in total the pension goes up by £15000. You and your employer are still adding £5000 a year, but by now most of that improvement is due to the investment growth, not your added money. This is simply because it is a large pot, which will always make more money per year in investment growth than a small pot would make. Just like how £100 in a bank account earns more interest per year than £10 in the same account.

You will observe this mathematical phenomenon and think to yourself, "hmm, each year the difference between what I put in and how much it goes up keeps increasing. This is an awesome pension!"

But it is just the fact that what you have accumulated and growing in the pension is getting larger and larger, relative to the annual contributions you're making. If you transferred that £100000 of investment into a different plan run by someone else which was still going up by 10% a year, you'd still see the same phenomenon.

That's kind of what I was thinking regarding the increases year on year. For example in a recent 12 month period just over £4000 was made in contributions but the pension value rose by over £6000. So again pardon for me being numb here could I transfer my pension from the current provider to the new provider and if so is it likely that there be any charges in doing so?

daveyjp

Moving your pot from one provider to another is quite normal. Your employer should provide relevant info.

bowlhead99

quirkyusername wrote: »

That's kind of what I was thinking regarding the increases year on year. For example in a recent 12 month period just over £4000 was made in contributions but the pension value rose by over £6000.

I'm not sure if you understand it or not.

The way you were explaining it, you thought the existing scheme was good because it went up by more than you put in. But what I was saying is that going up by more than you put in is to be expected once you have a decent sized pension pot - with more gains the bigger your pot is, because you're getting investment growth on all the money you have ever put in, not just on the current year contributions.

That's just how investment growth works, and doesn't mean your scheme is particularly good or bad. To see if it was good or bad as a comparison to other schemes, you would need to see how much investment growth those other schemes delivered over an equivalent timeframe with equivalent contributions.

Whereas what you said was "but I thought one advantage would be the longer you was the same provider then as time goes on the bonuses increase greater". It's not about how long you are with the same provider - the total potential investment growth on all your money added together is about how much total money you have, whether all that money is with the same provider or spread over different providers.

So again pardon for me being numb here could I transfer my pension from the current provider to the new provider

You literally told us in post #3:
" If you wish to transfer existing pension account to new provider we can contact new provider to arrange this".

You are the one telling us what you have been told about your options. You told us in post 3 that they will help you arrange a transfer from the current provider to the new provider. So you don't need to ask us a few hours later, "could I transfer my pension from the current provider to the new provider". You told us the answer yourself

And if so is it likely that there be any charges in doing so?

Probably not, or even if there is, it won't be noticeable in comparison to the total size of the pot.

- You can look at the current scheme rules to find out whether they have a charge to transfer out, or phone up the scheme to find out, or ask your employer to find out.

- It's extremely unlikely that the new scheme would have a charge to transfer in, because they'd like to start looking after your money. But your employer or the new scheme will be able to tell you if there is a charge for transferring in.

- And if you don't like it there is no obligation to transfer now. You could keep the money with the old provider and never transfer it at all, or you could transfer it at some point later.

AnotherJoe

quirkyusername wrote: »

The problem for me is I am happy where my pension is now having been with the same provider for over 30 years so it has a sizeable value with bonuses etc and has increased sizeably the last few years and I would like to see it continue that way. This information has come out of the blue with less than a week before it is changed. If the new one does have lower charges or better investment choices we don't know that.

Would it not be better if the contributions were made into the current sizeable pension pot than having to start afresh with the new provider?

It sounds as if that will stay the same though, they aren't shutting the original one down or transferring it without your agreement.

All that's happening is that new contributions will go into a new scheme, So you'll have two pensions. No biggie, no different to if you changed jobs.
Certainly the notice is very short but ultimately yes they can do this and perhaps rather than spend a lot of fruitless time discussing it they've just decided to get on with it to forestall all that.

AnotherJoe

quirkyusername wrote: »

As I'm sure you are aware I don't fully understand much about pensions but I thought one advantage would be the longer you was the same provider then as time goes on the bonuses increase greater. For example in recent years the difference between the contributions I have made and the pension value has increased year on year so was thinking the same would continue as each year goes on.

Only as a function of how much money is in there its not because its been there for 30 years. Its just a function of how much money is in there,

I'm sure you can appreciate that the more that's in your savings account the more it will go up in monetary terms? Eg if you have £1 in a 5% savings account it goes up by 5p, if its £100, it goes up by £5. That doesnt mean that if you had two savings accounts one with £1 in and one with £100 in the £100 one is "better" because it went up by more money! It just went up the same %.

quirkyusername wrote: »

the pension value has increased year on year so was thinking the same would continue as each year goes on.

Dont get confused by the word "pension" which seems to fry some peoples brains when they hear it. For example, you seem not to have understood what you wrote, when you said "the company says we can transfer it to the new scheme" and then next post you ask "can i transfer it to the new scheme?" :eek:


A pension is just a savings scheme, usually based on investments, with tax benefits and restrictions. There's nothing special or magic about it such as pensions grow more the longer you've held them simply because of the length of time. Its just a function of how much money is in there same as a savings/investment scheme. You need to look at % growth not actual numbers in order to compare.

wallpaperman

If the pension scheme has been going for 30 years, could it have Guaranteed Annuity Rates, very possible?

If so, then the OP could have a very good case for being annoyed by this change.

Just a thought.

squirrelpie

It seems to me that there's almost certainly nothing to worry about but that the employer could have handled the situation a lot better, giving you more notice and explaining things a lot better. Apart from letting your employer know, politely, so they can improve, it may well be best to forgive and forget the issue. With regard to whether it is sensible to transfer your existing pension to the new provider, that will depend on the rules of the two schemes. If you'd like to post some details of the schemes, people might be able to suggest what factors to consider.