Consolidate or not?

RichardS

Hi

Would appreciate some advice if anyone can offer any.

I'm 52 and hoping to retire around 60 if I can.

I have a personal pension that I arranged through a Financial Advisor and which I pay £400 a month into (discretionary pension with FundsNetwork). The current pot is £150,000 and the annual charges are 1%.

I have just started a new job and have joined a Scottish Widows company group pension scheme. If I contribute 4% to this my company will contribute 5% so my intention is to kick things off at this level. Annual charges for this pension are 0.5%. My salary is £55k. Contribution method is salary sacrifice.

So with this new pension option (and a lower charge of 0.5%) I am wondering if I am better off consolidating and transferring the personal pension into it and upping my contribution (by approx £400) or leaving things as they are and spreading my risk.

thanks

cloud_dog

RichardS wrote: »

Hi

Would appreciate some advice if anyone can offer any.

I'm 52 and hoping to retire around 60 if I can.

I have a personal pension that I arranged through a Financial Advisor and which I pay £400 a month into (discretionary pension with FundsNetwork). The current pot is £150,000 and the annual charges are 1%.

I have just started a new job and have joined a Scottish Widows company group pension scheme. If I contribute 4% to this my company will contribute 5% so my intention is to kick things off at this level. Annual charges for this pension are 0.5%. My salary is £55k. Contribution method is salary sacrifice.

So with this new pension option (and a lower charge of 0.5%) I am wondering if I am better off consolidating and transferring the personal pension into it and upping my contribution (by approx £400) or leaving things as they are and spreading my risk.

thanks

Re your contributions; you will definitely be (much) better off using your company scheme (and increasing/redirecting your Fidelity cons) due to SS. As a 40% tax payer you will save an additional 2% of NI cons and as a 20% tax payer you will save 12% NI cons (plus any company NI cons your company *may* pass your way - My company doesn't pass on its savings...booo).

With regard you to your existing Fidelity pot, there appears to be a significant AMC savings (reducing 1% to 0.5%). There are other considerations such as is this charge an 'all in' charge, i.e. does it include the fund charges as well. You often find that you may benefit from charges with the company scheme as sometimes that company will incur that cost.

EDIT: I'm sure someone like Dunstonh will be along shorty with far more insight as to the merits re the different platforms and charging implications.

GunJack

Plus, doing it all by salary sacrifice will simplify it from a tax perspective, I would imagine?

Linton

I agree with Cloud Dog that puttng all your ongoing cointributions into your new employers scheme is very sensible.


Whether you should transfer your advised pension into your employers scheme could be more debatable. Employers schemes often have only a very restricted set of investment options and this could outweigh the charge advantage. So I think more investigation is required as to how you would allocate your fairly large investment pot within the employers scheme.


I feel "spreading the risk" is a secondary issue as your risk is mainly spread by the set of underlying investnments you choose rather than the particular fund or platform.

RichardS

Thanks for the advice. Another thought occurs to me - presumably if I did transfer the funds, should I be timing when I do it based on the markets etc? The personal pension pot was around £155K a year ago I think rather than the £150K it is today. Would it be wise to let the pension regain some of those losses first or is that not worth worrying about too much as it could just as likely fall further?

cloud_dog

RichardS wrote: »

Thanks for the advice. Another thought occurs to me - presumably if I did transfer the funds, should I be timing when I do it based on the markets etc? The personal pension pot was around £155K a year ago I think rather than the £150K it is today. Would it be wise to let the pension regain some of those losses first or is that not worth worrying about too much as it could just as likely fall further?

It depends if you can hold your current funds in your works scheme? If not, then you may need to transfer as cash. As to whether you would gain or loose doing it this way.... flip a coin.

An alternative might be to see what funds are common in the two schemes, and if it works for you, switch Fidleity holdings in to SW available funds before transferring.

Albermarle

should I be timing when I do it based on the markets etc?

If you could time the markets correctly you would be sat on a luxury boat in the Bahamas and not worrying about your pension!
You might want to look at/check the risk profile of the funds you are in now, and the ones you will be in when you transfer, to make sure they are not wildly different .

FatherAbraham

RichardS wrote: »

Thanks for the advice. Another thought occurs to me - presumably if I did transfer the funds, should I be timing when I do it based on the markets etc? The personal pension pot was around £155K a year ago I think rather than the £150K it is today. Would it be wise to let the pension regain some of those losses first or is that not worth worrying about too much as it could just as likely fall further?

No, because you're going to transfer into similar asset classes, aren't you?

So when the funds which you're selling in the old pension are low in value, the similar funds which you buy with the proceeds the new pension will be low in cost. The same is true, mutatae mutandis, when the assets are highly priced.

Market timing is of no practical import in this transfer, as long as you have similar asset mixes in the two pension arrangements (and if you don't have similar asset mixes in the two pension arrangements, then at least one of them likely to be wrong for you).