General pension advice

noclaf

I am 39 years old and have two pensions with a combined value around £81k; £27k in a previous employer 'defined contribution' plan and £54k in my current employers pension plan.
I left my previous employer more than 3 years back and the pension ceased allowing any further contributions after I left the firm.
My current employer pension includes a pension merged in from an even earlier employer (I moved around a few times!). I initially tried to 'DIY' that pension and tsfr to a HL SIPP but then realised that I don't have more knowledge than the fund managers so then transferred it into my current employers pension plan.
So do I now so the same for my last employers pension and transfer/merge into the current pension or are there wider implications to consider e.g: TER charges for both pensions and any HMRC considerations?
Whilst I've always been of the 'spread your eggs' type mentality I'm wondering if it makes sense to combine the pensions if this would be beneficial to compounding long term?(till I hit retirement). I feel as if the old pension will just languish given no further contributions are permitted. It would also be more convenient (IMO) to have the pensions in a single place/provider.
Both pensions use Standard Life funds albeit different ones.

I am also aware my overall pension value is quite low for my age, current employer has significantly reduced their 'matching' contribution as a temporary measure due to Covid-19, I may need to consider increasing my contributions even if it's a small amount extra per month to bump it up?

Brynsam

Worth reading before you take any action on transferring your old pension: https://www.thisismoney.co.uk/money/pensions/article-3550085/STEVE-WEBB-merge-small-pension-pots.html

dunstonh

So do I now so the same for my last employers pension and transfer/merge into the current pension or are there wider implications to consider e.g: TER charges for both pensions and any HMRC considerations?

TER is obsolete unless you are looking at overseas funds or funds outside the scope of OCF.   So, look at OCF first then TER if an OCF is not available.

Yes, there are wider things to consider.  How you structure your portfolio and select the investments to meet your objectives.  Charges are very important but they are a secondary concern.

Whilst I've always been of the 'spread your eggs' type mentality I'm wondering if it makes sense to combine the pensions if this would be beneficial to compounding long term?

If you have 10 pensions all investing in the same fund then there would be no diversification.   The diversification comes from the investments.  Not the software administrator that issues the statements.

I feel as if the old pension will just languish given no further contributions are permitted.

Why do you feel that?

. It would also be more convenient (IMO) to have the pensions in a single place/provider.
Both pensions use Standard Life funds albeit different ones.

If you are using insured pension funds rather than UT/OEICs, ITs or ETFs (I only mention the letter given your earlier reference to TER) then you get full FSCS protection with no upper limit.  So, again, no reason to have multiple providers.

I am also aware my overall pension value is quite low for my age,

Not that far off if you are looking for an average lifestyle from state pension age (i.e. no earlier retirement).  Of course, your contributions in the future are going to be the key thing.

noclaf

@dunstonh - thanks for the feedback.
I will look at the OCF to check the costs.
Regarding my 'languishing' comment to put it a different way, let's say the £27k in that pension remains as it is for the next 25ish years without any further contributions, I would be wondering if a better return might be achieved by moving those funds into my current employer pension which will be receiving monthly contributions etc However realise now that it's not that simple and not the only consideration.
As an aside I will look at my current contributions, I am a higher rate taxpayer (not by a huge margin after pension contribution is taken into account) but could be the case that I could slightly increase the contribution without being significantly hit on my take-home pay.

AnotherJoe

noclaf said:

@dunstonh - thanks for the feedback.
I will look at the OCF to check the costs.
Regarding my 'languishing' comment to put it a different way, let's say the £27k in that pension remains as it is for the next 25ish years without any further contributions, I would be wondering if a better return might be achieved by moving those funds into my current employer pension which will be receiving monthly contributions etc However realise now that it's not that simple and not the only consideration.
As an aside I will look at my current contributions, I am a higher rate taxpayer (not by a huge margin after pension contribution is taken into account) but could be the case that I could slightly increase the contribution without being significantly hit on my take-home pay.

Of course not !!

Its simple maths. Each £1 in a pension grows at the rate of the underlying investment its in.

New £1's added to the pension grow at their own rate, again of their underlying investment.

They dont affect the existing £1's in any way.  If you moved that £27k in investment X in old pension into the new pension and kept it in investment X it will continue to grow at the same rate as before.

It wont magically grow faster just because you've added some more money to the same pension (in the same or different funds).

You can affect the growth rate of your existing £27k by making sure its in an appropriate investment (many (most?) default pension funds are pretty dire IMO, probably a lot of UK heavy funds, and bonds .) and secondarily by moving to a different pension if the fee for managing the investment is too high but employer pension funds tend to be not too expensive from what ive read here but its possible your new scheme is cheaper to manage than the old one.

noclaf

My 'taxable pay' after the various deductions such as pension contribution is £4213.79 per month so £50,565.48 per year. Does it therefore make sense from an income tax perspective to take the £565.48 and spread this across the 12 months as an additional contribution to my current employer pension? 

NottinghamKnight

Probably it's only £50 a month but will only cost you £30 or so.

noclaf

NottinghamKnight said:

Probably it's only £50 a month but will only cost you £30 or so.

Exactly my thoughts, not a huge amount but every little counts as they say!

garmeg

noclaf said:

My 'taxable pay' after the various deductions such as pension contribution is £4213.79 per month so £50,565.48 per year. Does it therefore make sense from an income tax perspective to take the £565.48 and spread this across the 12 months as an additional contribution to my current employer pension? 

You need to spread it over the 5 remaining pay months of 20/21 so approx £113 per month gross.

noclaf

garmeg said:

noclaf said:

My 'taxable pay' after the various deductions such as pension contribution is £4213.79 per month so £50,565.48 per year. Does it therefore make sense from an income tax perspective to take the £565.48 and spread this across the 12 months as an additional contribution to my current employer pension? 

You need to spread it over the 5 remaining pay months of 20/21 so approx £113 per month gross.

Ah yes, good point....am due a pay rise end of march so may actually consider starting it from then for the new tax year. We shall see.

ComicGeek

noclaf said:

garmeg said:

noclaf said:

My 'taxable pay' after the various deductions such as pension contribution is £4213.79 per month so £50,565.48 per year. Does it therefore make sense from an income tax perspective to take the £565.48 and spread this across the 12 months as an additional contribution to my current employer pension? 

You need to spread it over the 5 remaining pay months of 20/21 so approx £113 per month gross.

Ah yes, good point....am due a pay rise end of march so may actually consider starting it from then for the new tax year. We shall see.

Could you put all of your pay rise into your pension as well? I always found it easier to increase my pension payments with pay rises, before I got used to the extra money in my pocket!