Pension planning -feeling lost

Pineapple88

Hi everyone, 

I'm trying to sort out what to do with my current and previous pension and feel like I've received lots of advice from lots of people and I'm a bit lost! 

I'm nearly 35 and have three small pension pots - the first is a DB pension from a previous employer (I don't intend to do anything with this), the second is a DC pension worth £19k from a previous employer, and the third is a DC/auto enrolment pension with my current employer. With my current employer pension I pay 10% (5% mandatory and 5% voluntary additional payments) and my employer pays 5%. 

I also have some money (£10-15k) in cash plus ongoing monthly payments that I would like to add to a pension (I already have a cash emergency fund in cash and a S&S ISA this "spare" money can be allocated to a pension). 

I've been told that I shouldn't leave my former employer DC pension in the old scheme as it will be on the scheme's default fund and this is likely to not perform as well as funds. I feel lost comparing funds though and don't really know where to start? Should I transfer the money to a SIPP? Is this something I can do myself or do I need an IFA? Will IFA's manage small pots such as this one? 

I'm also not sure what I should do with the money that I have to invest in a pension myself. Should I add this to my existing £19k pot, or start a SIPP? 

Thank you 

Pat38493

You will probably get better answers if you post some detail of what funds your pensions are currently invested in.  The default fund on your old scheme might be fine.

If you have spare money to put in a pension the easiest way will most likely be to put it in your employer pension - if you tell the board what your employer pension is invested in you can get some comments on that also.

In both cases though, you don’t necessarily need to move the pension to a different provider in order to change the funds that it’s invested in.  Pensions generally are a tax wrapper and your pot within that wrapper can often be moved to different funds - you can check with your provider what other funds are available without transferring.

also it would be useful to know what charges you are paying on the schemes.

MX5huggy

are your current scheme contributions made via Salary Sacrifice? If so this would put adding additional funds via Salary Sacrifice to this scheme in pole position over using another SIPP. 

Marcon

Pineapple88 said:

Hi everyone, 

I'm trying to sort out what to do with my current and previous pension and feel like I've received lots of advice from lots of people and I'm a bit lost! 

I'm nearly 35 and have three small pension pots - the first is a DB pension from a previous employer (I don't intend to do anything with this), the second is a DC pension worth £19k from a previous employer, and the third is a DC/auto enrolment pension with my current employer. With my current employer pension I pay 10% (5% mandatory and 5% voluntary additional payments) and my employer pays 5%. 

I also have some money (£10-15k) in cash plus ongoing monthly payments that I would like to add to a pension (I already have a cash emergency fund in cash and a S&S ISA this "spare" money can be allocated to a pension). 

I've been told that I shouldn't leave my former employer DC pension in the old scheme as it will be on the scheme's default fund and this is likely to not perform as well as funds. I feel lost comparing funds though and don't really know where to start? Should I transfer the money to a SIPP? Is this something I can do myself or do I need an IFA? Will IFA's manage small pots such as this one? 

I'm also not sure what I should do with the money that I have to invest in a pension myself. Should I add this to my existing £19k pot, or start a SIPP? 

Thank you 

Told by whom - someone who knows the scheme and knows what they're talking about? Have you checked to see where the pension is actually invested and what choices you have in terms of switching to different funds within the same plan? What are the charges like in comparison to your current scheme?

THere's some good basic reading on MoneyHelper's website - eg https://www.moneyhelper.org.uk/en/pensions-and-retirement/building-your-retirement-pot

This might also be useful reading: https://www.thisismoney.co.uk/money/pensions/article-3550085/STEVE-WEBB-merge-small-pension-pots.html

You don't need to take any urgent action, so don't panic!

Pineapple88

MX5huggy said:

are your current scheme contributions made via Salary Sacrifice? If so this would put adding additional funds via Salary Sacrifice to this scheme in pole position over using another SIPP. 

No, they're not salary sacrifice. What is the difference between salary sacrifice and other deductions? 

Pineapple88

Marcon said:

Pineapple88 said:

Told by whom - someone who knows the scheme and knows what they're talking about? Have you checked to see where the pension is actually invested and what choices you have in terms of switching to different funds within the same plan? What are the charges like in comparison to your current scheme?

THere's some good basic reading on MoneyHelper's website - eg https://www.moneyhelper.org.uk/en/pensions-and-retirement/building-your-retirement-pot

This might also be useful reading: https://www.thisismoney.co.uk/money/pensions/article-3550085/STEVE-WEBB-merge-small-pension-pots.html

You don't need to take any urgent action, so don't panic!

Thank you. I've check those things. My pension is with Aviva so there is a good range of funds available, I just feel like I don't know what I'm looking at or which one(s) to pick.

No, nothing has been said by anyone who knows the scheme. It's been a few general comments from older people at work along the lines of "the default fund never performs as well as other funds". 

Pineapple88

My previous employer pension is with Aviva and the fund is Aviva Life & Pensions Old & New With-Profits Sub-Funds and my "investment choice" is Mixed Investments Universal Lifestyle. I'm not sure what the difference is between these two things.

This fund is no longer accepting new payments but existing pension can continue with it. 

The charges are 0.56% p/a. 

My current employer pension is with Scottish Widows and it's invested into the Pension Portfolio Three CS8 (described as "cautious"). The charges are 0.5% p/a. 

r6mile

Easiest solution might be to transfer all your previous pension into your current employer pension, and then see if you can make a lump sum payment as well m. Within Scottish Widows there should be a range of multi-asset funds and you can choose one that matches your risk profile.

if you can’t make lump sump payments into your current pensions, then you could put that in a SIPP with ie Vanguard and pick one of their Lifestrategy funds.

LHW99

No, nothing has been said by anyone who knows the scheme. It's been a few general comments from older people at work along the lines of "the default fund never performs as well as other funds". 

There is an argument that if you are young, moving to a more high 'risk' / high equity content fund may give you a higher final fund value down the line.

However, that's no good if you would have sleepless nights when the fund value dropped 20%+, as it would from time to time.

Default funds tend to be steadier (not always) but long term may increase less

Pat38493

LHW99 said:

No, nothing has been said by anyone who knows the scheme. It's been a few general comments from older people at work along the lines of "the default fund never performs as well as other funds". 

There is an argument that if you are young, moving to a more high 'risk' / high equity content fund may give you a higher final fund value down the line.

However, that's no good if you would have sleepless nights when the fund value dropped 20%+, as it would from time to time.

Default funds tend to be steadier (not always) but long term may increase less

Depends on the employer - the default fund with my employer is 82% equity so it’s pretty volatile, but probably suitable for anyone who has quite a few years till they want to access the funds (and arguably even beyond if they are doing drawdown).

Albermarle

Pineapple88 said:

My previous employer pension is with Aviva and the fund is Aviva Life & Pensions Old & New With-Profits Sub-Funds and my "investment choice" is Mixed Investments Universal Lifestyle. I'm not sure what the difference is between these two things.

This fund is no longer accepting new payments but existing pension can continue with it. 

The charges are 0.56% p/a. 

My current employer pension is with Scottish Widows and it's invested into the Pension Portfolio Three CS8 (described as "cautious"). The charges are 0.5% p/a. 

In very simplistic terms- a default fund is mainly a mix of equites ( shares) and bonds. Equities provide growth in the long term but are volatile and bonds add some stability.
Higher equity % should mean higher growth long term so is better for younger people, unless you are the nervous type.
The fund fact sheets should tell you approx the % equity and a risk score ( for example 4 out of 7) People with a long time frame are normally better at the riskier end.

With profits is a different type of investment, that smooths fluctuations, but is not very exciting.
SW Pensions Portfolio 3 is not what I would call cautious. More medium risk. Again as a younger person you might look at Pension Portfolio 1 as  somewhat more 'racy' being almost 100% equities or Portfolio 2 which is something inbetween.

There is no rush, just keep reading/researching/reading this forum.