Help point me in the right direction - possible pension amalgamation

boots_babe

Hi all,

I'll start by saying that for anything else financial I'm really on the ball and understand the detail of all options available BUT for pensions I have never had any great deal of knowledge, consider me a complete dummy! I've always paid into a company pension since I first graduated, as I knew how important it was to start early, but have just stuck with the default fund options within the pension, and never really given it too much thought. I'm 43 now and whilst I have no firm retirement plans, would certainly err more towards an earlier retirement, maybe 55 or so.

For last 8 years I've paid into my company pension, 14% contribution plus 8% employer contribution. This pot seems to be growing steadily overall. So far so good.

I also have 2 small previous company pensions, each with ~£35k in. One of these has gone down year on year over the last decade, the other has steadily been increasing. 

This is where my question comes in. I'd like to look into whether I am better to transfer both of these legacy pensions, into my current active pot. I know I could look into amending funds in the current pensions to try and improve matters, but ultimately it just feels simpler to get all the funds into one place - provided it doesn't prove drastically worse financially!

These are probably very dummy questions so apologies, but I'm not sure how to go about this:

• how do I work out whether it's likely to be a good financial step to bring over my 2 old pensions to my current active pension pot?
• what types of associated fees do I need to look out for? Will both old and new pension provider have some form of charge?
• what else do I need to consider?

Sorry for what are likely very basic questions in the world of pensions. I'm just hoping someone can give me some pointers, then I can happily go off and do whatever research and calculation are necessary.

Many thanks.

Pat38493

If you are willing to post the details of each of the pensions you mention it might help to get more detailed answers, and in particular are the two old pensions DC or DB pensions and do they have any protected benefits?  I.e. what pension provider are they with and what are the underlying investments right now.

In a lot of cases it’s pretty easy to transfer DC type pensions out if there are no protected benefits, and usually there are no charges for doing this, but to be sure on that you would need to provide further details (or ask the providers).

What else to consider?  If you transfer all your existing pots into your active employer pot, you might find that you cannot transfer it out again partially without leaving the employer scheme (again this depends on the rules and nature of the particular scheme your employer is using).  Therefore you may want to check that you are happy with the charges and available investment choices in your employer scheme.  

Generally with pensions, you need to pay attention to the charges and the underlying investments that each pension is invested in, as this has a much bigger impact than the pension provider.

 If not, another option is to transfer both the legacy pensions into a single consolidated one separate from the employer one (this is actually what I have just recently done).

Also if you post further information about your age, situation, intended retirement age,  and other savings and investments, you might get some other hints about optimising your approach.

Brie

As Pat has said it would be good to have some more details.  In the meantime here's my take on things.....

If either of the old pensions is a defined benefit scheme leave it where it is.  DBs are often good value, and give a guaranteed amount which you would lose if (assuming it is allowed) you move it into a DC scheme.  And likely your current OP is defined contribution as almost all of them are these days.

If either of the old pensions are DC then first thing to check is will your current scheme accept them as transfers in.  Some OPs say you must do any transfers in within the first X months of membership.  The good thing about transferring them in would be that everything would be in one place, with one set of fees (or maybe no fees as you are a current employee).  The bad thing is it might mean that on taking that combined pension you have to take it as 1 pension.  So that's one good reason to NOT transfer in as you have more flexibility.

I believe that most OP schemes that allow transfers in will do so free of charge but always good to ask them for fees as well as time scales for the movement of funds.

boots_babe

Hi Pat38493,

Happy to post details, I just didn't want to post too much detail that people may not want to wade through! All 3 pensions are/were DC. I have no firm retirement plans, but am 43 and imagine would be nice to have the option to retire earlier, maybe 55 or so.

My current active company pension:

£136,600

Via Scottish Widows

Fund name 'Scottish Widows Pension Portfolio Two Pension'

I cannot seem to find the fees associated

Previous company pension 1:

£35600

Via Legal and General

Fund name 'L&G PMC Standard Life Global Abs Return Strat 3'

Management charges - average around £2.50 per month

Previous company pension 2:

£35300

Via Aviva

Fund name 'Aviva Pension BlackRock (50:50) Global Equity Index Tracker'

States 0.4% fund charge

Thank you for your advice, I didn't know that I may be restricted from further transferring if I do it now, so I will definitely look into that before making a decision. This is the thing, being such a newbie to pensions, I simply don't know what I don't know at the moment!

In terms of other savings etc, we have an offset mortgage which is almost fully offset so for the purposes of this thread, let's disregard both mortgage and cash savings. Other things though are:

- I have £11k I put into a SIPP last year, as I needed to get myself under the £100k earning limit.
- We have £90k in stocks and shares - already very well managed and attended to by my husband. He's done really well and have seen really good growth here. 
- Around £50k in bitcoin (various coin types) - obviously a risky investment but we are comfortable, have had it for several years.
- I helped my parents buy a house so they could move close to us as they got older, our investment was £40k. We'll also get half of the remainder house value in their will, another ~£40k.
- Husband has a healthy company pension pot with his current employer, currently £550k. If I remember rightly he contributes 20% plus gets some % of employer contribution.
- Husband also has £50k in a previous company pension.

I think that's it. 

Albermarle

boots_babe said:

Hi all,

I'll start by saying that for anything else financial I'm really on the ball and understand the detail of all options available BUT for pensions I have never had any great deal of knowledge, consider me a complete dummy! If you spent an hour a week on this forum, you will find your knowledge will increase .I've always paid into a company pension since I first graduated, as I knew how important it was to start early, but have just stuck with the default fund options within the pension, and never really given it too much thought. I'm 43 now and whilst I have no firm retirement plans, would certainly err more towards an earlier retirement, maybe 55 or so.
The earliest you can access a pension is going up to 57, but for some existing schemes it will stay at 55. You will need to check

For last 8 years I've paid into my company pension, 14% contribution plus 8% employer contribution. This pot seems to be growing steadily overall. So far so good.

I also have 2 small previous company pensions, each with ~£35k in. One of these has gone down year on year over the last decade, Most investments have gone down in the last couple of years but a 10 year on year drop is highly unusual  the other has steadily been increasing. 

This is where my question comes in. I'd like to look into whether I am better to transfer both of these legacy pensions, into my current active pot. I know I could look into amending funds in the current pensions to try and improve matters, but ultimately it just feels simpler to get all the funds into one place - provided it doesn't prove drastically worse financially! You could also look at merging the two pensions, or opening a completely new one. Older pensions tend to have less flexibility with withdrawal options .

These are probably very dummy questions so apologies, but I'm not sure how to go about this:

• how do I work out whether it's likely to be a good financial step to bring over my 2 old pensions to my current active pension pot? Pension performance is driven by what investments you hold in them and trends in the financial markets.
• what types of associated fees do I need to look out for? Will both old and new pension provider have some form of charge? All pension providers have a charge, otherwise they would be bankrupt ! Also there is often a separate charge for the investment funds, although sometimes it is all rolled into one.
• what else do I need to consider?

Sorry for what are likely very basic questions in the world of pensions. I'm just hoping someone can give me some pointers, then I can happily go off and do whatever research and calculation are necessary.

Many thanks.

Just largely confirming and adding to what the other two posters already said.

Marcon

Brie said:

If either of the old pensions is a defined benefit scheme leave it where it is.  DBs are often good value, and give a guaranteed amount which you would lose if (assuming it is allowed) you move it into a DC scheme.  

Unlikely to be any reason why it wouldn't be allowed (albeit you might need to follow a circuitous route), which is not the same thing as saying it's a good idea - although in some circumstances it might be. 

OP, this might make useful reading: https://www.thisismoney.co.uk/money/pensions/article-3550085/STEVE-WEBB-merge-small-pension-pots.html

Pat38493

Thanks for posting the details.  I am not the best expert on fund analysis so others might have more comments.  

As mentioned by Albermarle you might want to spend a bit of time researching around pensions.

The issue with the employer scheme to check, is to ask whether they allow “partial transfers out” without stopping your employer based contributions.  If not, this potentially means you would have to opt out of the scheme if you wanted to transfer it all back out again.  That’s why a lot of posters here probably consolidate their old pots into one separate pot and not into their employer scheme.  

Also for the employer scheme, you should check what range of funds are available - some employer schemes only have a very limited range of funds to pick from, whereas others might have a huge number or even whole of market.

For your old schemes - as I say I am not the best expert there, but at a glance it looks like your L&G scheme is invested almost entirely in cash type assets and bonds - unfortunately bonds, which are normally considered to be the safer investment compared to equities, suffered a very bad 18 months and have actually done worse than equities (which is kind of a very rare event one in a hundred years as I understand it).  This is probably why that scheme has been going down the last couple of years.

If you are quite a few years away from retirement, I would suggest that being 100% in cash / bonds on one of your schemes is in any case probably not a good idea, as you have at least 10 years or more - therefore you may want to look at consolidating those 2 pots and putting them more into equities.  Even the other one if 50:50 equities bonds which is probably a bit too conservative for being 12 or 14 years from earliest access date.  I would suggest you research that aspect a bit as well.

You also of course have the option to consult an independent financial adviser who will charge you to give you further advice.

boots_babe

Albermarle said:

boots_babe said:

Hi all,

 If you spent an hour a week on this forum, you will find your knowledge will increase  
That's exactly what I've resolved to do! I've been on this forum the last couple of weeks and read all sorts of threads, whether directly of relevance to me or not. I figured I need to start somewhere, as ultimately I'd like to be as knowledgeable and competent with pensions as I am in all other areas of my financial life. This forum looks like a fantastic wealth of knowledge!

The earliest you can access a pension is going up to 57, but for some existing schemes it will stay at 55. You will need to check I realise that, but surely that wouldn't stop me retiring at 55, living off savings, then taking pension sometime after 57?

Most investments have gone down in the last couple of years but a 10 year on year drop is highly unusual  That's what I was thinking, that's what's galvanise me into thinking I really must get on top of my pensions!

You could also look at merging the two pensions, or opening a completely new one. Older pensions tend to have less flexibility with withdrawal options . OK thank you, I will investigate that as an option as hadn't known about/considered that.

These are probably very dummy questions so apologies, but I'm not sure how to go about this:

• how do I work out whether it's likely to be a good financial step to bring over my 2 old pensions to my current active pension pot? Pension performance is driven by what investments you hold in them and trends in the financial markets. I appreciate that, but let's assume both old and new provider offer same funds (I know they may not). Then other than the charges which I've mentioned below, is there anything else I should be considering here? I realise this is probably a really stupid question, but it's very much a case here of 'I don't know what I don't know'.
• what types of associated fees do I need to look out for? Will both old and new pension provider have some form of charge? All pension providers have a charge, otherwise they would be bankrupt ! Also there is often a separate charge for the investment funds, although sometimes it is all rolled into one. I realise that, I think I maybe worded that badly. What I meant was, if I complete a transfer, am I likely to be hit by TWO sets of transfer related fees, one from my old provider, one from my new one? 
• what else do I need to consider?

Sorry for what are likely very basic questions in the world of pensions. I'm just hoping someone can give me some pointers, then I can happily go off and do whatever research and calculation are necessary.

Many thanks.

Just largely confirming and adding to what the other two posters already said.

Thanks for taking the time to read and reply. I've added some comments above after yours.

Albermarle

Previous company pension 1:

£35600

Via Legal and General

Fund name 'L&G PMC Standard Life Global Abs Return Strat 3'

Management charges - average around £2.50 per month

That explains the very poor performance going back 10 years.

Some years ago ' Absolute Return Funds' were flavour of the month. They promised to make a return in all market conditions, but have failed abysmally and missed out big time on the boom years pre Covid. There has been a large outflow of money from this Standard Life Global Absolute return fund.

Its 5 year performance is minus 10%, whilst a typical middle of the road multi asset fund is 15 to 20% up despite the problems of the last 18 months.

Pat38493

To Elaborate a bit on your questions to Albermarle:

- Great that you are researching this - I started researching this about 2 years ago and I am still a newbie compared to lots of posters here but I already saved a lot of money and avoided a lot of mistakes (mainly mistakes of doing nothing!).

- Yes you can of course retire at 55 and live off savings - in this case you would need to plan to save some funds outside of pensions in ISAs or other investment platforms to fund the gap.

- Have you checked your state pension forecast on gov.uk ?  This is not one of your questions but it is almost always asked of people looking into their pension situation.

- As said before, your L&G pension pot is unfortunately in the worst type of investments you could have been in during 2022 and so far in 2023.  There wasn't really any way to know this in advance, but in any case I would certainly not be invested in that fund if I was still more than 10 years from retirement.  Nothing you can do to change the past but you can change it going forward. (I hope my analysis of the google search I did on this fund is correct but if not I'm sure someone else will pop up to correct me).

- Yes you can certainly open a new pension and put both your older pots into it.  In fact you mention that you already opened a SIPP - a SIPP is a pension wrapper so you could transfer both pensions into that.  Who is the SIPP with and what is the investment there?  (also it's good that you are aware of the 100K tax trap).

- Bitcoin - probably a dirty word round here but if you can afford to lose the money, up to you

- Choosing a pension provider is often about selecting based on the charging structure and comparing it to a) The size of fund that you will have with that provider b) The type of funds or assets you want to hold and c) Any special offers they have at the time like cashback or whatever.  There are some articles on other threads linked with comparisons of the major DIY pension providers who are out there.  Some of them offer a huge range of investments (e.g. AJ Bell) whilst others offer a limited choice (e.g. Vanguard).  If you don't want to spend months researching, you can do a lot worse than invest your money in one of Vanguard's life strategy funds - just pick your risk level.  However even there - bizarrely it's sometimes cheaper to hold your Vanguard fund, with a different provider than Vanguard, depending on pot size!

- You need to ask your providers about entry and exit charges, but generally most pension providers these days do not charge neither entry or exit charges for transferring.  Transfers are usually done by triggering from the receiving side - so you would tell your SIPP provider or suchlike the details of the pension that you want to transfer in, and they will take care of most of the process for you.

No need to worry about stupid questions - I was in the same position as you not long ago and still not very knowledgeable.  

squirrelpie

As Pat38493 mentioned, you might want to consider ISAs as well as pensions, if you don't already have them. They will protect your [husband's] stock market profits from tax and you can put in £20,000 each a year. You can draw on them any time you want/need and withdrawals are tax free. So they provide a useful alternative to pensions.