Pension consolidation and risk - a bit overwhelmed

October22Mover

Hey all,

I'm 36, finally got myself to a relatively stable financial position and I want to start thinking sensibly about my pension. All the advice is a bit overwhelming!

As a freelancer who does lots of fixed term PAYE contracts, I end up with loads of little pension pots scattered around and want to work out what to do with them, plus start topping up the auto-enrolled contributions at work with my own.

I so far have about £7k across six pots, so not breaking the bank. To make it more manageable I want to get them all into one scheme, start topping up myself, and then each time I finish a contract, transfer that one over as well.

My dilemmas are:
- The advice on the MSE pension pages is that there can be downsides to transferring out of existing pots, but maybe given how small the balances are that's less of an issue for me? It says a financial advisor can help navigate this BUT:

- I had an initial meeting with a financial advisor about this and mortgage stuff, and they said there's no sense in paying a financial advisor to arrange a pension product for me as there's not enough in these for it to be worth my while. Fair enough. But means I feel I'm flying blind a bit.

- The financial advisor did however push very hard for me to go for a high risk fund, saying I had plenty of time to recoup any losses if the fund hit a rocky patch. My dad is screaming at me to ignore him, but my dad is retired on a very generous final salary pension scheme which I will not have the benefit of, so yes I don't want to blow my cash on a gamble, but I also don't want to play it excessively safe and end up with relatively little when I retire.

What's everyone thoughts here? Should I just go for it and consolidate into one of my existing pots just to simplify things, then worry about trying to optimise where the money is once there's a bit more in there?

For the record, these are the places I have pots currently:
Aegon (Retiready) - I am currently enrolled on a workplace scheme here
Royal London
Pensions Trust (NOW Pensions)
NEST
People's Pension
Scottish Widow

Marcon

October22Mover said:

Hey all,

I'm 36, finally got myself to a relatively stable financial position and I want to start thinking sensibly about my pension. All the advice is a bit overwhelming!

As a freelancer who does lots of fixed term PAYE contracts, I end up with loads of little pension pots scattered around and want to work out what to do with them, plus start topping up the auto-enrolled contributions at work with my own.

I so far have about £7k across six pots, so not breaking the bank. To make it more manageable I want to get them all into one scheme, start topping up myself, and then each time I finish a contract, transfer that one over as well.

My dilemmas are:
- The advice on the MSE pension pages is that there can be downsides to transferring out of existing pots, but maybe given how small the balances are that's less of an issue for me? It says a financial advisor can help navigate this BUT:

- I had an initial meeting with a financial advisor about this and mortgage stuff, and they said there's no sense in paying a financial advisor to arrange a pension product for me as there's not enough in these for it to be worth my while. Fair enough. But means I feel I'm flying blind a bit.
Sound advice - but with such small amounts at present, you're not going to get yourself into too much trouble however blind you fly. At age 36 with £7K there's minimal scope for any form of real disaster!

- The financial advisor did however push very hard for me to go for a high risk fund, saying I had plenty of time to recoup any losses if the fund hit a rocky patch. My dad is screaming at me to ignore him, but my dad is retired on a very generous final salary pension scheme which I will not have the benefit of, so yes I don't want to blow my cash on a gamble, but I also don't want to play it excessively safe and end up with relatively little when I retire.
Ignore your dad; just don't tell him what you choose to do and that way you both get a quiet life and you follow a sensible path

What's everyone thoughts here? Should I just go for it and consolidate into one of my existing pots just to simplify things, then worry about trying to optimise where the money is once there's a bit more in there?

For the record, these are the places I have pots currently:
Aegon (Retiready) - I am currently enrolled on a workplace scheme here
Royal London
Pensions Trust (NOW Pensions)
NEST
People's Pension
Scottish Widow

Set up a SIPP and then move each little pot there when you complete a contract. I'll leave it to others to trumpet the values of their 'favourite' SIPP!

Revisit from time to time - and certainly as the SIPP value increases. 

October22Mover

Thanks for this!

I'm enrolled in the default SIPP pension with Retiready/Aegon, which is also where my largest pot sits, and which is currently losing money. Am not entirely confident in my ability to make good judgements about which funds to go with though tbh.

squirrelpie

It sounds like you were very lucky with the financial adviser you chose - they gave you good advice on two counts - both the lack of need for themselves, and how to invest.

Marcon

October22Mover said:

Thanks for this!

I'm enrolled in the default SIPP pension with Retiready/Aegon, which is also where my largest pot sits, and which is currently losing money. Am not entirely confident in my ability to make good judgements about which funds to go with though tbh.

There's plenty of good, basic information here: https://www.moneyhelper.org.uk/en/pensions-and-retirement and you could if you wished joined their Facebook group (link above gives details).

Albermarle

The financial advisor did however push very hard for me to go for a high risk fund, saying I had plenty of time to recoup any losses if the fund hit a rocky patch. My dad is screaming at me to ignore him

There is widespread misunderstanding on the meaning of high risk in investments.

Firstly things that are really risky, where there is a possibility of losing everything are actually Very High Risk and a financial advisor would not be recommending these to clients. ( such as crypto currency, or buying individual company shares) 

In the context of more mainstream investment funds, such as index trackers, high risk really means high volatility. However as long as you hold them long term the trend should be up. The real risk is that people get scared when markets are dropping fast and pull out, which is nearly always a bad decision.

Most retail investors tend to dilute the risk to varying extents. Probably in the long term this will restrict potential growth, but you can sleep easier during market wobbles.

At your age you should be at the riskier end of the spectrum, but it is down to your own risk tolerance.

Pat38493

I agree with Albermarle - the term "high risk" when talking about the type of funds that we typically use in pensions does not mean that you might lose all your money - it means that you have to leave the investment in place for a long time (more than 10 years) to be almost sure of making a good return.

LHW99

October22Mover said:

Thanks for this!

I'm enrolled in the default SIPP pension with Retiready/Aegon, which is also where my largest pot sits, and which is currently losing money. Am not entirely confident in my ability to make good judgements about which funds to go with though tbh.

Look at it another way - as the cost of the units goes down (so the total in the pot seems to be getting smaller) you will get more units for each of your monthly investments.

When the market starts feeling better (which it will in a year or few) those cheaper units will be gaining in value.

If you know you want something its always nicer to buy in the sales!

dunstonh

I so far have about £7k across six pots, so not breaking the bank. To make it more manageable I want to get them all into one scheme, start topping up myself, and then each time I finish a contract, transfer that one over as well.

That tells us two things. 
1 - yes, consolidating is almost certainly going to be beneficial to you
2 - you are behind on your retirement planning.

- The financial advisor did however push very hard for me to go for a high risk fund, saying I had plenty of time to recoup any losses if the fund hit a rocky patch. My dad is screaming at me to ignore him, but my dad is retired on a very generous final salary pension scheme which I will not have the benefit of, so yes I don't want to blow my cash on a gamble, but I also don't want to play it excessively safe and end up with relatively little when I retire.

In pension terms, high risk isn't that high risk.  It usually means close to or at 100% equities.  That is common sense and logical for someone in their 30s who is still paying in.   Your dad is wrong.     He is probably imposing his "secure" views on to you but lacks experience in dealing with risk based options.  Going too low on investment risk can actually be riskier than going too high on investment risk.    Mainly as investment risk is not the only risk.   Shortfall risk and inflation risk also exist.

So, think of high risk as being high risk on a conventional scale that actually excludes the real high risk options that you can get on a SIPP (i.e. single company shares, unregulated investments, niche investment areas etc)

It is likely that on at least one or more of your pensions, you are already at "high risk"

I'm enrolled in the default SIPP pension with Retiready/Aegon, which is also where my largest pot sits, and which is currently losing money. Am not entirely confident in my ability to make good judgements about which funds to go with though tbh.

Aegon Retire Ready is not a SIPP.

Pat38493

dunstonh said:

Aegon Retire Ready is not a SIPP.

It's not a SIPP by the technical definition, but they seem to call it a SIPP on a marketing level, and the range of funds available is quite large (but not full market) - at least that's the case with mine.

JohnWinder

You’re probably the right age to get a lot out of Hollow’s book How to fund the Life you Want. https://www.evidenceinvestor.com/have-you-read-our-award-winning-book/ , or other UK pension guide books.
Less on pension rules, but plenty about choosing the right funds for you is Hale’s book Smarter Investing.
Online forums like this are good, but there’s plenty of dross, and all jumbled together in an unsystematic way. Read a decent book; they’re written by people who know the ropes, they’ve been edited to reduce the dross, and backed by a publisher putting money up for them. Whatever else you do read some books, you won’t need an advisor then, or will you muck it up badly.