Consolidate pensions or not?

dansakman

Plan to retire in 2 years time but probably not access any DC pension until 6 years time.

I now have two DC pensions

A. Aviva. 200 odd funds available. Probably I can switch funds. Currently in a managed "with profits" fund. Fees 0.7%. For the last 5 years has made returns below its benchmark. Too much UK. 55% stocks 45% bonds and other. All drawdown options available.

B. Current Employer scheme. 25 bespoke funds. Low fees 0.07% to 0.6% max. Generally funds are performing close to benchmark over the last 5 years. Currently I have this at around 80% stocks. No fund switching costs. UFPLS and Annuity at drawdown but no FAD so at retirement I need to transfer.

I did have a meeting with a financial planner who told me to keep both and on retirement use A and then use B (after transferring somewhere else).

I was told although the fund A is less cautious than my risk profile the "with profits" aspect and low risk rating served me well as it smoothed out volatility and targeted the earlier drawdown (it would probably last me about 4-5 years of expenses). I was told I would lose valuable "with profits" benefits if I transferred but Aviva said this was not the case. 

So I have come to think of this is a discrete lower risk bucket - first to tap when the ISAs are drained. 

My monkey brain however still wants to consolidate into A into B. I feel the fees of A are too high and performance not great and part of me just wants everything in one place 

I think my employer scheme has all the funds I could ever want, perform well, and are low cost. 

Anything I'm missing?

Brie

Are you able to keep the employer scheme where it is after you leave their employ?

dansakman

Brie said:

Are you able to keep the employer scheme where it is after you leave their employ?

Yes that is possible 

Albermarle

If you do transfer you will have to think about how to spread the investment going forward.
Opinions will always vary, but I would think a mix of relatively high risk 80% equity fund and a low/medium risk with profits fund, is not such a bad mix.
You will be glad to be in the with profits fund ( or similar) if the markets take a dive.

jamesd

You have ISAs which I assume means cash. I also assume that you're 55 or close to it.

Are you maximising your annual pension contributions, capped by the lower of your gross pay or £60k annual allowance?

This is a straightforward move that adds 6.25% to the value of your money if everything happens at basic rate.

dansakman

Seems like I will have to drill deeply on this one. There may be exit penalties and market value reduction and I may miss out on a final with profits bonus, Trying to find out

dansakman

Roll forward 6 weeks...

I've still not been able to find out if there are exit penalties or a market value reduction is in place or if there is any other implication of transferring out of Aviva pension and the "with profits" fund.

My online queries have been replied to but my direct questions not actually answered!

Got nowhere on the phone with them.

I've lodged a complaint through Aviva website and that has not been acknowledged either

dunstonh

Roll forward 6 weeks...I've still not been able to find out if there are exit penalties or a market value reduction is in place or if there is any other implication of transferring out of Aviva pension and the "with profits" fund.

That seems strange as Aviva are usually very quick.  
Aviva show it on their policy details summary that is usually emailed to the adviser within 48 hours.   Its the sort of information that is available from their call centre in minutes.

My online queries have been replied to but my direct questions not actually answered!

Were they direct or could they be considered as falling under adviser permissions? or misinterpreting?
For example, you mention you may miss out on a final bonus but that isn't how it works.   Asking questions like that sound as if they could fall outside of Aviva's permissions and they cannot answer them.

Is it possible that your plan doesn't  have those things and they cannot answer about something you don't have.

e.g. if its unitised with profits then there may not be an MVR possible.   and for exit penalties, you just need to compare the transfer value with the current value.  Both of which are usually supplied upon request.

dansakman

Finally got answers via online chat. 

Online emails seem to go to a team not able to deal with difficult queries I guess.

Sometimes you just gotta find the right person

Seems there are no exit penalities, no special benefits to lose and I'll be able to keep the final bonus amount accrued thus far.

So I just need to decide:

Do I leave the money there as I'm targeting retirement and access in 5 years and its lower risk profile and with profits nature assists me and accept the higher fees

Or do I move to my employer scheme with its outstanding low costs and pretty good bespoke funds which address downside risk of equities. 

Guess no one can call this one - I just have to make a choice and live with it

Albermarle

Guess no one can call this one - I just have to make a choice and live with it

Spot on with your assessment !

dansakman

Just wanted to finally add my decision on this matter

I did a deep dive on my actual with profit pension fund returns year on year going back to 2007 and compared with my existing regular pension funds with my employer.

My feeling is that probably yes there is some evidence of lag before a bad year hits you in the with profits scheme and then some damping off the impact but not enough for my pension not to drop by 19% in value after the 2008 financial crash (MSCI global index went down -37%). Perhaps covid crash and the Truss/Kwatang bond fiasco it dealt with better.

My employer funds were perhaps more wired to the fortunes of the global markets and saw bigger dips but also bigger gains. 

Ultimately I've chosen to transfer out of the with profits funds because:

1. There's no financial penalty to exit right now e.g no MVR in place or exit fees and I get to keep final bonus accrued thus far. 
2. I will save 0.5% on fees and probably gain an extra an extra 2-3% with my employer schemes "safe" fund. 
3. "With profits" seems like too much "smoke and mirrors" - its too opaque. I much rather take any losses due to market downturns on the chin in the certain knowledge that they will recover given enough time. 
4. Its at least 6 years before I drawdown on this pension. I have others sources of income and I'm prepared to change my retirement plans to adjust for any sequence of returns risk. 
5. A loss is not a loss until you crystallise it and I'm not going to panic about a dip in value when I've still got years in the market. 
6. If not planning on buying an annuity then with profits is possibly something better for when actually in retirement drawing down flexibly rather than leading up to retirement.