Transferring previous company pensions into existing one.

Lisa_H

I cant see if this has been asked before so apologies if it has..... I have two frozen company pensions from previous jobs. As a general rule should you always transfer your frozen pensions to your existing company pension or leave them frozen until you retire? Thank you!!

EdInvestor

Hi Lisa

There's no general rule.It depends on what type of pensions they are: if money purchase or group personal pensions, what charges you are paying and what funds they are invested in (if appropriate) and similarly how good the current scheme is. These days, some people like to consolidate old money purchase/GPP schemes in low charge online SIPPs.

If they are final salary pensions, advice will often be to leave them alone (especially if public sector).Sometimes early leavers get a pretty poor deal and if you feel inclined to make some effort, you may be able to do better by investing the money yourself.

But it isn't necessarily better to "tidy them up".

Lisa_H

EdInvestor - thanks, it all sounds quite complicated to me!! By the time I retire I could have them scattered all over the place!

EdInvestor

Feel free to post some details about them if you want further guidance.:)

dunstonh

These days, some people like to consolidate old money purchase/GPP schemes in low charge online SIPPs.

Or stakeholder or personal pensions which can be cheaper than SIPPs and far less complicated.

Occupational schemes often have built in guarantees/features which you cannot get replicated on personal schemes. However, sometimes personal schemes can be better. Although that would be in a minority of cases.

Also, sometimes terminology gets mixed up and a pension may not be an occupational pension scheme but a group personal pension. Again, there may be enhancements which the employer has negotiated (such as lower charges). However, it could be a high charged plan provided by a bank (for example).

Its not complicated if you know about pensions. It is damned complicated though if you don't.

Lisa_H

What I'm actually asking is does it really matter what kind of company pensions they are to make it worth while to transfer into your latest company pension? If you're a person that has had lots of jobs when you retire you could have lots of frozen ones all over the place!!! I have a Boots and Vodafone one frozen and I'm now paying into a police one (although I'm a civvie!!), I'm 35 and I expect I will have been employed by a few more companies by the time I retire. What are the pros and cons of transferring them into the one I'm already paying into and later on, the one I'm paying into at the moment into future ones?

dunstonh

What I'm actually asking is does it really matter what kind of company pensions they are to make it worth while to transfer into your latest company pension?

Yes it does. Not all schemes are equal and you can lose vital benefits (or gain them).

What are the pros and cons of transferring them into the one I'm already paying into and later on, the one I'm paying into at the moment into future ones?

Occupational schemes often have indexed income and spouses pension before and after retirement. If you transfer out of one of those into what is in effect a glorified personal pension, then you lose all those benefits.

If the scheme you are currently a member of is a good one, then you can benefit. Howewer, not all schemes want to take in transferred funds and they may not offer you very good terms. Couple that to a penalty that may be applied on the transfer out, you could lose more than you gain.

Occupational pension transfers are considered a high risk advice area. That alone should put you on guard. The arguement for convenience doesnt really work when you will lose out financially. That is if you would lose out. The only way to be sure is to have a transfer analysis (TVAS) completed on each pension. Otherwise its all guesswork.

EdInvestor

Lisa

I would see the key factor as whether or not the company pensions are of the "final salary" (aka "defined benefit") type.

With this type of pension, the company takes the risk and guarantees you an amount based on your final (leaving salary) uprated for inflation over the period until you retire.You have no interest or control over how the money is invested, it is up to the company to provide the pension, not you.These pensions are normally best left alone.

With the other type of pension, you have a role in deciding what funds the money is invested in.Pensions like these require attention, and IMHO, all else being equal it may be best to move them to a low cost provider where you can get access to high performance funds or other investments.

So I suggest you check your pensions, and if they are final salary, leave them alone, but if they are not, consider what might be done to improve performance and make supervision easier, if necessary.

[The ones in the second group are called "money purchase/defined contribution" pensions or "group personal pensions" or "EPPS". You'll be pleased to hear that next year the rules are being simplified so that they are more or less the same for all types :rolleyes:]

#BTW re the Boots pension, if it is final salary, you can rest assured you will not have any proiblems with that one.It's one of the safest in the land.:) The guy who was in charge of it switched all the scheme's money into bonds just before the stockmarket crashed back in 200-01.As a result it's one of the very few older big company pension schemes in the UK with no deficit.

Lisa_H

Thanks to both of you, you've both been a big help. I didnt realise there was so much to it! :T

Lisa