What to consider to ensure you don’t lose out
Have you ever considered moving and consolidating your pension to another scheme or provider?
There are a host of reasons why people might want to do this before they reach retirement. Better fund performance, lower charges or better death benefits; others are simply changing jobs.
Most schemes will allow you to move your pension pot to another scheme, which could be a new employer’s workplace pension scheme, a personal pension scheme, a self-invested personal pension (SIPP) or a stakeholder pension (SHP) scheme.
Moving to a new employer
When you move jobs, you are treated as having left the workplace pension scheme, but you don’t lose the benefits accrued. You may decide that you want to consolidate your pot to the scheme offered by your new workplace.
It is important to do it for financial – and not emotional – reasons. Don’t move your pension pot out of a first-rate scheme simply because you want to cut all links with an old employer.
Better performance
If your scheme is performing poorly, you may well want to move your money elsewhere.
Once again ask yourself whether you are prepared to invest in higher risk funds to potentially obtain a better return. If you are approaching retirement age, think particularly carefully before making such a decision.
There is no guarantee equal or higher returns will be achieved when compared to your existing arrangement(s).
Access to a wider range of funds
Consolidating your pension may sound like a good option if you want to gain access to a wider range of funds than offered by your current scheme?
Alternative death benefits
If you feel the death benefits offered by your current scheme don’t match those offered by more modern schemes.
You might, for example, want to move your money into a scheme that allows one of your relatives to inherit your pension when you die, rather than simply spouses or dependents. The same might apply if you are not married to your long-term partner but want them to inherit your pension once you’re gone.
Consolidating several pensions
As people change jobs more frequently, they often accumulate a number of small pensions along the way. It can be hard keeping track of schemes, and difficult to really know how much your total retirement is worth.
Think carefully before making the switch
You need to be careful before moving your pension pot out of certain schemes – including public sector schemes, such as the nurses’ or teachers’ schemes – as these offer extremely generous benefits which can be hard to replicate elsewhere.
Equally, if you are thinking about moving your personal pension to another provider, you must check that the benefits are not outweighed by any exit penalties and entry charges.
Professional, expert financial advice
If you’re a member of a defined benefits pension scheme and the value of your benefits is more than £30,000, you will need to take professional, expert financial advice to ensure that the value you are offered represents good value and that this is in your best interests – you may be giving up guaranteed pension benefits, especially if you’re moving your pension pot to a defined contribution pension scheme. Please contact us for more information.
A PENSION IS A LONG-TERM INVESTMENT. THE FUND VALUE MAY FLUCTUATE AND CAN GO DOWN, WHICH WOULD HAVE AN IMPACT ON THE LEVEL OF PENSION BENEFITS AVAILABLE.
YOUR PENSION INCOME COULD ALSO BE AFFECTED BY INTEREST RATES AT THE TIME YOU TAKE YOUR BENEFITS. THE TAX IMPLICATIONS OF PENSION WITHDRAWALS WILL BE BASED ON YOUR INDIVIDUAL CIRCUMSTANCES, TAX LEGISLATION AND REGULATION, WHICH ARE SUBJECT TO CHANGE IN THE FUTURE.
