The pension transfer market
How you can make your old savingsfrom previous jobs work for you long after moving on
QfromI HAVE various pensions previous employment. I’m contributing to some and not to others.
What advice would you give with regards to consolidating these policies as I don’t like the idea of them devaluing? John Graham
AThis is a great question and one that will apply to thousands of other readers at the moment.
It’s very easy to move from job to job and start a new pension every time, forgetting about the one that you had at your previous employer. Over time, you realise that you have a number of pensions lying around and your probably don’t know what they are worth or what you can do with them. In some cases, you might not even know what company they are with. The point you make about your pensions devaluing is important as well. I get letters and email from lots of people who have old pensions lying around that they haven’t looked at for years. They often have no idea what funds these pensions are invested in and how these funds have performed over the years or, indeed, how much their pension company is charging them to look after their pension.
So, the starting point for anyone who finds themselves in this situation is to sit down and make a list of all the pensions that you have and the company that they are with.
You should also reconcile them with your bank statements to see which ones you are still paying into since I have spoken to people in the past who weren’t sure whether they were still paying into some pensions or not.
You could then write to all of the companies involved and ask them to provide you with up-to-date valuations for each of those that you have, as well as a list of the funds that you are invested in, the performance of these funds over the years and the charges that they apply for managing your pension fund for you.
But I think that it makes more sense to take the basic information to a properly qualified financial adviser who will be able to go through each of the pensions you have and analyse them for you before telling you which ones they think you should keep and which ones you should consolidate.
The adviser will probably start the process by going through some sort of “fact-finding” exercise with you, where he or she will ask you
about your current situation and your plans for the future. They will probably carry out some sort of “attitude to risk” analysis as well, so they will be able to judge whether the funds your pensions are invested in are suitable for the amount of risk you are prepared to take with your money.
They will then write to all of your pension companies and ask them for all of the information I mentioned above.
When they get it back, they will analyse it to see whether it makes sense for you to leave the pensions where they are or to consolidate them all into one of your existing schemes, or into a new pension that they will set up for you. It’s really important that this work is carried out thoroughly and that’s why I’m suggesting you pay a properly qualified person to do it, rather than trying to do it yourself.
Some older personal pensions, for example, have built-in guarantees that you could lose if you transfer to another scheme, while others are charged in such a way that you can be heavily penalised if you move your money to another pension company, even after a number of years.
On the other hand some final salary schemes can’t be transferred at all and, in fact, even if you could, you would be crazy to do so. In many cases, you can’t transfer your money from one pension to another until the company you are transferring from is satisfied that you have taken advice so that they can be sure you understand the pros and cons of such a transfer.
It’s important that you ask the adviser you’re talking to how they intend to charge you for the advice you’re looking for.
Different advisers have different methods of charging and you need to know up front how much the advice you are asking for is likely to cost you.
Make sure you do this before they start to work for you.