Where do I put pension pot?
It’s best to get an expert to carry out a full assessment of each of your schemes first
QLAST week you helped a reader who had joined a new company and had questions about its pension scheme. I’m in a similar situation, having just started a new job. I have joined my employer’s scheme for the reasons you gave last week and my question relates to the three or four personal pensions I have from previous employers. I think in total they are probably worth around £100,000. Some people I’ve been talking to seem to think that I should leave them all where they are, while others tell me that I should transfer them all into my new employer’s scheme. I’m confused by all of the different advice I’m getting. What do you think? Stephen Harvie
AGOOD question. The short answer is that I don’t know enough about you or your old pensions to give you a definitive answer at this stage. What I can do, and will do, today is to give you some pointers that will help you come to a decision about the best way forward. You should probably talk to a pension expert before you make up your mind but what follows will help you think about the questions you want to ask that person when you see them. For most of us, our pension is our most valuable asset apart from our house but we don’t spend enough time making sure that it’s working as efficiently as it should be.
Part of the reason for that is that for many of us our pensions are paid either in whole or in part by our employers and we don’t really think of it as our money.
Then when we leave an employer we forget about the pension and in many cases can’t even remember where it is until years later.
As we approach retirement, we think that we better dust them all down and figure out what they’re for. If you take anything away from this today it is that your pensions are important and you should keep on top of them at all times so that you know how much they are worth now, how much they are likely to be worth at retirement, and whether they will provide a sufficient income for you when you stop work.
You’ve started that process, Stephen, because at least you can tell me how many pensions you have at the moment and how much they are worth.
You have, as you say in your question, to think about whether to leave them where they are or move them into your new employer’s
scheme. You could also move any two of the old schemes into the third one, or even set up a brand new scheme to take them all.
You would, I would imagine, be better staying in your current employer’s scheme since they will be paying into it for you and you would lose these contributions if you left that scheme and made contributions to your old scheme.
Which option is better for you is dependent on the make-up of the old schemes, how much they cost, how much flexibility they have when it comes to taking benefits at retirement, and how well the funds that you are invested in have performed since you started investing. Some older persons also contain valuable guarantees that give you a higher level of income if you take them at a certain time, and that could be lost if you transfer them, so it’s important to look at that as well.
All these questions are best answered by an adviser who can carry out a full assessment of each scheme and a comparison with your new employer’s scheme.
The adviser will also want to know about your plans. When do you intend retiring, how much income will you need when you retire and what other assets to you have that could help to supplement the income that is available from your pensions?
Your adviser will also ask about your new job and how likely it is that you will stay there long term, and if you don’t what your career trajectory looks like. That will allow an evaluation of whether you’re likely to “job-hop”, potentially adding other pensions to the ones you have already accumulated.
Based on all of that information your adviser will make a recommendation to leave the old schemes where they are or transfer them elsewhere, either into your new employer’s scheme or one of your old schemes.