Combining Pensions

Combining Pensions 

All about combining pensions with Andrew Edge from Yellow Brick Financial Planning. 

Can I combine all my pensions into one?

This is something we are asked regularly and yes, in most cases, it is possible to combine all pensions into one place. In some cases, this might not be the best idea, depending on the type of scheme. 

For example, a final salary or defined benefit scheme will have certain conditions that may mean that it can’t be combined – plus, it may not be in your interest to do that.  With most money purchase, defined contribution pension schemes it is certainly possible, and pension mobility has become a lot easier. 

People who move regularly from job to job are now able to move their pension plans quite simply because of new workplace pensions legislation. 

How do I combine all of my pensions? What’s the process and how long does it take?

If you have a pension plan that’s worth more than £30,000 you will need to appoint someone like myself, an independent financial advisor, to arrange that on your behalf. Even when the pension is less than £30,000 I still recommend you seek advice. There could be some trapdoors that you’re not aware of. 

As an independent financial advisor I will analyse the benefits that you’ve accrued against the costs. and compare your existing plan with a new pension arrangement. We’ll also look at past investment performance compared to the proposed plan.

We will consider whether it is in your best interests to move. If so, we would need appropriate discharge forms and full information from the existing providers. We would then submit those on your behalf. The process can normally take six to eight weeks. Some providers can take longer, while others are more efficient. 

The government is very keen to ensure that this process doesn’t take months to complete, to give people confidence in the service.

Are there any pensions I can’t combine?

This supplies to some final salary pension benefits and there are also other plans which will have guarantees attached to them. A new pension provider is not going to be keen to take on a guarantee it can’t meet. So where we come across pension plans with Guaranteed Minimum Pension Liabilities, it’s unlikely.

Certainly as an advisor we would not recommend a transfer because it’s an important guarantee to you.

What about employer contributions?

If you’re a member of a pension scheme and you’re currently benefiting from an employer contribution, we wouldn’t recommend moving. You would lose out on the minimum employer contribution, which is 3% of your earnings. 

If you move to an alternative arrangement it’s unlikely that your employer is going to continue to pay that 3% into your new pension plan. It’s why they set up a workplace pension scheme in the first place.

How do I find old pension pots?

Where people have moved jobs a lot or are in an industry where mobility is very common, they can end up with a number of pension plans. They may lose track of where these are. 

The government has introduced the Pension Tracing Service, which enables you to track down past pension benefits. The service will provide you with the contact details of the pension scheme that you believe you were a member of. It won’t tell you whether you have benefits within that plan. 

You’re provided with the contact details so that you can write to the provider, give them your national insurance number and date of birth and they will then be able to advise you what level of benefits you have within that plan. It’s a very useful service.

Again, the purpose of this is to give people greater faith in the pensions sector and show that the providers have this information at their fingertips.

Will combining my pensions help growth?

If you’ve got three or four different pension plans each will have its own plan charges and fund costs. By combining those plans – if it’s considered to be in your interests – there will only be one plan charge and one set of investment fund charges to deal with, and that should help encourage growth. 

Also, working with an independent financial advisor like myself, we will make sure the funds you have invested match your attitude to risk – which should also help to maximise the growth potential going forward.  

Not only could consolidating your pensions help increase the growth potential of your overall pension assets, it’s also a lot easier to administer.

What are the benefits of combining pensions?

The ease of administration working up to your retirement date is a real benefit. It’s good to be able to just go to one place and decide how you’re going to take your benefits. 

Flexible pension arrangements are very much at the fore now, rather than annuities which were prevalent when rates were a lot higher. They’re not so attractive now,  but they do still have their place. 

But by having your arrangements all in one fund it’s easier to decide how best to take your pension benefits in retirement. You can get valuations online at the touch of a button and immediately see how much is available to you.

Are there any other costs to consider?

If you appoint an independent financial advisor like myself, and we all work in a similar fashion, there’ll be an initial advice fee. This is based on the asset or the value of the funds under advice. There would also be further advisor fees if you wanted ongoing advice, which is payable throughout the term of the contract. That would entitle you to a yearly face-to-face meeting either in person or via video call. 

That’s important, because we can ensure that you’re keeping on track, that your aims and objectives are being met and your attitude to risk has been taken into account. So while there are some additional costs that you may not have incurred when those pensions were left under your previous employment, hopefully the increased growth potential of those plans will offset those costs.

It’s very important that people take greater responsibility over their pension benefits and work with an independent financial advisor to ensure that they’re keeping on track and and there aren’t any hidden surprises along the way. I’m here to take the strain and make sure you get the best out of your retirement.