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Should you put all your pensions in one pot?

coloured eggs basketIf you’re anything like me, you’ve probably had lots of different jobs in your career. As a journalist, I moved publications every three or four years, leaving a trail of little pension pots behind me. Keeping tabs on them all was a headache so, about 15 years ago, I lumped them all into the work-place scheme I was in at the time. It cost – a lot – so when a friend asked me recently whether she should do the same, I decided to look into it again.

The two major decisions are whether you want to put your pensions into one existing scheme (as I did) or whether you want to put them into something new entirely. If you choose the latter, you need to consider whether you’re happy to manage the money yourself or if you want someone else to do it. Whatever you do, it’s going to take ages so be prepared…

There are plenty of firms, including the big financial advisers such as Tilney and Chase de Vere, which are happy to consolidate your pensions and suggest places to where the whole sum can be transferred. Profile Pensions*, for example, will even track down missing nest-eggs for you too. Sadly all of the above can be pricey and you should consider the following points before moving.

1. Is the firm regulated by the Financial Conduct Authority (FCA)?
To avoid scammers, check your adviser is registered with the FCA here. As with any financial offer, also apply the common sense rule: ‘if it sounds too good to be true, it probably is’ ie it’s a fraud.

2. Will you lose any benefits by leaving?
Some schemes, particularly older ones, may have valuable perks such as a spouse’s pension or guaranteed payments. If you move away, you’ll have to give them up.

3. Am I going to have a better investment choice or cheaper fees?
There may not be any point in moving otherwise!

4. Is it worth it?
The cost of transferring may be so high that it’s not worth doing so check what you’ll be left with. Also, if you have under £10,000 in the pot, in some circumstances you may be able to take the whole lot out as cash.

5. What is the law?
If you have £30,000 or more in a final salary or defined benefit plan, you must get financial advice before transferring. These plans normally pay out a ‘defined’ sum no matter what the stock market is doing ie the level of payment is guaranteed. This is hugely valuable and, if you have such a scheme, you probably want to stick with it if you can.

A cheaper alternative is to move everything into a self-invested personal pension (Sipp). It’s an investment plan you operate online and tends to have lower fees. But you have to pick your own investments (or pay someone separately to help you). Also, you may not be allowed to transfer in any defined benefit pension schemes.

Nevertheless, I would consider the Sipp route as transfer is free at Hargreaves Lansdown, for example. There's also cash back (until 17 December 2018) from £20 to £500 depending on how much you transfer (at least £5,000) while at Fidelity Sipp* you can earn between £20 to £1,000 in cash back and Fidelity will cover up to £500 of your transfer costs. The Fidelity offer lasts until 7 December 2018, exclusions apply.

Pension transfer involves a lot of heavy lifting which is fine (although boring) if your circumstances are straightforward. If the situation is more complicated, it’s probably worth getting some advice. See our SMM guide here to finding an independent financial adviser.

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Wednesday, 14 November 2018