Pension Transfers and Consolidation
There are many reasons why you may be considering transferring your pension(s): a singular event, such as divorce or redundancy; a doubt over the suitability of your existing provisions or the desire to ensure they are modern, fit-for-purpose contracts to meet your future retirement.
There are many advantages in both consolidating and seeking the most up-to-date plans and solutions. For example, there may be cost advantages from benefiting from a large fund discount as a result of pooling all, or at least some, of your policies together. Your old pension contract might simply be very expensive. You may also be duplicating the same charges across various pensions which may be removed by consolidating your policies together.
The advantages of a new product should not be underestimated as it may be a more appropriate vehicle for your retirement planning. Although pensions are by definition a long term policy this does not mean that you have to have the same old model throughout your life.
Just as with any product or solution you would expect there to be improvements made over a period of time, and this can be clearly demonstrated with many new pensions being offered by leading providers today. Both technology and competition are at the forefront of these offerings.
For example, with many new pension policies you can have immediate online access if you wish, enabling you to value your policy(s) by how much you have paid in and how it is invested along with projections of the likely benefits at retirement, the type of investments, how they are performing and so on. Compare this with dealing with one of the many old pension providers (some of whom may be closed to new policyholders) who take weeks to respond to the simplest of requests such as ‘what is the value of my pension?’
A new policy may give you much greater access to more diverse investments. This is more important from an investment perspective, as your pension funds grow in value, in order to diversify and reduce risk by not ‘putting all your eggs in one basket’. With a modern pension you are no longer restricted to one option, but empowered (if you have the right policy) to shop around, cherry pick the best options for you, and take your business elsewhere if you are not satisfied.
However, not all new things are necessarily the best, however. Old pensions, for example, can be like old cars; some are real classics and are irreplaceable, while others need to be towed away.
Pension provision is long-term planning and as with any scheme, this should be reviewed regularly. Whatever your reasons for considering transferring your pensions, fundamentally the two questions that need addressing are:
Are your existing plans suitable for your continuing needs or is that policy no longer fit for purpose?
Can a new pension vehicle get you to where you want to go more quickly, potentially providing you with significantly increased financial benefits at retirement?
How do you know you are doing the right thing by transferring your policy(s)?
When working out of your pension(s) are still suitable, it is not just a case of reviewing your provider(s). I have frequently heard people reflect on their existing policies, saying: ‘my pension is with so and so and they are a highly respected, establish leading pension provider’. That may well be true but not all policies are equal, even with the same provider.
Your policy(s) may be with a leading pension provider and you might not have considered that this might not be the best option available to you currently. At the time you first commenced this pension it may well have been a market leading policy. However, pensions, just like any other product or service, can become out dated and bettered by new offerings.
When working out if your existing pensions are still suitable, it is important to examine your individual plans because every pension provider has a variety of different policies on offer, some better than others. Indeed, you could have a plan with one of these leading pension providers which is not actually their policy at all but rather inherited from another pension provider through a merger or acquisition.
The demise of one pension provider from the past can be used as an extreme example to highlight this point.
You may be familiar with the story of the pension provider previously and wholeheartedly recommended by Which? Magazine: Equitable Life. They had to close to new business due to miscalculating the cost of the very generous guarantees offered to some lucky policyholders.
If you were within this group of policyholders, then the last thing you would want to do is transfer your funds away from these guarantees. At the time of writing, some of these guarantees offer you a return on your pension fund of more than twenty times the current bank of England base rate (0.5 per cent)!
Conversely, if you held a non-guaranteed policy with the same provider, particularly one heavily invested in their ‘With Profits’ fund, it would be very prudent to consider transferring your pension(s) to another provider. The question here, as with many other closed pension providers, is; ‘can you transfer your pension funds elsewhere?’ They have in place exit penalties that are designed to discourage you. I can help you decide if this course of action is appropriate for you.
I have referred to old, or even dysfunctional, pension policies above as a reason for considering reviewing your present pensions and their providers. However, in some cases some of these old pensions have terms and conditions, and costs and guarantees that may suggest you should stay with this very good pension policy. It is therefore important to take independent financial advice that gives you a rigorous analysis of both your current and proposed pension policies in relation to your own individual circumstances and plans.
Along with the need to work out if your existing pension policies are still suitable, it is also important to recognise how good some of the new offerings are. Innovation in pension provisions in recent years has come with numerous benefits that should be examined.
How I can help
I can help you assess your existing pension policies through a vigorous analysis of cost, terms and conditions, benefits and access to suitable investments to suit your individual circumstances, timescale, attitude and values.
I can help you ascertain the true worth of any guarantees or bonuses on your existing policies.
I can place you in an informed position enabling you to make confident decisions regarding your various pensions in relation to your own particular circumstances, values and objectives.
In short, I can help you form a suitable plan with the objective of potentially maximizing your retirement benefits. Pensions can be rather intangible beings; they are there in the background and it is not easy to work out if there is anything wrong with them. Pensions require reviewing. If you let years pass without examining your pension provisions, you may look back and find that your pension(s) could really have done better for you.