Is it time to spring clean your pensions?

If you've accumulated numerous workplace pensions over the years from different employers, it can be difficult to keep track of how they are performing. Given that workers can have many jobs during their working life, many finish up with a scattering of relatively small pension pots, with the challenge of keeping up with them all. The risk is that long-forgotten plans will end up in relatively high cost, struggling funds. On top of this, there is the almost inevitable challenge of computer passwords and mountains of paperwork to keep on top of their management.

Pulling together all your disparate plans and moving your money to a new home, may result in a reduction in charges, particularly if you've older plans with high fees, and access different investment options.

So, is transferring everything to one, easy-to-manage pension, the way to go?

With pension auto-enrolment when you move to a new employer your pension won't automatically follow you. Accordingly, it`s very easy to find yourself with a whole host of plans from different providers, every time you move jobs. This is becoming more of an issue for individuals. Setting up a new plan, to house funds swept up from old employers’ schemes as you move jobs, could be the ideal solution.

Additionally, the impact of high charges should not be underestimated. These can be a good reason to guide your decision on where to leave your pension savings. Superior investment returns are always important, but lower plan charges will improve the chances of your funds growing.

How pension transfers work

As a starting point, you should contact your financial adviser or find a good one if you don`t already have one. Assuming it is right for you, they will then on your behalf, contact your current pension providers to get confirmation of how much your pension is worth (the ‘transfer value’), the terms and conditions of your scheme, and details of any exit fees. They will check whether there are any benefits you would lose by transferring away.

With advice and if you decide to go ahead, your adviser will contact the provider they have recommended and will manage the transfer on your behalf. The transfer itself will take the form of your old provider selling your investments and moving your money, in cash, to your new provider. The transferring provider has a time limit to move your funds and the clock starts ticking once they have received all the correct documentation.

On considering whether to combine your pension pots isn't always simple and straightforward. However, there are often clear advantages and disadvantages:

The advantages include:

• Keeping an eye on and managing your pension savings is simpler and easier to do with just one plan. The convenience of having only one makes it easier to make and implement decisions.
• You may pay lower overall charges if you put your money into a pension with competitive fees compared to plans with high charges’.
• You will probably be able to invest in a wider choice of Investment Funds in a modern plan.
• Consolidating your pensions into one plan can make things considerably simpler when you come to access your money at retirement. For example, not all plans will allow you to access your funds in the manner of pension drawdown.

The disadvantages include:

• Some plans still have exit penalties, so transferring your money will reduce the size of your funds.
• Older plans may have some attractive features that would be lost upon transfer. These include the option to take greater than 25% tax-free cash and/or guaranteed annuity rates.

To make informed decisions about your planning, or if you have any concerns, please feel free to contact your usual Dentons Wealth Independent Financial Adviser.

Although every effort has been made to ensure that the information provided in this article is accurate and correct, the information provided does not constitute any form of financial advice. We recommend that you take financial advice before making any financial decisions.