Most schemes will allow you to move your pension pot to another pension scheme, which could be a new employer’s workplace pension scheme, a personal pension scheme, a self-invested personal pension (SIPP) or a stakeholder pension (SHP) scheme. You don’t have to decide straight away – you can generally do this at any time up to a year before the date that you are expected to start drawing retirement benefits. In some cases, it’s also possible to move to a new pension provider after you have started to draw retirement benefits. Before taking any action, it is essential you obtain professional, expert financial advice.
Moving to a new employer
When you leave one job to move to another one, you are treated as having left the workplace pension scheme, but you do not lose the benefits you have built up. At this stage, you may decide that you want to move your pot to the scheme offered by your new workplace. But if you are thinking about doing this, it is important to do it for financial – and not emotional – reasons. It’s crucial that you don’t move your pension pot out of a first-rate scheme simply because you want to cut all links with an old employer.
Looking for better performance
Pension consolidation is often a consideration if your money is stuck in an under-performing pension scheme delivering poor – or non-existent – returns. If your scheme is performing poorly, you may well want to move your money elsewhere. But once again you need to ask yourself whether you are prepared to invest your pension pot in a potentially higher risk fund in order to get a better return.
If you are approaching retirement age, you need to think particularly carefully before making such a decision.
Seeking out lower charges
You may want to consolidate your pension because your scheme comes with high charges which eat into your returns, leaving you with less money in retirement.
Wanting to access a wider range of funds
At the same time, moving your pension pot may sound like a good option if you want to gain access to a wider range of funds than those offered by your current scheme.
Searching for better death benefits
If you feel the death benefits on offer with your current scheme do not match up to those offered by more modern schemes, you may want to move your pension to a different scheme. You might, for example, want to move your money into a scheme that allows one of your relatives to inherit your pension when you die, rather than simply spouses or dependents. If you are unmarried but have a long-term partner who you want to inherit your pension once you’re gone, the same might apply.
Wanting to consolidate several pensions
As people change jobs more frequently during their working life, they often accumulate a number of small pensions along the way. It can be hard keeping track of schemes, and difficult to really know how much your total retirement is worth. For this reason, some savers may want to clean up their finances by moving their old workplace pensions into one pot.
Think carefully before making the switch
You need to be careful before moving your pension pot out of certain schemes – including public sector schemes, such as the nurses’ or teachers’ schemes – as these offer extremely generous benefits which can be hard to replicate elsewhere. Equally, if you are thinking about moving your personal pension to another provider, you must check that the benefits are not outweighed by any exit penalties and entry charges.