Transfer occupational pensions?
|Retirement | Investment Choice
Asked by Dinan, submitted
15 December 2011.
My partner has ended up with 3 pensions from previos employment, 2 with Friends Provident and the other with Aegon. They are valued £46K, 14K & 5.5K respectively, the latte being Aegon (which had £1K set up charges).
Their new employer has no pension so we are free to chose ourselves – the intention is to continue paying in privately. But which one? Upon initial explorations FP would appear not to be amongst the best performers. Do we combine all three into a new pension ourselves?
I read that Pru 3-Invesco Perpetual Income Pension Fund is a top performer. Could we put all three pension pots into that? And do we need a IFA to do so – to avoid costs. Or can we use Hargreaves Lansdown to facilitate the procedure?
Answered by Justin on 30 August 2012
I'm rather gob-smacked your partner was charged £1,000 to set up the Aegon pension. This is nothing short of a rip-off and he/she should complain very strongly unless they willingly handed over the money to a financial adviser (still a rip-off but harder to redress).
There are two main issues, what to do with the existing pension funds and what to do with new contributions moving forwards.
Starting with the latter, the choice is realistically a stakeholder pension or low cost self invested personal pension (SIPP). The main differences are stakeholder pensions normally being cheaper while SIPPs provide access to a much wider range of investments.
Unless you want to access specific investments or run your own portfolio then a stakeholder pension will probably suffice. A few companies, notably Legal & General and Scottish Widows, offer a reasonable choice of funds. Discount broker Cavendish Online offers commission rebates to further cut costs - although as Stakeholder pension commissions are low in the first place there's only a thin slice of pie to share.
There are plenty of low cost SIPPs to choose from, take a look at our comparison for more details. Hargreaves Lansdown is ok value for smaller fund investments, but there are better deals out there for larger sums.
You could consider transferring the existing pensions into the new pension too. You don't need a financial adviser to do so, but watch out for the possibility of stiff transfer penalties and loss of any guaranteed annuity benefits on the existing pensions. Either might be a good reason to stay put.
At the very least it would be worthwhile reviewing the funds held to see whether there are better alternatives within the existing pensions. While good past performance is one factor to consider, don't forget risk. The closer you are to retirement the safer you'll likely want to be - the last thing you want is for a stockmarket crash to decimate your retirement plans. You don't need an IFA to carry out such transfers,
The Invesco Perpetual fund you mention is certainly available via SIPPs, but you could check whether your existing providers offer access too. It's a good fund, but I wouldn't suggest betting an entire pension fund on it, better to spread risk across a range of investments.
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