The question I am asked most often is, “should I move my pensions?”, and people are right to be confused. The industry makes it an almost impossible task for the individual to work this out, and for some with more complex arrangements, advice should definitely be sought.
But what about those of us who don’t have complex arrangements? And how do we even know if our arrangements are complex?
The question is easier to answer if it is broken into 2 components:
- Is there a reason I shouldn’t move my pension(s)? Its very important that you do this first. It should be done first because there may be some guarantees, benefits or other features of your current pension(s) that mean you would either not be able to switch the pension(s), or may want to think very hard about it before you do. Scottish Widows have produced a handy letter on this page, which outlines the questions that you should ask your current provider(s). You will quickly be able to identify if there are any issues that warrant further investigation, and which pensions you can easily switch.
- Secondly, is there a reason I should move my pensions? Assuming that you have gone through the above process and are happy that you can move your pensions, this is the next logical question. A recent FCA study identified that price was, on average, the biggest factor in deciding which platform provider to use (27%), with brand next (23%) and the investment options (18%). Given this information, price may be a good starting point in considering whether to switch, by working out if you are overpaying compared to what else is available. Having gone through the process above, you’ll know the fees for your existing providers, and can compare with new options. Under 0.5% per annum in charges could be considered low cost and over 1% would be expensive, with a range in between. If you are happy with the price and brand of your pension provider, then you have covered the top 50% of considerations, which has to be better than not doing anything! You might then find looking at the investment options is easier because you can focus on that one area alone, rather than feeling like a rabbit in the headlights.
Whether to switch is a big question but it is much easier when broken down into component parts. If you can work out if you are overpaying that’s a great start, then work from there. You will have to invest some time to do this but surely that's better than having to invest the time, and more money, later!!