How To Move Your Workplace Pension
If you have a number of pensions it’s only natural to contemplate how to make life a little easier by having everything in one place. Transferring pensions is a bit of an outdated expression these days, you might now hear it referred to as:
- Pension Switching
- Pension Consolidation
- Combining your pensions
Whatever the terminology may be, in this article we’re talking about moving your pensions together, how it works and what options are open to you. I think we’ll stick with the word “consolidate”.
Consolidating your defined contribution pension
At Zippen, we’re all about the world of defined contribution pension pots. Not up for the jargon? I don’t blame you.
A defined contribution (DC) pension plan could be a:
- workplace pension your employer has set up for you, or a
- private pension you’ve set up yourself.
The amount in your DC pension pot at retirement will depend upon how much has been paid into it and also how this money grows.
Between now and when you come to take the proceeds of your pot, you may well look to combine your pensions. Given that every time you have a new job, you’ll likely be enrolled into that employer’s pension scheme, it’s possible that you could end up consolidating your pensions several times throughout your working life. You might also end up consolidating into, or out of, a personal pension or Self Invested Personal Pension (SIPP) you have, or you will, set up yourself.
Is it a good idea to move my pension?
This is the big question, and it’s a really important one too.
Only a company, or person, regulated to give financial advice can tell you if a consolidation of your pensions is the most appropriate course of action for you. The suitability of a consolidation is largely dependent on your individual circumstances and objectives.
The need for pension consolidation spans numerous objectives and not all of these objectives are pertinent to all of us. For example, somebody may wish to consolidate:
- To have the convenience of everything being in one place
- To ease personal administration
- To make it easier to keep tabs on numerous pension pots
- To save money on charges
- To ensure that their pension reflects the level of investment risk they’re comfortable with.
When consolidating, there are some key factors that must be considered, the importance of which cannot be overlooked:
- Ensure that any pot that is receiving third party contributions (from an employer or otherwise) isn’t moved forcing any future contributions to cease and potentially be lost
- Ensure that any pot that is being moved doesn’t contain any one of a list of numerous valuable benefits that could be irreplaceable upon transfer.
This list of valuable benefits could include:
When can I move my pension pot?
Assuming your DC pot contains no valuable benefits and it isn’t receiving contributions that may be lost upon switching, you can move the pot at any time, although caution should be applied if you plan to take benefits imminently.
Will the new pension be more expensive than my existing one?
Prior to consolidating pensions, consideration should be given to the charging structure of each of the pots. Whilst there’s more to “value” than just charges, it is an important element that should be considered. Charges do vary from pot to pot, be this an annual management charge, an annual fee, a platform fee or an investment charge - these variations mightn’t appear great upon initial discovery, but factored into hopefully increasing fund values, and time, the charges can have an impact. There could also be unexpected trading fees or levies for certain instructions, all worth finding out about.
Can I cash in a pension from an old employer?
In a word, no.
The days of getting a refund of contributions when you leave an employer before you complete two years service are a thing of the past. Monies invested in pension pots are for our retirement and whilst this may seem a bit harsh, think of it as the gateway to a better life and an earlier exit from full time employment.
Always be scam aware, if a company is offering you access to pension funds before the age of 55, it’s likely to be dodgy.
Enough of that gloom, you don't have to stop working to start taking money from your DC pot, but you must normally be at least 55 years old (57 from 2028).
In its most simplistic form, when you start to take money from your DC pot, up to 25% of your pension can be taken as a tax-free lump sum. The remainder can be used to provide a taxable income, or one or more taxable lump sums. In reality, the form of this tax free lump, and the income can take many guises, with options such as drawdown which keeps money invested and purchasing an annuity, which guarantees income.
Pension Consolidation Options
We’ve talked about value, charges, DC pots and valuable benefits; why you might want to consolidate and why you might not.
But how would you actually go about consolidating your pensions?
Go to an IFA
IFA’s serve a great purpose. They are qualified to give you holistic advice on all elements of your financial wellbeing. They’re incredibly helpful if they can help you with the consolidation of complicated Defined Benefit pots too. However, the charges IFAs must levy to cover their insurances, time and overheads mean that those of us with small pension pots simply can’t justify the financial outlay.
Ask your pension provider
Lots of great pension providers offer simple online pension consolidation solutions - hooray! However, what they don’t offer is impartial advice. At best, they can offer advice on their own products, or, maybe they just offer a service whereby you, the consumer, takes responsibility for identifying pots with valuable benefits and exclude them from consolidation yourself - scary, right?
Ask a consolidator
Google it. There are lots of pension consolidators out there. But which one to use? Some are linked to IFA firms, some cleverly market themselves as almost charitable, consolidating your pots for free, whilst actually taking your funds under their own management and still leaving you with multiple pots.
It just doesn’t seem fair. How is it this complicated?
We want access to responsible pension consolidation advice, where we can be guided and looked after, inexpensively, with costs known and our best interests at heart…
...Welcome to Zippen!
Zippen was born out of a clear moral, emotional and market need. It is a service that enables individuals to transfer and consolidate (hence ‘zip’) their pensions (‘Zip-pen’) all in one place, delivering convenience, financial advantage, or both.
We work to a very different model in three significant ways:
- where others will consolidate pensions into a newly-created and therefore additional pension pot, Zippen simply consolidates your pensions into one of your existing schemes.
- Zippen has no ties to any institutional investment companies and is therefore completely independent, impartial and unbiased.
- Zippen offers simplified advice relating to pension consolidation, taking on the responsibility for checking those valuable benefits, the protection of incoming contributions and the burden of the consolidation paperwork.
Where the cost of using an IFA’s services can be an unknown, Zippen combine small pots at a known fee which, if possible, may be taken from the pension pot. See our pricing here.
Our service is a digital chatbot that guides you through the pensions maze, searching for lost pots (Did you opt out? Didn’t you? Let’s try and solve that mystery!) and makes a recommendation to you with regards to consolidation.
Zippen is straightforward and hassle free, all with the added security of simplified advice.