For this week’s blog, we have asked our guest contributor, David Smith of Tilney Financial Planning to provide some thoughts on pensions. We are grateful to him for his input and are sure this will be food for thought.
There are plenty of unloved pensions out there. According to our latest research this is usually because people have lost interest (27% of people), lost paperwork (26%) or moved house without informing the pension provider (26%)*. This is compounded by the average person having changed jobs five times by the time they reach 55*, creating numerous neglected workplace pensions that can stack up if they aren’t moved across to the new provider.
Without any attention or TLC, the sad truth is that overlooked pensions can create a big problem – since you will be unaware of how much you have to spend in retirement until you find and review them. Your old pensions could also be invested in funds which are performing poorly – so your savings could be at a standstill, or even shrinking. Older pensions also tend to have higher provider fees which could add up to a huge amount if you have several old pensions.
If you have a lot of old pensions with different providers, it might be beneficial to locate them and bring them under one roof – a financial planner will be able to help you track down and consolidate** your old pensions. One pension pot will be easier to control, you could save on provider fees and you’ll be able to review the performance of your investments to ensure all of your money is working hard for you.
*Tilney’s research from a survey of 1,293 full and part-time workers.
**Before you consider transferring a pension, it is important to ask yourself: Will I lose any valuable benefits or features from my existing pension plan? Will I incur any penalties on my existing pension if I transfer? Is it an occupational final salary pension scheme? (in which case it is very unlikely to be advisable to transfer) Have I considered the charges on my current plan? (a new arrangement may be more expensive – especially if you have a stakeholder pension). Exit fees may apply if you leave Bestinvest.