Anthony Scott shares his expertise on combining pensions.
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Can I combine all my pensions into one?
Yes, you absolutely can. It does depend on the pension, but I think the most important thing is that you have somebody who regularly looks at these things, at least look at it as an option and see if there’s some benefits to doing that.
How do I combine all my pensions?
It can vary. If you look historically at pensions, they were always based on final salary schemes. So effectively, when you got your pension, you got part of your salary in pension. It’s not like that anymore and most of us now save into what we call ‘money purchase saving schemes’, so they’re connected to investments.
So if somebody wants to combine all their pensions, we may find that there are some very old final salary schemes, that normally one would absolutely keep, there might be some strange hybrid schemes, and they’re often weird and wonderful, and there might just be some normal, more modern pension schemes.
Once we start that process it actually depends on who we’re talking to, so it won’t surprise you to know some pension companies are really quick and some are a bit more challenging. It’s a process we have to correlate all the information, but the good news is that we work with one of the UK’s largest financial advisor networks, Openwork, so they check all our work and the figures we send in.
Once we’re happy with all the information we’ve gathered and it’s been checked, we then go back to the clients and agree the way forward. Once we’ve agreed that, it’s a relatively quick process, but it can take months to get to that point. Working with a good team is a good starting point.
Are there any pensions that I can’t combine?
Absolutely, which is why it’s a good idea to have a good look at what you’ve got and see if it’s appropriate or not. There has been a lot of bad press about pension transfer work that shouldn’t have happened, which is why we’re delighted to work with Openwork.
If there are pensions that would be far more advantageous for the client to leave where they are, then we will do so. It’s our job to share that information with a client.
How do I find old pension pots?
A good starting point is just to map out your career path to where you are today. Talk to your Financial Advisor because it may well be that they have some names of pension schemes and by just writing to those old companies it’s amazing what we can find. Often after many years, these figures can be quite large, so it’s well worthwhile backtracking.
Will combining my pensions help growth?
In the main people do tend to move around from one job to another more than they did historically, so what happens is you have all these little pension pots begin to build. So I think the starting point for anybody asking that question is, how close are you to the pension pots. you’ve got? How are they performing, and is somebody advising you?
I think, often, you’ve moved on with a new company, and the company you were with ten years ago is so far down the line. You’ve got five year’s worth of pension planning there that you’ve simply not looked at, and neither has an advisor.
So, in terms of growth and value and understanding the investment, if you’re engaged with the financial advisor who you trust and you want to work with for many years ahead, then it does mean you’re going to get an up to date overview of your investments. If they match what your risk profile looks like and match with your plans going forward, it should absolutely have an impact on growth as well.
What are the benefits of combining pensions?
What I love about combining pensions is that It’s such an exciting subject, because you actually see a value growing. You invest regularly and can actually see the thing developing year after year. Annual catch-ups with your advisor helps you see the benefits of proper financial advice, so it turns the dry subject into a really exciting one.
The other thing that a lot of people are much more aware of is where they invest their money. People are thinking about what’s good for our environment, and where you would actually like that money invested. You can now have all those conversations with your financial advisor which makes it very tangible, you can actually be involved right in the middle of the pension, so that would be the main benefit.
What costs are involved with combining pensions?
With Fiducia I’m delighted to say that we’ve always provided the initial talk for free. I think it would be wrong of us to have a clock ticking, so we don’t work in that way. Once we’ve talked to a client and they understand what we’re doing, then we will talk about costs.
We will go through our cost brochure and agree together what fees we are going to charge upfront.
It’s such a daunting subject for clients and I think that’s often one that’s avoided, but literally every year counts. So if you’re thirty and you’ve not paid into a pension for the last ten years, you’ve lost ten years worth of paying into that pension.
If you think, I may as well not bother now, think again, because your retirement age might not be until you’re seventy, you could literally have forty years worth of investing ahead of you. Imagine the power of that if you actually focus on pensions now and get involved with a finance advisor you like working with, you can build pension pots. But, it is essential that you do it now.
At the moment we’re in markets that are up and down with all that’s happening in the world, but that’s a great positive if you’re investing regularly, because you’re investing when the markets are a little depressed, so investing regularly and often, and engaging with a financial advisor can make a massive difference to your future wealth.