Let's start with a few questions
How many pension pots do you have? How much is each one worth? What does each scheme charge and what’s its investment approach? If you don’t know the answers – and let’s face it, not many people do – you may want to think about bringing all your pensions together with one provider.
Of course, it’s not black and white, and there are sometimes reasons to stay with one or more of your current providers – see below. But weighing up the potential pros and cons now could be good for you when retirement comes.
Here are three potential benefits of bringing your pensions together.
easier to keep track and top up
Having all your pensions in one place could make it much easier to keep track of how much you’ve saved. It also makes topping them up with extra contributions or lump sums far more straightforward.
We know what you’re thinking: ‘It’s pensions, it must be complicated!’. But transferring from one defined contribution (DC) scheme to another is often quite simple.
Using something like Coutts Invest, for example, means it can usually all be done online, with the pension providers doing all the hard work for you.
you could save thousands in fees
There are reasons beyond convenience to consider consolidating your pensions. You could save thousands of pounds in fees and charges, and therefore potentially have a larger pension to enjoy later in life.
The overall costs of saving in a pension have been coming down, but the fees and charges involved can still add up.
There can be some key differences between providers too. Some add an inactivity charge that means you pay extra if you stop contributing, while others could hit you with a contribution charge when you do pay in.
Put it all in one place, though, and you’re paying a simpler, single set of fees.
don't let your pension become a zombie
Another reason to look at your pensions is that, over time, some of the funds they invest in could lose their edge. Perhaps a ‘star’ manager moves on, or investors go elsewhere, leaving a fund so small it stays untouched and unloved – left at the mercy of market movements.
Research by investment fund performance website Morningstar published in February 2019 identified 194 of these so-called ‘zombie’ funds, with a total of £4.2 billion assets invested (as at 31 December 2018).
Could your pension pot be in one of these?
Let's start with a few questions
How many pension pots do you have? How much is each one worth? What does each scheme charge and what’s its investment approach? If you don’t know the answers – and let’s face it, not many people do – you may want to think about bringing all your pensions together with one provider.
Of course, it’s not black and white, and there are sometimes reasons to stay with one or more of your current providers – see below. But weighing up the potential pros and cons now could be good for you when retirement comes.
Here are three potential benefits of bringing your pensions together.
easier to keep track and top up
Having all your pensions in one place could make it much easier to keep track of how much you’ve saved. It also makes topping them up with extra contributions or lump sums far more straightforward.
We know what you’re thinking: ‘It’s pensions, it must be complicated!’. But transferring from one defined contribution (DC) scheme to another is often quite simple.
Using something like Coutts Invest, for example, means it can usually all be done online, with the pension providers doing all the hard work for you.
you could save thousands in fees
There are reasons beyond convenience to consider consolidating your pensions. You could save thousands of pounds in fees and charges, and therefore potentially have a larger pension to enjoy later in life.
The overall costs of saving in a pension have been coming down, but the fees and charges involved can still add up.
There can be some key differences between providers too. Some add an inactivity charge that means you pay extra if you stop contributing, while others could hit you with a contribution charge when you do pay in.
Put it all in one place, though, and you’re paying a simpler, single set of fees.
don't let your pension become a zombie
Another reason to look at your pensions is that, over time, some of the funds they invest in could lose their edge. Perhaps a ‘star’ manager moves on, or investors go elsewhere, leaving a fund so small it stays untouched and unloved – left at the mercy of market movements.
Research by investment fund performance website Morningstar published in February 2019 identified 194 of these so-called ‘zombie’ funds, with a total of £4.2 billion assets invested (as at 31 December 2018).
Could your pension pot be in one of these?
Our experts answer key client questions about pensions.
Tax reliefs referred to are those applying under current legislation which may change. The availability and value of any tax reliefs will depend on your individual circumstances.
reasons to be careful
There are reasons to be cautious about changing providers that you should think through before making any changes.
For example, if you have a defined benefit (DB) scheme – a pension that provides a set outcome, usually based on your time with an employer and final salary – it may be worth hanging on to it. They are generally more generous than DC schemes, which depend on how the relevant investment assets perform. Many DC schemes, including Coutts Invest, won’t take transfers from DB schemes.
Also, some older schemes come with conditions – good and bad – that are worth considering before giving up. They include:
- High exit charges – some pension schemes will levy an additional charge when you transfer out. This can negate the benefit of transferring to a lower-charging scheme.
- Guaranteed annuity rates – annuity rates have fallen sharply over the last decade, and so a guaranteed level of income established when rates were higher can be a valuable benefit.
- Minimum rates of return – guaranteed rates of return can offer security, particularly as you draw close to taking money from your pension, but should be weighed up against expected market returns and fee levels.
If in doubt, you should get advice from an independent, qualified adviser.
There are reasons to be cautious about changing providers that you should think through before making any changes.
For example, if you have a defined benefit (DB) scheme – a pension that provides a set outcome, usually based on your time with an employer and final salary – it may be worth hanging on to it. They are generally more generous than DC schemes, which depend on how the relevant investment assets perform. Many DC schemes, including Coutts Invest, won’t take transfers from DB schemes.
Also, some older schemes come with conditions – good and bad – that are worth considering before giving up. They include:
- High exit charges – some pension schemes will levy an additional charge when you transfer out. This can negate the benefit of transferring to a lower-charging scheme.
- Guaranteed annuity rates – annuity rates have fallen sharply over the last decade, and so a guaranteed level of income established when rates were higher can be a valuable benefit.
- Minimum rates of return – guaranteed rates of return can offer security, particularly as you draw close to taking money from your pension, but should be weighed up against expected market returns and fee levels.
If in doubt, you should get advice from an independent, qualified adviser.
It’s straightforward to consolidate your existing DC pension pots into a Coutts Invest Pension and take advantage of our low-cost multi-asset funds with active asset allocation.
Advice and product fees may apply if you decide to progress your financial plan following your free consultation.
When investing, past performance should not be taken as a guide to future performance. The final value of your pension fund will depend primarily on how much has been paid in and how well the fund's investments have performed. The value of investments can fall as well as rise, and you may not get back the full amount you invest.
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For more information about our services, please speak to your adviser or call 020 7957 2424.
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