Changing jobs is part of working life. But while you might remember your previous employers, you may not have given much thought to the pension schemes you left behind.
Over time, you could accumulate several workplace pensions, each with its own provider, investment choices and charging structure.
It is easy to assume these pensioOld Workplace Pensions: Are You Paying More Than You Need To?
ns are ticking along nicely in the background. However, it is worth checking whether they remain suitable for your circumstances.
Could you save money by combining them? Possibly. Could transferring an old pension leave you worse off? Also possible.
Here is what to look for when reviewing your old workplace pensions.
Why old workplace pensions deserve attention
When you leave an employer, your pension usually remains invested unless you make another arrangement. Depending on the scheme, you may still be able to leave it where it is, transfer it elsewhere or make further contributions under the applicable rules.
Over time, your circumstances may change.
You might have a different attitude to investment risk, new retirement goals or a clearer idea of when you want to stop working. An investment strategy chosen years ago may no longer reflect your plans.
You may also have lost track of the pension's current value, charges or retirement options.
Reviewing old pensions gives you an opportunity to understand what you own and decide whether anything needs to change.
The potential benefits of combining old pensions
1. Easier administration
If you have several pension accounts, keeping track of statements, passwords, providers and correspondence can become frustrating.
Combining suitable pensions could reduce the number of accounts you need to monitor.
It may also make it easier to see your overall pension savings and understand how they contribute towards your retirement objectives.
That said, some people prefer to keep separate arrangements for different purposes. Simplicity is useful, but it should not come at the expense of valuable benefits.
2. An opportunity to compare charges
Pension charges can vary significantly between providers and products.
Your existing arrangements may include annual management charges, investment fund charges, administration fees or other policy costs. A receiving pension may charge differently, so it is important to compare the complete picture.
For example, suppose an old pension is worth £40,000. If its total annual charges are 1% rather than 0.5%, the difference would initially be around £200 a year, assuming the same value is used for illustration.
That is a comparison of costs, not a prediction of future investment returns. Actual charges may change as the pension value changes, and other fees may apply.
The key question is whether a proposed transfer offers a worthwhile overall benefit once all charges and features have been considered.
3. Reviewing your investments
An old workplace pension may still be invested in the fund you selected many years ago, or in a default fund chosen under the scheme.
That fund may still be appropriate, but it is worth checking.
A pension review can help you understand the investments you hold, the risks involved and whether they remain consistent with your goals.
Combining pensions could make your investment arrangements easier to coordinate. However, a new pension does not automatically deliver better returns, and changing investments can introduce different risks and costs.
4. Better visibility of your retirement plans
Knowing the value of your old pensions is an important step towards understanding your future financial position.
Bringing suitable arrangements together may make it easier to assess how much you have saved, alongside your State Pension, any defined benefit pensions, ISAs and other savings.
This can help you plan when you might retire and how you could use your pension savings.
The risks: what could you lose by transferring?
Before moving an old pension, check carefully for features that may be difficult or impossible to replace.
Valuable guarantees
Some older pensions contain guaranteed annuity rates or other guaranteed benefits. Others may include protected tax-free cash entitlements or special contractual terms.
These features can have significant value. Transferring the pension could mean giving them up.
Exit charges and other costs
Some pension arrangements apply exit charges or other costs when you transfer.
Check whether these apply and whether any benefits of transferring justify the expense. Do not assume that an apparently cheaper pension will be cheaper once every relevant cost is included.
Different retirement options
Your existing scheme may offer particular ways to take benefits that are not available from the receiving pension.
Check whether you can access your money in the way you intend, including any conditions, restrictions or minimum ages that apply.
Defined benefit pensions
If an old employer provided a defined benefit pension, you may have a promise of retirement income based on factors such as salary and service rather than the value of an investment pot.
Transferring out can mean giving up a guaranteed income and associated scheme benefits. This decision requires particular care, and specific advice requirements apply to transfers involving safeguarded benefits.
Do not treat a defined benefit pension like an ordinary investment-based workplace pension.
How to find old pensions
If you have lost track of a pension, start by checking old statements, payslips and employment records.
You can also use the UK Government's free Pension Tracing Service to find contact details for pension schemes. It will not tell you whether you have a pension or how much it is worth, but it can help you locate the relevant provider.
Once you have identified the provider, request an up-to-date statement and details of the charges, investments, benefits and transfer conditions.
Should you combine your old workplace pensions?
The right decision depends on what each pension offers and how it fits into your plans.
Some pensions may be suitable for consolidation. Others may be better left where they are because of their guarantees, charges or specific benefits.
Rather than automatically transferring everything, take the time to compare each arrangement on its own merits.
If you have old workplace pensions and are unsure what to do next, Yorkshire Adviser can help you explore your options as part of a wider pension review.
Whether you are in York, Harrogate, Ripon or elsewhere in North Yorkshire, understanding your existing pensions is a sensible first step towards making informed retirement decisions.