By TIM STALKARTT 09/10/2012
According to a recent research survey by Prudential featured in the Financial Times, more than 80% of workers fail to transfer their company pension funds when moving jobs, and 15% rely on their new employers to arrange the transfer.
One sixth of employees may have lost track of pension funds after changing jobs
The article suggests that this may mean that up one sixth of employees in the UK have lost track of their pension funds after changing jobs, with the Department of Work & Pensions estimating that by 2050 there may be up to 50 million dormant pension pots.
In many ways this comes as no surprise: the excitement and challenge of a new role usually takes precedence over sorting out pensions which all too often go on the ‘too difficult’ pile. Actually with a little guidance it is easy and straightforward to consolidate your pension - with potentially real benefits for your future income.
SIPPs create a single portfolio for pension assets
One way to keep control of your pension is to explore whether you can consolidate existing small pension pots into a Self-invested Personal Pension (SIPP).
A SIPP enables all of your pension assets to be managed as a single portfolio but with access to a wide range of investments from a variety of fund managers or stocks and shares. You can either select your own investments within a SIPP or have the portfolio managed for you, for example by using our Managed Portfolio Service. SIPPs enable to you consolidate yet diversify at the same time.
SIPPs can typically include transfers from any pension arrangement including Executive Pension Plans, most paid-up occupational money purchase pensions and old protected-rights pensions that were accrued from contracting out of the State Second Pension or the State Earnings Related Pension Scheme (SERPS), as well as personal pensions.
However, before acting it is vitally important to ensure that you won’t lose any valuable guarantees or benefits that may be attached to your existing plans. These might include a higher tax-free cash rate than the standard 25% normally available from a SIPP or personal pension, life insurance or rights to retire before the normal retirement age of 55.
It is also important to check whether there are any exit fees that may be excessive. Finally, it is very unlikely to make sense to transfer a Final Salary Scheme Pension, which will pay you a known level of retirement income.
If in doubt as to whether to transfer a pension, it is essential to take professional advice.
Our newsletter Best Pensions has more information on the benefits of consolidating your pension pots plus other helpful articles on investing for the future.
Find out more
The value of investments, and the income derived from them, can go down as well as up and you can get back less than you originally invested. Prevailing tax rates and reliefs are dependent on your individual circumstances and are subject to change.