Getting a new job is great news but comes with its share of challenges. It may involve a new role, a different commute, or even a total relocation. On top of this, there are also things to organise with your old workplace, like a handover meeting. But have you thought about what’s going to happen to your old workplace personal pension? Amongst all the excitement of changing jobs, it’s important not to lose track of your old workplace pension. Here are three areas you should check:
When it comes to retirement planning, it’s essential to know the value of your pension pot. This can be helpful when making future decisions involving merging pensions, or when thinking about your future income. Before you leave your current workplace, make sure your pension provider has your correct details – for example, is your login based on your work or your personal email address? This is extra important because your company’s pension provider might change. It is easy to lose track of which pension company has your old workplace pension and making sure they have the correct details helps everyone to stay in touch.
Once you leave your old workplace, you and your old employer will no longer be making contributions to your pension pot. However, the pension provider will continue to charge management fees. There is the real risk that your pension fund will be eroded by these charges, potentially leaving you with no money in this pension pot. It’s important to check that your pension provider is not charging you excessive fees. If they are, then this is one of the major reasons in favour of pension consolidation – merging pensions into one pension pot to avoid multiple fees and management charges. Remember, the longer you leave it, the more money you could potentially lose due to pension fees.
Finally, you should check what type of old workplace pension you hold. A defined benefit pension is often attractive, as it offers a guaranteed retirement income. However, this is the most expensive option for the employer, and you need to be confident that the company is secure enough to be able to provide this.
If you have a defined contribution pension, you should check where the funds have been invested. Like any other investment, personal pensions are invested in different ways – it could be a mixed asset fund, or a Self-Invested Pension Plan (SIPP). Different funds have different levels of risk, and it’s important that you are comfortable with this. This is a personal decision (although an independent financial adviser, like the team at Pension Works, will be able to help) and depends on your own attitude to risk and growth potential.
Thanks to auto-enrolment, many people have multiple workplace pensions, and your old workplace pension may be only one of them. Check our recent article on multiple workplace pensions for some further tips. A pension adviser, like us at Pension Works, regulated by the Financial Conduct Authority, will be able to give you independent advice on what to do with your old employer pensions and retirement planning.
To get free, impartial advice on old workplace pensions contact us today on 0808 164 2664. Or, to find out more about Pension Works, click here.
This can be found on your payslip, P60 document or letters about tax, pensions or social benefits.
If you have (or have had) a pension that is described below then we can potentially carry-out a Pension HealthCheck.
Defined Contribution Pensions
These are ‘Pot of Money’ pensions where the benefits provided take into account the value of the fund at retirement. They can be personal pensions or Occupational Pensions. There are no guarantees as to what pension will be provided. This will be a reflection of contributions made and investment growth.
Defined Benefit Pensions
These offer the promise of a guaranteed pension at retirement which reflects the length of service with an employer. It will be based on either the Final Salary or Average Career Salary of the employee. Providing the company is still in existence, there is no investment risk for the pension receiver. This type of pension is becoming less frequent.
This is a generic term for pensions that are not workplace schemes.
Group Personal Pensions
Employer-sponsored schemes – each member has a personal pension plan, and their contract is with the pension provider. The employer’s role solely is to select the scheme provider, decide if there should be any restrictions on fund choices and take contributions from the employee’s pay and forward them with employer contributions to the pension provider.
A private pension arrangement or personal pension is taken out by a sole-trader or self-employed worker.
State Earnings Related Pension (formerly Graduated Pension and subsequently State 2nd Pension or S2P) was an additional element of State Pension for employees. The amount of pension was linked to the employee’s salary. SERPS was abolished in 2016 when the flat rate State Pension was introduced.
Private pensions are contracts between the pension member and an insurance company or another pension provider.
These are personal pensions where the member has a much wider choice of investments, including commercial property and single company shares.
Personal Pensions with a set of rules that impose amongst other things a maximum annual management charge (AMC), low minimum contribution levels (£20 per month) and an appropriate Default fund.
Private pension linked to an employer’s Defined Benefit Scheme but separate from the Scheme’s internal Additional Voluntary Contribution (AVC) arrangement – largely defunct since the rules were eased several years ago, allowing people to contribute to both personal and employment schemes as they wish.
Money Purchase Pensions
This is another name for Defined Contribution Pensions.
Unfortunately, we are unable to help clients who currently work for or have a pension from one of the following:
If you are unsure about the type of pension(s) you hold, please contact us on 0800 756 1288 or email email@example.com