Keeping track of your Pension Pot
Work patterns have changed over the last few years with workers having a number of different jobs during their lifetime, which quite often results in them having a number of small pension pots. This is even more of an issue with the closure of a number of company pension schemes.
Understandably, it can be difficult to manage and coordinate small pension pots, but also essential to know what you have, to be able to plan for a suitable pension at retirement. Quite often we are approached to advise on pulling these plans together in to one new plan for that purpose, however it may not always be the best course of action to transfer all old pensions to a new one.
Over the years, various governments have introduced changes to pension regulations which often mean that newer schemes are less generous than older ones. A transfer of an old scheme to a new plan may well mean that potentially very important benefits are lost.
A number of older personal pension plans set up in the 1980’s have very attractive ‘guaranteed annuity rates’ (GAR) included within the plan. These GARs provide a guarantee that should the plan holder stay with that company until retirement, they will guarantee to provide them with a certain pension at retirement. Interest rates in the 1980’s were substantially higher than they are now, and some policies are guaranteeing a pension at a rate of over 10% of the plan value, which would be impossible to replicate now. Again once the pension is transferred this valuable benefit could be lost.
The question also arises where these pensions should be moved to, when a decision has been made to transfer. If an employer pension scheme is available, then it may be possible to transfer the funds to this plan or it may be more beneficial to move to a brand new personal pension plan.
As you will appreciate this is a complicated subject and we would recommend that professional advice is always sought before moving any pension scheme.
Pension schemes details can also be lost due to moving house, an ex employer closing down or lost paperwork. The UK government provide an useful pension tracing service, which may be able to trace any missing pensions and they can be contacted on 0845 6002 537 or by visiting www.gov.uk. Finding missing pension schemes may take some time, but would be well worth the effort in the end.