What is pension switching?
Pension switch means transferring one or more schemes to a new provider. The principle is much the same as switching to a new bank account or energy provider.Other phrases used to describe pension switch: pension transfer
Why would I bother switching?
Your pension could have a big part to play in how you live your life in the future. And if it is not currently working how you need it to, then simply sticking with what you have got could create issues further down the line.
There’s plenty of time left, can’t I leave checking my pension for another day?
Making small changes to your pension now could make a huge difference to your future. For example, let’s say you could save 1% a year on your pension’s annual management charges but you decide to put off switching for a year – that’s over £520 potentially gone1. Put it off for five years and you could lose over £3,100. Leave it for 20 years and you could have lost a whopping £27,057. The simple fact is the sooner you fix a leaky pension, the better.
So, basically it’s all about how much I am being charged?
The fees you are being charged is just one aspect. Pensions are complicated products with many different elements and it’s all about getting the right balance for you. For example, your pension could currently be shrinking, rather than growing, because of the way it is invested. Or, you might not be able to leave any remaining funds to a loved one when you die – which is far from ideal if this is what you want to do.
Can I switch any kind of pension?
You can switch all private pensions and most employee pensions. You do need to be careful if you are thinking about switching a final salary company pension. These types of schemes generally come with guaranteed benefits when you retire, which you would lose if you were to switch. You cannot switch out of unfunded public sector schemes which cover organisations and professions including the NHS, teachers, armed forces and the police.
There seems to be a lot to consider, I think I’ll stick with what I’ve got
Being completely frank, sticking with what you have got could seriously undermine your plans for the future. Alternatively, it could be absolutely the right decision for you. The issue is not knowing and when it comes to something as important as your pension, is this a gamble you are willing to take?
What to look out for?
If you are doing some research around pension switch then you are probably looking at more than just one company. So, we have listed below some important questions to bear in mind and of course.
Is the company regulated?
Regulated financial advisers must be registered with the Financial Conduct Authority (FCA). If they are not listed on the FCA register then they are not authorised to provide advice. Scammers may try to trick people that they are authorised so it is always important to check. Our FCA registration number is 754580.
What will it cost you?
To advise you on whether you should switch your pension or not a financial adviser will first need to review your situation, including your pension provision and personal circumstances. For this the cost can vary wildly. Our view is that people shouldn’t have to pay to receive expert advice on what to do with their pension. So, we only charge clients a fee if we recommend a change to their pension that they agree with and then instruct us to act upon.
Do you know if you will be giving up any benefits?
Certain pensions – especially final salary company schemes – come with a set of guaranteed benefits, such as a promise to pay you an income for the rest of your life. A financial adviser should make very clear to you any such benefits and advise on whether giving them up is the best thing for you to do or not. Ultimately, you should always have the right information, presented clearly, so that you can make a balanced decision.
If you switch your pension, how will your savings be invested?
The way your money is invested matters. It could be the difference between just getting by and having the freedom to do what you want to do in the future. If a financial adviser cannot clearly show how your savings will be invested and the impact this could have then you should seriously consider not using them.
How will your pension be managed over time?
It is likely that your circumstances and goals will change over time. This is why it is important that your pension is reviewed at least once a year, so that it is always tailored to suit where you are at in life. It’s not worth settling for advice that promises grand changes in the short term but cannot back this up with thorough ongoing management of your pension.