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Are you too loyal to your old pension providers?

Sticking with a pension provider that your employer chose for you could be a mistake. Discover how you might benefit from transferring your old workplace pensions.

Important notes

This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.

This article is more than 6 months old

It was correct at the time of publishing. Our views and any references to tax, investment and pension rules may have changed since then.

We’re not exactly loyal when it comes to our finances. Just under two-thirds of Brits said they have switched banks at some point in their life. And last year, nearly 6 million switched energy providers in search of better deals and service or more ‘green’ credentials.

So perhaps it’s time to think about doing the same with your pension.

To help you decide whether it’s worth staying loyal to your old workplace pension providers, we take a look at the factors you need to consider before transferring.

This article isn’t personal advice. If you’re not sure what the best course of action is for your circumstances, please ask for advice. Before transferring a pension, make sure you won’t lose any benefits or guarantees. You’ll be out of the market if your pension is transferred as cash, meaning you won’t benefit from any rises of suffer any falls.

Why transfer an old workplace pension?

Unlike a bank account or a utility company, it’s often our employers who choose our pension provider. We usually start a new pension pot for every new job we have. And with the average person working for 11 different employers in their lifetime, you could end up with several old pension pots dotted around, none of which you chose yourself.

It makes sense to leave your pension where it is if your employer is still paying into it. But once you’ve left that employer, or if they’ve stopped paying in, you’re under no obligation to stick with the same provider.

In fact, you might be losing out as many workplace pensions offer an outdated service. If you’re only getting one postal statement a year and can’t easily see your pension online, how are you supposed to know whether you’re on track to meet your goals? Not only that, your old workplace pensions might have a limited range of investment and retirement options.

That’s why it’s important to check in with your old pensions and see whether they’re meeting your needs. There are plenty of other pension providers out there that could offer more flexibility and a far better service.

Is it worth transferring a pension?

Ideally, your pension should last as long as you do. So if you're going to have a lifelong relationship with a company, choosing one that gives you more benefits and a better service could pay off in the long-run.

Plus, if you’ve got several old pension pots with different providers, bringing them all under one roof now could mean less hassle later on. With only one set of log-in details to remember, it should be much easier to keep an eye on how much you’ve got saved up and how your investments are performing.

When deciding whether it’s worth transferring, there are a few important things you’ll need to consider. Of course, you’ll need to compare the charges for each pension provider and think about what it’s going to cost you. It’ll often depend on how much you have invested, how often you change investments and what services you use.

But it’s not all about cost, you need to play the long game and think about overall value for money. We take you through the other things you need to think about.

Check #1. Will I lose any benefits or guarantees by transferring?

Some pensions come with valuable guarantees like a secure income for life, a guaranteed annuity rate, or protected tax-free cash.

As a rule, it’s best leaving any pensions with guarantees where they are as these benefits are likely to be lost upon transfer. Giving up guarantees means you might not get back as much as you pay into a pension and could end up running out of money in retirement.

So that means leaving defined benefit and final salary schemes alone, but other pensions can have guarantees too. You should check your paperwork to make sure you won’t lose guarantees by transferring and speak to your pension provider if you’re not sure. It’s also worth finding out whether there would be transfer fees or exit penalties before you transfer.

Check #2. How easy is it to manage your pension?

It’s not always possible to view or make changes to an old workplace pension online. If your pension is stuck in the dark ages, perhaps it’s worth thinking about moving it.

Chances are you keep an eye on your bank account or utility bills with an app on your smartphone. So why not do the same with your pension?

You can bring your pension into the 21st century by choosing a provider with an app. Nearly half of our pension clients use the HL app, which allows you to see your pension investments and make changes on the go.

Check #3. Where can you invest?

Workplace pensions often restrict you to a small number of funds from a few companies. Having such a limited pool of investments to choose from means you’re less likely to find something that match your values and goals.

If you want more freedom over where you invest, you could consider moving to a Self-Invested Personal Pension (SIPP) like the HL SIPP. It’s designed for people who are happy to make their own investment decisions and has a wider investment choice than most traditional pensions. As well as thousands of funds to choose from, you’ll have access to shares, investment trusts and bonds.

What is a SIPP?

Check #4. What are your options at retirement?

Since 2015 there’s been more flexibility when it comes to taking your pension from age 55 (57 from 2028). But some workplace pensions don’t offer all the newer pension freedoms.

To start retirement on your terms, you might want to consider moving your pension to a company that offers the full range of retirement options.

Having access to all the options means you’ll be able to access the money you need, however and whenever you need it. You could mix and match different options by using drawdown or withdrawing a lump sum when you need flexibility, and then buying an annuity when you need a regular, secure income.

Discover the full range of retirement options

What you do with your pension at retirement is an important decision. You should make sure you understand all your options and check that the option you choose is right for your circumstances. If you’re aged 50 or over, you can get free guidance from Pension Wise. It’s an impartial government service that could help you understand your retirement options.

If after looking at all the information, you’re still not sure what retirement option is best for you, take a look at financial advice.

Why consider the HL SIPP?

The HL SIPP could give you more freedom and control over your pension, with access to:

  • Our free app – rated 4.6 stars on the App Store and Google Play
  • Ready-made portfolios to choose from
  • Expert investment research and market updates
  • The full range of options at retirement

A SIPP is designed for people happy to make their own investment decisions. All investments can go down as well as up in value, so it’s possible to get back less than you put in.

More on the HL SIPP

App Store is a service mark of Apple Inc., registered in the U.S. and other countries. Google Play is a trademark of Google Inc.

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    Important notes

    This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.

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