Are you sticking with your old pension provider out of a false sense of loyalty or because you are not sure what better options there are around? In this article, I explain why you might want to consider transferring your old workplace pension in the UK to a SIPP.
The results of a recent UK survey by PensionBee regarding pension saving revealed some surprises which turn the conventional trope that young people are reckless with their money on its head.
In fact, Generation Z (adults under 24) are the most likely generation to be saving into a pension and to know how much they have saved to date. Having grown up with the internet they are managing their retirement savings online and keeping track of what they have in real-time. Compare that to some of my Generation X clients who still rely on annual paper pension statements and have often lost track of some pensions altogether.
I’d hazard a guess that many young people will be much more on the ball about switching pensions if they can get a better return elsewhere. And they will be right to do so. Loyalty to old pension providers can cost you dearly so it is worth taking a look at what you have invested where, and considering your options.
Transferring a pension has pros and cons
Before we look at the pros and cons of transferring a pension, I’d like to state the usual caveat that there is no one-size-fits-all solution when it comes to any aspect of financial advice so please don’t take this as personal advice. Use it instead to start a conversation with your financial adviser about your unique situation. Definitely don’t make any decisions without consulting a professional. Transferring pensions can sometimes mean losing certain benefits and guarantees and is not something to be done without due care.
Reasons for expats to transfer a pension
The average person will have six jobs during their working life – a figure expected to rise for millennials and Gen Z. Often moving jobs means a new pension pot so that leaves the average person juggling a number of different pensions, with all the providers chosen by the employer. That means they haven’t necessarily been selected with the employee’s best interests in mind.
Of course, it doesn’t make financial sense to move a pension if your employer is paying into it but once you have moved on to a new job you are not obliged to keep your money with the pension provider chosen by your ex-employer. Indeed, you may find that your former workplace pension’s modus operandi is outdated and doesn’t fit your lifestyle. If communication is limited to one statement through snail mail per year, it won’t be easy to know whether you are on track to meet your retirement goals.
In addition, you could well get a better return elsewhere. This is particularly pertinent to expats who have access to more flexible savings options when compared to the limited options offered by many workplace schemes in the UK.
Is it time for a retirement saving review?
If you aren’t sure what pension savings you have or wonder whether your investments could be performing better it is definitely time for a review. The first step is to list all your old pensions, assess their performance, and work out whether they are meeting your needs.
If you think you may have lost track of any UK pensions – a problem that is much more common than you would think – you can use the government’s Pension Tracing Service to locate them.
Considerations before you transfer or consolidate pensions
Once you know what you have, you can decide whether to make a transfer or consolidate pensions with different providers into one pot. Keeping track of one retirement fund is obviously a lot less hassle than trying to juggle several and it is much easier to assess performance.
On the other side of the coin, you need to weigh up the cost of transferring and what you might be giving up. This will depend on the value of your investments and the services that you use.
For many expats a self-invested personal pension (SIPP) is an attractive option with cheaper fees and a better fund range.
If you are an expat with a UK pension and would like to chat through any aspect of transferring a pension or taking out a SIPP, please get in touch at firstname.lastname@example.org.
Senior Financial Consultant- Highly Commended Emerging Talent of The Year (International Investment Awards 2019)
I aim to maintain and grow an excellent relationship with each client which lasts throughout their working lives and beyond. I strongly believe that a good financial adviser can make a significant difference to an individual’s financial success and positively impact their lives, which is why I love doing what I do.