After a job move, it can be easy to forget about pension arrangements with a former employer, at least temporarily. But it’s important to make sure that the money is invested in the right asset mix, to monitor costs and performance, and make changes when needed. Having a ‘mothership’ pension – outside of a workplace pension with a current employer – can make that process much easier and aid your retirement goals.
Setting your own investment strategy
Workplace pensions typically have a limited choice of investments. You are invested in an investment vehicle of the pension scheme’s choosing (‘default fund’), which is designed for the ‘average’ employee. A preferrable option is to pursue an investment strategy based on your personal objectives, time horizon, and attitude to risk. Consolidating multiple plans into one flagship pot – in the form of a self-invested personal pension – allows you to tailor the asset mix/selection.
Are your pensions on auto pilot?
Investors in certain ‘target date’ or ‘lifestyle’ retirement funds should be mindful of a changing asset mix. Such funds automatically reallocate from stocks towards ‘safer’ assets in the years leading up to a pre-determined retirement date. However, that might not reflect your intended use of those assets or circumstances at the time.
Some savers may wish to retire much later than planned or may not need to access a pension for a long time after retirement, so may consider a higher allocation towards growth funds for longer. A preferable approach is to regularly review your investment strategy and flexibly adapt when circumstances dictate.
Less admin, lower fees
Combining older pension schemes makes your pension assets far easier to manage and can lead to reduced costs, as some plans may have higher management charges. Some old workplace pension plans may not offer flexi-access drawdown, which enables retirees to dip into their pension funds flexibly as and when they need to.
Combining multiple pots into one single flexible plan can give you greater options when it comes to planning for both the short and long term. But it’s important to watch out for potential charges or loss of benefits that would result from exiting a plan.
Find out more by calling 03300 564 446, or get in touch via our contact form.
This article is for general information purposes only and does not constitute financial advice or a personal recommendation. Past performance is not a reliable indicator of future results. Investments can rise or fall in value, and you may receive less than you originally invested. Tax treatment depends on individual circumstances and may change in the future.
