[Closed] Consolidating pensions - advice for an idiot

It appears that there could be some financial risk involved and all providers suggest obtaining independent financial advice (which sounds costly).

This normally only applies to Defined Benefit (final salary) pensions, which your NHS one could be. The Aviva one will almost certainly be Defined Contribution (money purchase) where you just build up a pot and see how well it does.

I was wondering about consolidating pensions by transferring the other 2 pension pots to the new scheme but the process and paperwork (which I’ve requested and have to hand) seem rather complicated.

Generally a good idea for Defined Contribution pensions as it's easier to keep track of them all. Paperwork for transferring these is normally just two side of A4 tops.

Hijack....

I'm already drawing a pension  from a DB scheme but will have £20k in a DC scheme when I stop work this year. Im considering what to do with the latter (taking 25% tax free and buying a motorbike is one of my options).

but will have £20k in a DC scheme

Below £30k you don't need to an IFA to review it, so you can pretty much move it wherever you like.

Take 25% tax free and put it in an stocks and shares ISA, move the remainder to a SIPP and keep investing or draw down the lot subject to tax? Lots of options, all depends on what you want from it long term.

Thanks for the advice Footflaps, it's good of you to take the time. I have all the necessary paperwork so hopefully it shouldn't take too long to sort out.

Agreed - and don't forget - pensions are not only a great way to protect you from tax - but can also be transferred to a significant other without any tax penalties (like inheritance tax).

Below £30k you don’t need to an IFA to review it

That £30k rule only applies to DB schemes doesn't it?  With DC you can do whatever you like with any amount without being forced into the grasping hands of an IFA.

That £30k rule only applies to DB schemes doesn’t it?  With DC you can do whatever you like with any amount without being forced into the grasping hands of an IFA.

There is the third way. Transfer the pensions into a 3rd party scheme via an IFA. OK you might not get the least biased advice as they will be earning a commission, but then you're apparently happy just to consolidate everything into one with your current employer so it's no different really. They might tell you something you don't know or haven't thought of, do the paperwork for you and once it's done you can transfer your current one and any future ones into it too.

That £30k rule only applies to DB schemes doesn’t it?

I * think * it might also apply to some DC company schemes, can't recall.

Transfer the pensions into a 3rd party scheme via an IFA.

I've had to deal with quite few IFAs over the years and they've all been next to useless. All you're doing is giving them a commission for very mediocre advice. In a nutshell you explain your circumstances to them and then 3 weeks later they send you a generic report which completely ignores everything you discussed with them. Consolidate into a SIPP, split the sum up 3-4 ways amongst standard funds and you've saved yourself a few % or a few £k.

+1, very much this ^^^

I’ve had to deal with quite few IFAs over the years and they’ve all been next to useless. All you’re doing is giving them a commission for very mediocre advice. In a nutshell you explain your circumstances to them and then 3 weeks later they send you a generic report which completely ignores everything you discussed with them. Consolidate into a SIPP, split the sum up 3-4 ways amongst standard funds and you’ve saved yourself a few % or a few £k.

Dont always agree with you but I agree with this. I have made all of my financial decisions and whilst I have made a few mistakes I think with careful research you can do it yourself. I do have an Economics degree and an interest in finance but I think the role of an IFA is overblown.

The rules are an arse in places. I had 2 Scottish Widows pensions for different companies. They said I could not transfer one into the other without using an IFA, yet there was nothing stopping me transferring one of them to my new employers pension scheme which was not Scottish Widows!

The rules are an arse in places.

Yep, just force you to throw money at someone who adds zero value other than being a 'tick in the box'.

Yep, just force you to throw money at someone who adds zero value other than being a ‘tick in the box’.

As long as you don’t mind pension mis selling like those who were involved in the British Steel fiasco.  Consulting an IFA would like have saved some of these folks tend of thousands of pounds each. But yeah you’re right the rules are pointless!!!

Wasn't it unscrupulous IFAs doing the mis-selling with BS?  The only possible solution to mis-selling is to educate, inform and thereby empower the policy-holder, but sadly that's not how the financial services industry likes to operate (I speak as an insider)

Wasn’t it unscrupulous IFAs doing the mis-selling with BS?

Yep.

The only possible solution to mis-selling is to educate, inform and thereby empower the policy-holder,

Never going to happen!

but sadly that’s not how the financial services industry likes to operate

The whole IFA model is broken. Most people can't afford them and don't have assets to justify them; and the ones who can realise they're not worth the money they charge (ok a bit simplistic).

I did think we should have recommended share portfolios for ISAs / SIPPs provided by some central body, which people can just copy. They can have recommended fee levels, so you can go to HL and ask for SIPP Plan A and say you expect to pay no more than x% etc. Would simplify the whole thing loads esp charges as you'd know what a good % was. Similar to Stakeholder pensions which have capped fees etc.

Sorry I’m a bit hungover therefore slow this morning but...

If I have one “big” matched contribution pension being invested across three pots via Hargreaves Landsdown, are you saying moving the 3 small pensions I started when I was 18 and not performing much into the HL one and into a fund is the right thing to do?  E.g. all my funds are in one place (HL, across 3 managed funds with varying levels of risk) presumably to buy an equity plan in 20 years time, is it good to have an “eggs in one basket” scenario?

Having 100% of your pension with HL is not putting all your eggs in one basket.  HL is simply the platform (an expensive one, but that's another discussion altogether!).  You say that your pension will be invested across 3 funds, each of which will own shares in dozens of individual companies.  Lots of baskets there.

Your 3 old pensions, if they are DC schemes, will now be paid up and may be subject to excessive fees, in which case you should consolidate them into your HL account.

Having 100% of your pension with HL is not putting all your eggs in one basket.

Yes and no. Google Beaufort Securities and read the discussions about that. From the FT

Brokers and investment platforms have admitted they are powerless to prevent customer funds being tapped in the event of an insolvency, after a brokerage collapsed with “huge ramifications” for investors. Some clients of Beaufort Securities, which was closed by Financial Conduct Authority in March, have been told they will have to foot the bill for costly insolvency proceedings being carried out by PwC, the professional services group. The move prompted anger among private investors after they learnt that funds in ringfenced pensions and investment accounts could be raided if their broker were to fall into insolvency. Brokers said the reminder underlines the importance of clients doing due diligence on providers and making sure companies were well capitalised before investing with them. “From a corporate point of view, I don’t think this would ever happen to us,” said Richard Stone, chief executive at investment company The Share Centre. “But ultimately administrators will always need to be paid and the rules allow the insolvency administrators to levy their charges against the client money, resulting in a shortfall.” Danny Cox, chartered financial planner at Hargreaves Lansdown, said: “Our customer assets are held in a segregated account, so are separate from the business and cannot be accessed by our creditors. Recommended City broker Beaufort Securities declared insolvent by FCA “But there is a provision, which PwC is using, to state that if there are not enough assets in the business to cover administration fees then those can be recouped from client money.”

I have my pension split three ways across three different platforms for this very way (also if one gets hacked I only have to worry about 1/3 of my nest egg and getting that back etc).

NB Given the size and scale of HL, even if they did fold (very unlikely) their funds under management are vast, so any costs unwinding it all would be a drop in the ocean. The main risk is that a rogue trader hasn't invested your money in the funds and lost it somewhere else, so you never actually owned the assets.

I'd heard of that case, and I wonder if there's something specific with regard to the way in which Beaufort was set up and run that allows the administrator to make a claim against client money.  e.g. II says all client money is afforded trust status, which ring-fences it from creditors' grasping hands:

https://www.ii.co.uk/about-ii/your-protection/ (scroll to the bottom)

Doesn't mention administrators though.  Hmm.

an expensive one

My company pays 🙂

Your 3 old pensions, if they are DC

No, just small private pensions.

Ok got it re HL being the vehicle, thanks.