Retirement planning
I opened a new pension.
It is sitting there, ready and waiting.
But I haven’t transferred anything into it.
That is slightly odd, because opening it was not an impulse decision.
I had looked properly at the costs of a pension I have held for many years. That prompted me to research alternatives, compare providers, charges, investment choices and retirement options, and eventually open a SIPP.
I did the research.
I opened the account.
Then I stopped.
What makes this stranger is that I am not unfamiliar with pension transfers. Over the years I have consolidated several old workplace pensions into what became my main pension pot. I also have a separate workplace pension from my most recent employer.
So why does moving this particular pension feel different?
My main pension has been with me for years.
I know where it is. I know how to access it. I have watched the balance rise and fall. I have deliberately moved other pensions into it.
Somewhere along the way it seems to have stopped feeling like one pension provider among many and started feeling like my pension.
There is probably some irrational loyalty in that.
But there is something else too.
The new account is a SIPP, a self-invested personal pension.
Part of the attraction was greater control.
What I had not fully appreciated was how different wanting more control feels from accepting more responsibility.
I think this is where I had unconsciously made the decision bigger than it actually was.
When I thought about moving a substantial pension into a SIPP, part of me was treating it as though I would also have to take complete responsibility for investing the money myself.
But those are separate decisions.
A SIPP gives you greater choice over how your pension is invested. It does not mean you have to start choosing individual shares yourself.
Depending on what the new provider offers, it may be possible to retain the same investments or choose funds that provide a broadly similar diversified investment approach. In some cases investments can be transferred directly rather than being sold first, although this depends on what both providers support.
So there are really two questions:
Should I change pension provider?
And:
Should I change how my pension is invested?
They do not have to have the same answer.
Realising that makes the prospect of transferring feel rather less daunting.
It does not remove the responsibility. If I choose a SIPP, I am deliberately choosing an arrangement that gives me greater control over my investments.
But greater control does not necessarily mean having to manage every investment individually.
Perhaps I had been giving myself more responsibility in my head than the decision actually required.
There is a sizeable gap between what people say they would like to do with their pensions and what they actually do.
Department for Work and Pensions research found that 53% of private pension holders aged 40 to 75 had more than one pension, but only 25% had ever consolidated pensions.
More tellingly, 66% of people who had not consolidated said they would prefer their pension savings to be in one pot rather than spread across several.
That does not mean those people should consolidate. There can be perfectly good reasons for keeping pensions separate.
But it does suggest an intention-action gap.
Knowing you could change your pension is very different from actually being comfortable doing it.
Perhaps some of my reluctance is emotional.
But caution around pension transfers can also be entirely rational.
MoneyHelper warns that pension transfers usually cannot be reversed and that people should understand what they might be giving up before proceeding.
An existing pension could contain valuable guarantees, protected benefits or particular retirement options that might be lost by transferring.
Charges matter, but cheaper does not automatically mean better.
The investments available may differ. Service may differ. Retirement options may differ. Financial protection can also depend on the type of pension involved.
Even the mechanics of moving the money need to be understood. Investments may sometimes be transferred directly. In other cases they may need to be sold and the proceeds transferred as cash, potentially leaving the money out of the market for a period.
So being cautious about making the transfer is not necessarily irrational.
Sometimes caution stops us making a sensible change.
Sometimes caution stops us making an expensive mistake.
The difficult part is knowing which one is happening.
Keeping my pension where it has always been feels safe because nothing appears to change.
But things are still happening.
Charges continue to be taken.
Investments continue to perform.
My circumstances change.
Retirement gets closer.
And a pension that suited me 10 or 20 years ago may not necessarily be the pension I would choose today.
The Financial Conduct Authority recently found that some customers in older pension products were receiving poorer value than customers in newer arrangements. Its review identified issues including complicated charging structures, older product designs and people remaining in investments selected years earlier even though their circumstances may have changed.
That does not mean older pensions are bad.
Some contain valuable benefits that would make moving them a poor decision.
But familiarity is not, by itself, a reason to stay.
Just as a lower charge is not, by itself, a reason to leave.
This is where I have ended up with my own pension.
Perhaps I should keep it exactly where it is.
Perhaps moving to the SIPP will eventually make sense.
But I now realise that I have been bundling several decisions together:
Do I want to change pension provider?
What would I actually gain by moving?
What might I lose?
Do I want greater control and the responsibility that comes with it?
Do I actually want to change how the pension is invested?
Those questions deserve separate answers.
If I work through them and decide my existing pension is still right for me, then staying becomes an active decision.
That is very different from opening an alternative account and thinking:
“I’ll deal with that another day.”
The goal is not to overcome pension inertia. It is to make sure inertia is not making the decision for you.
There is another reason why comparing providers and charges alone cannot answer the question.
Your pension has a job to do within a much bigger retirement plan.
When are you likely to need it?
What other pensions do you have?
When will your State Pension begin?
What savings and investments do you hold elsewhere?
Will you still be working?
What income will your partner or spouse have?
How much do you expect to spend?
Could this particular pension remain invested for several more years?
How important are flexibility, investment choice, predictable income or leaving money behind?
Those questions can change what good value means.
The question is not simply whether another pension is cheaper. It is whether your existing pension still fits the retirement you are now planning.
This is where Planiva fits.
Planiva lets you model pensions alongside State Pension, savings, other income and retirement spending, then compare what happens under different assumptions.
It will not tell you whether to transfer your pension.
It will not recommend a SIPP, pension provider, investment or fund.
What it can help you understand is the question that comes first:
What does this pension actually need to do as part of my retirement?
Once you understand that, you are in a better position to investigate whether your existing pension still fits the job and whether the differences offered elsewhere actually matter to you.
If the decision involves guarantees, protected benefits, tax consequences or investments you are uncertain about, regulated financial advice may be appropriate.
As for my new SIPP?
It is still sitting there waiting.
But working through why I have hesitated has already made the decision feel more manageable.
Changing pension provider does not necessarily mean completely changing how my pension is invested.
Choosing greater control does mean accepting more responsibility, but perhaps not quite as much as I had imagined.
Perhaps I will move.
Perhaps I will stay.
But doing nothing and deciding to stay are not the same thing.
That is the decision I need to make first.
Planiva provides financial planning, scenario modelling and decision-support tools. It does not recommend pension transfers, pension providers, SIPPs, investments, funds or other financial products and does not provide regulated financial advice.
Pension transfers can have significant and sometimes irreversible consequences. Before transferring, check carefully whether you could lose guarantees, protected benefits or other valuable features. Free guidance is available from MoneyHelper and Pension Wise. If you need a personalised recommendation about whether to transfer a pension or how it should be invested, consider speaking to an appropriately qualified regulated financial adviser.
Look beyond the headline balance to charges, investments, benefits, flexibility and overall value.
Explore the tension between pension defaults, personal circumstances and retirement planning.
See why retirement needs ongoing decisions rather than a plan made once and forgotten.
Understand how finding and reviewing old pension pots fits into wider retirement planning.
Model pensions alongside State Pension, savings, income and retirement spending.
Before deciding whether to move a pension, understand what role it needs to play in your retirement. Planiva lets you model pensions alongside State Pension, savings, other income and spending, then compare different retirement assumptions. Planiva does not recommend pension transfers, SIPPs, providers, investments or funds and does not provide regulated financial advice.
