Investment and pensions

[sxturbo]

I know their is a few people on here who are a dab hand at such black magic as investment and pensions.

I currently have 2 pensions with different companies. I no longer work for 1 of them.

I was thinking about amalgamating the 2 into 1,

Is this a good idea? They all seem to use differing investments to grow the pension.

I've got one with standard Life, one with smart pensions.

They have no benefits attached.

 

[gas112]

depending on your age and size of pots they may not allow you to amalgamate them

 

[sxturbo]

depending on your age and size of pots they may not allow you to amalgamate them

I'm mid 30's and there definitely isn't very much in them, I won't say values but it's less than 20k

 

[JohnD]

I moved several small pensions into a SIPP with Interactive Investor. Very easy, I just filled forms and posted them off. No commission or adviser fees. You might find that no adviser will take you on because to make a profit he would have to charge you a big chunk of your small fund.

I also made contributions from earnings, which automatically receive a tax rebate into the account

They work on a flat fee basis, I think £20 a month, which is £240 a year, so if you have a small fund, it will be cheaper to use a company that charges a percentage of fund value. I should think you can find one that charges 1% or less, in which case a £20,000 pension would cost about £200 a year.

Over time, as your fund grows, the flat-fee gets better and better value. You can move the fund in future if you want.

If you are not an interested investor you will do best to choose low-cost trackers.

I understand Fidelity and Vanguard are very good providers, and have low charges. I believe less than 0.5%. I don't use them, funnily enough if I buy Vanguard funds the charges are lower in my own SIPP because they don't increase if I put more money in. Charges can severely reduce your fund growth over 30 years.

https://www.which.co.uk/news/2021/07/switch-diy-pension-provider-and-save-22800-before-retirement/

(If you are an enthusiastic investor, you will also probably do best to choose low-cost trackers.
Like on the horses, most mug punters lose money.)

 

[JohnD]

Important note

If you are in, or can join, a company scheme where the employer makes a contribution, grab it with both hands and stay until you leave the company.

You will pay no tax or NI on the amount deducted from your pay.

 

[sxturbo]

I'm not particularly investment savvy, I don't think I would be confident to do it myself

 

[sxturbo]

Important note

If you are in, or can join, a company scheme where the employer makes a contribution, grab it with both hands and stay until you leave the company.

You will pay no tax or NI on the amount deducted from your pay.

Sorry yes these are that,

Would there be a benefit in amalgamating them?

The standard Life is the old one

 

[JohnD]

Just pick some tracker funds.

People on here will offer advice.

Some would go for UK only, but I also have European, International and Far East.

Over the next 30 years compound growth could be quite large.

Your existing pension is probably invested in funds something like that, but probably unitised and possibly higher charges.

Trackers are a "buy and forget" option.

 

[JohnD]

Sorry yes these are that,

Would there be a benefit in amalgamating them?

The standard Life is the old one

Ask them (or look at your annual statement) what the funds are and what the charges are for the old scheme. Once you've left the job there will be no more contributions.

You will probably do best to stay in your current employer's scheme. It's very rare to benefit from leaving. It might also have a death or widows or disability benefit. They might accept Transfers In which are worthwhile if they have a low charge and you don't want to self-manage.

 

[JohnD]

I found a Standard Life charges page. Yours MIGHT not be the same.

"The government sets a maximum charge that can apply to Stakeholder pension plans. It’s currently 1.5% each year for the first 10 years and then 1% each year after that. The government could change these limits in the future."

https://www.standardlife.co.uk/pensions/personal-pension/stakeholder-charges

 

[Iamchamps]

Without full details of the pensions no one can really give you that advice. Find the paper work for them and speak with a financial advisor.

 

[conny]

Give PensionWise a call. It is a free government advice centre and they will explain what your options are. They are totally impartial and cannot give you financial advice or recommend anyone but they will tell you the benefits and pitfalls of various schemes. If either of the pensions are 'final salary', (unlikely if you are in your 30's), they cannot advise on them. If both are stakeholder pensions then they can be helpful. You will need as much detail about the pensions as you can find such as how much they are currently worth, who they are with, do they have any benefits such as death grants, widows benefits etc. When you ring the first time they will make an appointment for a phone consultation with an advisor at a time and date of your choosing.

Pension Wise (moneyhelper.org.uk)

 

[Justin Passing]

I'm assuming your pension holder gives you some choice on where the fund is invested.
Have a look at the Moneysupermarket .com forum. They have some savvy people on there, one or two are IFA's and will give you a straight answer.

Or several. One option would be a short annual check by an IFA just to give a sanity opinion for a flat fee.
I don't know of any advantage to amalgamation, I had about 4 pensions at one point, no drama.

Most of what IFAs do of course is set out that it's all a risk, and assess your willingness by using their incalculable wisdom - via half a dozen questions!
With my hindsight I could easily say go for Global, Dynamic , Accumulation funds. Dynamic means riskier but if you look at a multi-asset fund (they will be unless specified), the fund manager will shift the investments over time to avoid obvious bad ones (war zones etc). Those outperform the average over time. If you look, at eg Hargeaves Lansdown where they have a good graph-drawer to compare 5 years. You can split the investment of your fund, don't forget, even if it's with the same company. Near the end of your working life you move towards more conservative funds so you don't get caught if the worst happens.

Here's some HL graphs. Ftse100 is in blue, the middle ones are Global Dynamic, and the grey flattish one is Global Cautious.
I've had money in US Index funds for the last few years - that's the yellow one. That's the sort of strategic decision you can afford to take and review, pretty infrequently. IFA stuff.

Yes it drops more when there's a drop, but it comes back higher, again and again.

That's only 4+ years, and through the slings an arrows of outrageous US presidents. Extrapolate.
Now imagine the line, which over time would go off the top of your computer, representing the performance of the bleedin obvious - microsoft, amazon etc.
If in Aug '17 you'd put 10k in, your standard UK index tracker blue would be at +1.5k.

If you'd put just 1k in microsamazoogle, which may be too granular for a pension pot direction,
that 1k would have gone up to MANY thousands. Extrapolate to 20 years.
Some of those co's are here, this is just a screenshot of biggest co's. Those are Annualised Growth Rates.
MS's 31% over the last 10 years is 1488%.

SO when someone says "use a tracker, you won't beat it", hesitate.
Think electric cars, mobile internet access, IoT data collection - they need 5G. Over to you and good luck.

 

[JohnD]

SO when someone says "use a tracker, you won't beat it", hesitate.
Think electric cars, mobile internet access, IoT data collection - they need 5G. Over to you and good luck.

Survivor bias

remember your investments in Trans-Atlantic Zeppelin, Malcomated Spats Company, Congreves Inflammable Powders, US Hay, and the up and coming Baltimore Opera Hat Company.

 

[JohnD]

And just for interest, let's suppose you'd been lucky enough to hear a hot tip about Microsoft, and put your shirt on it, on 1st April 2000.

After thirteen years, you'd still be out of pocket and wishing you could afford to buy a new shirt. If you hadn't sold out in 2009 when it looked like going down the drain.

Nobody knows who the winners will be, and who the losers.

Remember BHS? Debenhams? FW Woolworth? Aston Martin? Rolls-Royce?

One of those would have been a great long-term buy. Do you know which?

Polaroid cameras? Cassette tape decks? Diesel cars? CD players? HMV record shops? Blockbuster videos? Glossy magazines? Nokia phones?