Iona Bain: Hello, I'm Iona Bain, and welcome to A Little Bit
Iona Bain: Richer brought to you by Legal & General. Now today, we're
Iona Bain: talking about a topic that might not make your heart
Iona Bain: race, but honestly it's the question that I get asked
Iona Bain: the most when I'm out and about, talking to people
Iona Bain: up and down the country. Should I combine my pension
Iona Bain: pots? Yes, today we're talking about pension consolidation. Time and
Iona Bain: again I hear things like, " Should I do this? Where
Iona Bain: do I even begin? Is it worth the hassle?" So
Iona Bain: today, we're going to blast through this and prove that
Iona Bain: it's actually easier than you might think because even just
Iona Bain: having an awareness of where all your pension pots are
Iona Bain: will go a long way to making you feel more
Iona Bain: in control of your pension savings. And by doing a
Iona Bain: wee big about them now, it's going to give you
Iona Bain: a much clearer view of your financial future. So joining
Iona Bain: me today to cut through the jargon is Mike Crossley.
Iona Bain: He heads up the Workplace Pension Consolidation Team at L&
Iona Bain: G, so he's just the man for this job. Welcome,
Iona Bain: Mike.
Mike Crossley: Thanks.
Iona Bain: So let's just set the scene. Why do people end
Iona Bain: up having more than one pension pot?
Mike Crossley: So loads of people, as they move around between different jobs, they'll
Mike Crossley: typically get enrolled in a new workplace pension each time they
Mike Crossley: start a new job. So I've known people who've got
Mike Crossley: to the age of 30 and had three, four, sometimes
Mike Crossley: five pensions really early in their career. And of course,
Mike Crossley: you've also got people who might be self- employed who
Mike Crossley: might have opened a SIP.
Iona Bain: So people can end up with all these pots, and
Iona Bain: yet they don't know how easy it is to move all of
Iona Bain: them into one place. Talk us through that process. How
Iona Bain: straightforward is it?
Mike Crossley: Yeah, it's a lot more straightforward than I think a
Mike Crossley: lot of people assume. I think when you talk to
Mike Crossley: people about transferring a pension, they assume it's going to
Mike Crossley: be pages and pages of forms to fill in, but
Mike Crossley: the reality couldn't be further from that. Most pension providers
Mike Crossley: now will allow you to request a transfer online, and
Mike Crossley: most of the time that can go through without a
Mike Crossley: paper form in sight.
Iona Bain: Oh, really? Could you do that theoretically through an app
Iona Bain: as well?
Mike Crossley: Yeah, most pension providers now will have an app that you
Mike Crossley: can log into, and often you can start the pension
Mike Crossley: transfer process there. Now of course, it does vary from
Mike Crossley: who your old pension provider is, how it works, but
Mike Crossley: I've known transfers complete in as little as three working
Mike Crossley: days from that initial online request.
Iona Bain: Okay, so that's very encouraging. The question is why should
Iona Bain: we bother? We've all got a hell of a lot
Iona Bain: to do in our lives, so why add consolidating your pension
Iona Bain: pots to that to- do list?
Mike Crossley: So the first thing I'll probably say is the clarity
Mike Crossley: it can give you can be really powerful. If you've got three, four, five different
Mike Crossley: pensions, it can be tricky to understand how much have you
Mike Crossley: saved, are your savings on track to give you what
Mike Crossley: might be a good income in retirement. So bringing them
Mike Crossley: together can be a really positive first step towards getting
Mike Crossley: on top of your retirement savings.
Iona Bain: So it's a question of not forgetting that you have pension pots, and
Iona Bain: therefore being able to maximize what you have much more
Iona Bain: effectively?
Mike Crossley: Yeah. It's really important not to be one of those
Mike Crossley: people whose lost an old pension and it can happen
Mike Crossley: so easily. As people move house and stuff, they forget
Mike Crossley: to tell their pension provider. And then when you try
Mike Crossley: and remember, "Oh, what was that pension I had five, 10
Mike Crossley: years ago," really easy to fall into that trap. So
Mike Crossley: bringing them together perhaps after you've just changed job and
Mike Crossley: you've got a new pension is a great way of
Mike Crossley: keeping on top. And actually, reducing your life admins. You're
Mike Crossley: not then needing to tell five different pension providers each
Mike Crossley: time you move.
Iona Bain: That's a very good point. Often, when we are reluctant
Iona Bain: to do something in the short term, actually we're just
Iona Bain: storing up more problems for the longterm. It could actually
Iona Bain: save us time in the long run. So younger workers
Iona Bain: in particular might end up having quite a lot of
Iona Bain: small pension pots, but is there a pot that would
Iona Bain: be too small to make all this worthwhile?
Mike Crossley: The short answer is no. Even if you've got a
Mike Crossley: really small pension pot, let's call it £ 200 maybe from
Mike Crossley: that café job you did for six months, it's still
Mike Crossley: worth transferring that across, consolidating it into your pensions and
Mike Crossley: not losing it. Because £ 200 today might not feel like
Mike Crossley: very much money in a pension, but actually it's going to
Mike Crossley: be worth bringing that across because that's going to add a small extra bit of
Mike Crossley: money. And of course, it might grow for another 20 or 30 years and be
Mike Crossley: worth something a bit more by the time you actually
Mike Crossley: retire.
Iona Bain: And when we're talking about the different values of pension
Iona Bain: pots, and you mentioned large pension pots and small pension
Iona Bain: pots, how much are we talking here?
Mike Crossley: I've seen pensions being transferred worth as little as £ 50 and worth as much as £500,
Mike Crossley: 000 and everything in between. As little rule of thumb,
Mike Crossley: maybe I'd think of a larger pot being £ 50,000 or
Mike Crossley: more.
Iona Bain: And is the process the same regardless of the value
Iona Bain: of your pot?
Mike Crossley: Yeah. The underlying process is exactly the same whether it's £50,
Mike Crossley: 50,000, or even £500, 000.
Iona Bain: But I imagine if it is higher value, then you're
Iona Bain: going to want to take financial advice perhaps?
Mike Crossley: Yeah, I think I would certainly be reading the paperwork
Mike Crossley: a little more closely on one of those larger pots
Mike Crossley: than a small one.
Iona Bain: But also, is there a reason to transfer your pensions
Iona Bain: into one pot because of how your investments might perform,
Iona Bain: or maybe because you can get lower fees?
Mike Crossley: So if you've got different pensions, it's really worth having
Mike Crossley: a look at the different fees that you might be paying on them
Mike Crossley: because what might look like a really small difference, like 0.
Mike Crossley: 5%, can actually add up to something really substantial over
Mike Crossley: the years. So checking that difference before you transfer is
Mike Crossley: definitely on the list. Aside from the fees, it's also
Mike Crossley: worth understanding that different pensions could be invested in different
Mike Crossley: ways. So each pension you've got via your employer will have
Mike Crossley: probably gone into a default fund unless you've chosen your
Mike Crossley: own funds under there. So as well as differences between
Mike Crossley: default funds in different pension schemes, there's also different ranges
Mike Crossley: of investments that you can choose if you're interested in
Mike Crossley: doing it yourself.
Iona Bain: So you can definitely take more control of your pension
Iona Bain: and how it's invested if you want to?
Mike Crossley: Absolutely.
Iona Bain: And also, if you're a bit younger, could you choose
Iona Bain: maybe to have your pension invested in a more adventurous
Iona Bain: way?
Mike Crossley: Yeah. Many pension providers will try and have their default
Mike Crossley: fund allowing for that. So they'll usually be set up
Mike Crossley: to give you growth in your early years and want
Mike Crossley: more protection as you get closer to retirement. But if
Mike Crossley: you feel confident and you know what you're doing, you can absolutely
Mike Crossley: navigate through the fund range available and choose something that's
Mike Crossley: appropriate for your appetite for risk and growth.
Iona Bain: That's good to know. And what do competitive fees look like on
Iona Bain: a pension?
Mike Crossley: Most pension providers will charge on a percentage basis of
Mike Crossley: the total value of the pension pot. Sometimes it splits
Mike Crossley: into what's known as an annual management charge, the cost
Mike Crossley: of running the pension, which is separate to a fund
Mike Crossley: management charge, which is the cost of the underlying investment.
Mike Crossley: Other providers will just have a single all- in fee
Mike Crossley: that combines the two. So listeners might see differences in
Mike Crossley: the fee structure between their different providers, but of course
Mike Crossley: it's quite simple to add the two if they are
Mike Crossley: separate and compare them to one overall fee. Now, what's
Mike Crossley: competitive. Workplace pensions are actually capped, so they shouldn't ever
Mike Crossley: cost more than 0. 7%. But often, they'll be less than
Mike Crossley: that, particularly if you've worked for a big employer who
Mike Crossley: might have negotiated a much lower fee even you'd typically
Mike Crossley: be able to get if you came to a pension
Mike Crossley: provider directly. So sometimes I can be as low as 0. 2%
Mike Crossley: for all of the fees combined. Now, if you think
Mike Crossley: about that then, perhaps you've got one that's 0. 7% and
Mike Crossley: another one that's 0. 2, and you're starting to think, "
Mike Crossley: Well, does that make much difference?" Let me give you
Mike Crossley: an idea. So if you've got about 25, 30 years away
Mike Crossley: from your retirement and you've got a £10, 000 pot, moving that
Mike Crossley: from a 0. 7% to a 0.2% one could make as
Mike Crossley: much difference as £ 2000 by the time you get to retire,
Mike Crossley: assuming the underlying investment performance is the same. So it
Mike Crossley: can make a substantial difference.
Iona Bain: That could pay for a holiday.
Mike Crossley: It could, indeed.
Iona Bain: A very nice one. So what about people who are
Iona Bain: not sure if they have an old pension or they
Iona Bain: don't know how much might be in there? Where can
Iona Bain: they go to find out more?
Mike Crossley: So the first thing is to have a look through your
Mike Crossley: old paperwork and see if you can find any old
Mike Crossley: statements with policy numbers on or whatever else. If you
Mike Crossley: can find those, you've made a really, really good first
Mike Crossley: step. If you haven't got any even little traces of
Mike Crossley: a pension, but you think it might be there, the
Mike Crossley: government actually has a free tracing service that's available online.
Mike Crossley: So you can go on there, search for your employer
Mike Crossley: and see who that pension might be with. Private pension
Mike Crossley: providers sometimes offer pension tracing services that can help you
Mike Crossley: do that as well.
Iona Bain: So even if you can't remember what the name of
Iona Bain: the pension provider is, so long as you can remember
Iona Bain: who you worked for, that could just give you enough
Iona Bain: of a clue to go hunting for that lost pension?
Mike Crossley: Absolutely.
Iona Bain: So that's really good to know. And are there some
Iona Bain: types of pensions that you wouldn't transfer?
Mike Crossley: Yeah, this is a great point. So if you've been working in the public sector
Mike Crossley: and you've maybe got something like an NHS, Armed Forces,
Mike Crossley: or civil service pension that might be a defined benefit or
Mike Crossley: career average type pension, those work fundamentally different to a
Mike Crossley: defined contribution you might have got through a private company.
Mike Crossley: So some of those pensions, you won't even be able
Mike Crossley: to transfer even if you wanted to.
Iona Bain: Right. So it's not even an option?
Mike Crossley: Most of the time, it's not even an option. Some
Mike Crossley: defined benefit schemes will let you, but you do need
Mike Crossley: to take advice from a specially- trained financial advisor. So
Mike Crossley: that's off the cards for most people, it won't normally
Mike Crossley: be in your interest to do that.
Iona Bain: But if you have a defined contribution pension, then it
Iona Bain: is something that's still worth considering? Or are there certain
Iona Bain: situations where even then, you have to be a bit careful?
Mike Crossley: Yeah, I think that's a good way of thinking about
Mike Crossley: it. Most of the time, particularly if your pensions been
Mike Crossley: set up in maybe the last five or 10 years,
Mike Crossley: it's unlikely to have any sort of special benefits that
Mike Crossley: you might lose on transfer. But some older defined contribution
Mike Crossley: pensions have what we refer to as safeguarded benefits attached
Mike Crossley: to them. So this could be something like a guaranteed
Mike Crossley: annuity rate that you get more when you retire, or
Mike Crossley: it might even be invested in a with- profits fund
Mike Crossley: where there could be a significant penalty for not seeing
Mike Crossley: it through to maturity. Now, if you've got any doubt
Mike Crossley: at all as to whether you might have any of
Mike Crossley: those old or special features, you can always call your
Mike Crossley: provider and check. They'll always tell you if that's the case.
Iona Bain: That's a good piece of advice. If in doubt, find
Iona Bain: out. Now, Mike, you've promised that this is actually a
Iona Bain: lot more straightforward than people think it might be, so
Iona Bain: I'm going to hold you to that. Talk us through
Iona Bain: what the transfer process actually involves, and what you need to look out for, and what you need to bear in mind.
Mike Crossley: So if you've got an old statement in your hand
Mike Crossley: for one of your old pensions and you've got the
Mike Crossley: policy number, the first thing you might do is go
Mike Crossley: on the provider's website, see if you can log in.
Mike Crossley: Check the value, check the charges, have a look and
Mike Crossley: see if there's any sort of special features there. Once
Mike Crossley: you've done that and decided that transferring is the right thing
Mike Crossley: to do, go to your new pension provider's web portal
Mike Crossley: or app and see if you can start the process online.
Mike Crossley: That's usually going to be the simplest way. Most of
Mike Crossley: the time, all you'll need is the name of your
Mike Crossley: old provider and a policy number, complete the online form,
Mike Crossley: read all the risk warnings carefully of course. And what
Mike Crossley: then happens is lots of stuff behind the scenes which
Mike Crossley: you don't necessarily need to worry about, but can be
Mike Crossley: useful to understand. So your new pension provider will then
Mike Crossley: contact your old provider on your behalf. If the old
Mike Crossley: provider goes, " Yeah, we've got a pension for you," what
Mike Crossley: they'll do is they'll actually sell down any investments that
Mike Crossley: you're holding in that old pension scheme. Once it's in
Mike Crossley: cash, they'll send it across to your new provider. Your
Mike Crossley: new provider will usually automatically invest it in line with
Mike Crossley: how your pension's already invested, whether that's the default fund
Mike Crossley: or something that you've chosen yourself. So it can be
Mike Crossley: very, very straightforward in terms of it coming across and
Mike Crossley: you might just get a little SMS after five days
Mike Crossley: or a couple of weeks saying it's all done. You
Mike Crossley: log in and you see it there.
Iona Bain: That's very reassuring because I think a lot of us
Iona Bain: do believe that it's going to involve, as you were
Iona Bain: saying before, lots and lots of paperwork and it was
Iona Bain: going to take a long, long time, but that might
Iona Bain: not be the case.
Mike Crossley: Now, it can really vary by who your provider is.
Mike Crossley: There are still some old school providers out there who
Mike Crossley: insist on having a paper form and it will take
Mike Crossley: a little bit longer. But what I'd probably say is
Mike Crossley: persist with it, don't be put off by that big
Mike Crossley: envelope and long paperwork because once you've done it, you only have to do it once, and then your pensions are together.
Iona Bain: True. You've just got to embrace the admin, Mike, that's the
Iona Bain: message here. And also, I think people will be thinking, "
Iona Bain: Actually, I don't know whether it's a good idea for
Iona Bain: me to transfer my pension across." Is there any kind
Iona Bain: of safeguard in place there to ensure that people are
Iona Bain: not making the wrong decision here?
Mike Crossley: Yeah, pension providers definitely put some safeguards in there to
Mike Crossley: stop you doing something really reckless or that might not
Mike Crossley: be in your interest by accident. So for example, if
Mike Crossley: you've got one of those old pension policies and it's
Mike Crossley: got a guaranteed annuity rate or something like that, as
Mike Crossley: soon as your new provider goes through to your old
Mike Crossley: provider, the old provider will raise a flag and go, "
Mike Crossley: Sorry, there's a safeguarded benefit here. This pension can't be
Mike Crossley: transferred without advice," and they'll knock it back to your
Mike Crossley: new provider who will probably drop you a message or give
Mike Crossley: you a call and let you know. There's some good
Mike Crossley: safeguards in there to stop people making a really big mistake.
Iona Bain: That comes as a relief I'm sure to lots of
Iona Bain: folks listening and watching. And the other question is does
Iona Bain: it cost anything?
Mike Crossley: Now, transferring your pension is normally free with most providers.
Mike Crossley: So you shouldn't be charted either by your old provider
Mike Crossley: for transferring out, or from your new provider for transferring
Mike Crossley: in.
Iona Bain: And people might be wondering if they need to get
Iona Bain: financial advice in order to transfer their pension. Is that
Iona Bain: the case?
Mike Crossley: The simple answer here is that financial advice can be very worthwhile, but
Mike Crossley: it's probably not relevant for most people just thinking about
Mike Crossley: bringing their old pension pots together, particularly if all you've
Mike Crossley: got are five or six quite low value pots from
Mike Crossley: your early career. Now, if you've got a really big
Mike Crossley: pot where the difference in charges is going to make
Mike Crossley: a big difference or you're concerned that maybe you have
Mike Crossley: got some special benefits, but you can work out whether
Mike Crossley: they're worth keeping or whether you should transfer, a financial
Mike Crossley: advisor can be really, really helpful in helping you make
Mike Crossley: sense of all that and make a sound decision. You just
Mike Crossley: need to be aware that they will usually charge for
Mike Crossley: their services.
Iona Bain: I can imagine, Mike, that pension providers have really had
Iona Bain: to up their game in terms of making it easier
Iona Bain: for people to consolidate their pensions because gone are the
Iona Bain: days when people would have a job for many, many
Iona Bain: years, if not for life. And therefore, this issue of
Iona Bain: people having lots of pension pots and not really knowing
Iona Bain: what to do with them, that's something the pensions industry
Iona Bain: has had to really respond to, hasn't it?
Mike Crossley: That's right and so much has changed around this in
Mike Crossley: the last 10 years. Lots of that's been driven by
Mike Crossley: digital, so being able to do a lot more stuff
Mike Crossley: via apps and online portals. But you're absolutely right, there's
Mike Crossley: a lot more pension pots out there, lots more people
Mike Crossley: wanting to do it. And the really nice thing actually
Mike Crossley: is that the people who have completed it are often surprised
Mike Crossley: at just how easy it was. I have seen people
Mike Crossley: transfer sometimes seven, eight, nine different pensions and they've been
Mike Crossley: amazed at the fact they could just do it all
Mike Crossley: online and how quickly it's all come together.
Iona Bain: Yeah, I can imagine that must feel very satisfying as well,
Iona Bain: not thinking that there are all these different pension pots
Iona Bain: in all these different places, and just knowing it's all
Iona Bain: there in one place. I definitely have that kind of
Iona Bain: personality where I like that kind of order in my
Iona Bain: life and I'm sure lots of other people are the
Iona Bain: same.
Mike Crossley: Yeah.
Iona Bain: And people watching and listening might have heard of something
Iona Bain: called the Pensions Dashboard and they'll be thinking, " Well, when
Iona Bain: that comes along, I'll be able to see all my
Iona Bain: pensions in one place." So why should people still be
Iona Bain: thinking about pensions consolidation even if or when that happens?
Mike Crossley: Yeah, this is a great question. So we're expecting pension
Mike Crossley: dashboards to be available from late 2026 and that will
Mike Crossley: be a fantastic resource for people to see all their
Mike Crossley: pensions in one place, and it should give you real
Mike Crossley: clarity on how much you've saved and where is it.
Mike Crossley: However, it doesn't mean that bringing your pensions together isn't
Mike Crossley: worthwhile because there's still those factors like the differences in
Mike Crossley: charges potentially or the difference in investment. And of course, once
Mike Crossley: you can bring them all into one place in a
Mike Crossley: single pension, it can still be better for clarity and
Mike Crossley: planning for the future.
Iona Bain: So you've given us a really helpful whistle- stop tour
Iona Bain: there, Mike. I wonder if we can finish off with
Iona Bain: your top three tips for anyone whose thinking about moving
Iona Bain: their pension savings?
Mike Crossley: Number one, do not be put off by the potential
Mike Crossley: hassle. It is going to be easier than you think
Mike Crossley: and you'll feel a lot better when it's done. Number
Mike Crossley: two, take those few minutes before you press go just
Mike Crossley: to read through, check the charges in particular because that can
Mike Crossley: make a difference especially when it's over a 20 or 30- year
Mike Crossley: period to retirement. And the last one is look out
Mike Crossley: for those scammers. So if someone calls you out the
Mike Crossley: blue or starts offering you incentives to transfer, you just
Mike Crossley: need to ask yourself, " Why is this person so keen
Mike Crossley: to make me transfer?" So just pause, think about it,
Mike Crossley: and if it looks like it might be too good
Mike Crossley: to be true, it probably is.
Iona Bain: That is absolutely excellent advice, Mike. Thank you very much.
Mike Crossley: Thank you.
Iona Bain: Well, I hope that's helped clear the muddy waters on
Iona Bain: pension consolidation for you and inspired you to take on
Iona Bain: a bit of life admin. If this episode has made
Iona Bain: you feel empowered to get a hold of your pension
Iona Bain: savings, then why not share the podcast and help others
Iona Bain: get a little bit richer too? Next time, we're breaking
Iona Bain: down tax with Accountant Tim Paul and lots of easy
Iona Bain: wins to help you legally reduce the amount of tax
Iona Bain: deducted from your salary. This podcast is brought to you
Iona Bain: by L& G. You can keep up with the show
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Iona Bain: or a topic you'd like answered on the show, then
Iona Bain: you can get in touch on our socials. We'd love
Iona Bain: to hear from you. Until next time, thanks for listening,
Iona Bain: and see you soon.