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The day when you will finally be able to stand on your feet and collect your pension may seem a long way off. It’s no surprise that many of us aren’t entirely sure which pension pots we have, who owns them – especially if we’ve changed jobs a lot.
We inquired with the Senior Policy and Proposal Manager Wealth and Pension ServicesAdam Gifford explains how to be pension-savvy when you leave a job or start a new one…
first things first
There are two main types of pension (more on that later) but no matter what type of pension you have, Gifford says that when you change jobs, “the first thing you should do is check and make sure your contact details with your pension provider are up to date.” This will make it even more difficult to lose your pension.
“Your pension is often determined based on your employment details, so your work email address, but obviously when you leave, that’s not necessarily where you want to send your email,” says Gifford. “So go in and make sure your address, contact number and email are up to date with the pension provider. It’s also useful to update your nomination – this is where you’ll set who you want your benefits to be paid to if something happens to you.”
And if you don’t know exactly where your pensions are, and don’t know what contact details are on them, you can use the government’s pension tracing service: gov.uk/find-pension-contact-details,
If you’ve only been on the job for a short time, you may have a smaller amount of utensils, but Gifford says it’s worth keeping track of them all, no matter how small the quantity. “Where we found pots worth less than £1,000 Government He’s trying to make sure they grow and consolidate over time.” One of the dangers is if you have a small amount of money and you’re not contributing to it, potentially, depending on your investments, it could start to reduce its value,” he said. “It might be a good idea, when you have a small amount, to roll it into a new pension.”
defined contribution pension
Are all details up to date? “Then you have some options about what you want to do,” says Gifford. “Defined contribution pensions are what most people get nowadays. This is effectively where the individual builds up a stockpile of money for retirement. Typically, your employer will contribute and you will usually contribute a fixed amount as well.”
“If you change jobs and you’ve got one of those, generally, all contributions coming in will stop, because obviously your employer won’t pay for you because you’ve left the company,” he adds. “You can leave the pension where it is and it will continue to grow over time based on how your money is invested.”
Alternatively, depending on the provider, “you can potentially continue to make individual contributions” – a good option if you’re self-employed. This is not always an option. If not, and you want to continue contributing to it, “you’ll need to transfer it to a new pension pot” that you can contribute to.
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“Your new employer will usually offer you another pension arrangement. This may be with a different provider to where your pension was before, or in some cases, it may be the same one,” says Gifford. Depending on the provider, you may be able to combine the pots if you already have a pension with them, or you may end up with multiple pension pots, all with different providers.
At this point, you can consider mixing your pots with your new pots. “This makes it easier to keep track over time,” says Gifford. “You’ll just want to check what the charges are between your new provider and the old provider – although they’re usually quite competitive in these types of arrangements – then check your investments too, just to make sure you’re happy with the new investment options.” If you’re happy with them “you should be able to bring them in, and then you’ll get a pension going forward.”
Remember to check any “guarantees” attached to your pension before making any mergers. “This is more applicable to older pensions, but there are things like guaranteed annuity rates, protected tax-free cash and pension age with benefits policies,” says Gifford. Don’t get caught.
defined benefit pension
The other main type of pension “Defined benefit pensions are where you’re building up income for retirement, so they’re usually tied to your salary, and so you’re not building up a huge chunk of money. You’re building up an income that will be paid to you once you reach retirement age under the plan,” Gifford explains. “When you leave one of these types of pension plans, you become a deferred member. Whatever you have built into that pension remains, and then every year, typically, the plan will increase the value of that income by a measure of inflation.”
When you change jobs, again, there are many options. “If you’re in a private sector defined benefit pension, or a funded public scheme, such as a Local Government Pension Service, you can potentially transfer your defined benefit pension to a defined contribution pension.” This is generally not advised and is not always possible anyway, for example “in schemes such as the police or fire service, you will not have the option to transfer to a defined contribution pension.”
Another option is that “you can potentially transfer to another defined benefit pension” which works similarly to merging DC pensions.
ask for help
Money matters can be confusing at the best of times, and pensions can seem quite abstract, but there are people who can help you make sense of it all. “Talk to your provider,” says Gifford. “If you’re able, it’s always worthwhile to seek financial advice [from a financial advisor] Not only because they can make sure everything is being done correctly, but also because they can assess your broader financial situation and help you think about retirement planning.
you can also see money helper Website for lots of free help.