Following on from last month’s Enews article about Pensions Awareness Day, one topic which crops up on a regular basis is whether or not to combine or consolidate previous pension schemes into one.
There is no clear-cut answer as it depends on many factors, but this month we will look in very general terms about the “Pros and Cons” of doing so.
These days the term “gig economy” is frequently used to signify a labour market involving short term contracts and freelance work. Many years ago, there used to be “jobs for life”, but nowadays people can end up with a plethora of pension pots which have been accumulated throughout their careers.
The vast majority of employees are now enrolled in what is known as a Qualifying Workplace Pension Scheme and these are what are referred to as “Defined Contribution” – or DC for short – pension plans where savers build up a pot of money. The other type of scheme – Defined Benefit (or DB) are less common now for building up an entitlement to a retirement pension, but some of our clients may still have them from previous employments. Advice on DB arrangements require specialist advice and permissions from the Regulator, the Financial Conduct Authority (FCA). As the FCA say that people should begin by assuming that staying in the DB scheme is the best option for them (partly due to the underlying guarantees), Chancellor Financial Management Limited took the decision not to advise on possible transfers out from this type of scheme.
Due to the large number of factors involved in considering whether to transfer out of previous private and workplace schemes, taking good quality independent financial advice is always recommended, but let us have a look at some of the key considerations.
The value of your investment can fall as well as rise.