Jolly good question. Here’s some ways to find out:
When you get a delightful annual review of your pension you will be no doubt overjoyed at the obscure and befuddling prose, the strange terminology and even stranger figures. Put that aside and scour the pages to find out how much you are being charged each year for management of your fund. Or if you can’t see it in the literature, phone the company up and nag them until they tell you. If it is higher than 1.5% a year freeze that pension and set up something better-performing somewhere else. Click here for ideas.
Have a look at the bottom line – how much do you have in your pension pot right now? Have a look at last year’s figure, and the year before that, and the year before that. Has it been keeping up with the stock market (or, ideally, beating the market) or would you have done better putting the money in your local building society? If you want to read more about how to compare investment options, go here.
Order a pension forecast from your fund manager to see how your fund is stacking up for your retirement. They will let you know what sort of amount of money you can look forward to when you retire if you continue to contribute the same amount each month until that date. They’ll give you two figures – the actual amount of money they expect you to have and the ‘real’ value of that money. That is, how much your money will buy you in real terms, taking inflation into account.
The second figure is the important one because we want around £400,000 in ‘real’ terms, not just in numbers. Add that to the other money you have invested and you’ll get an idea of how much you will have once you hang up your briefcase for the last time.
You can transfer a pension, just like you can transfer a PEP or ISA, but you might be charged for it. Find our best buys Isas here.
If you’ve been paying into a company pension scheme for more than two years you can leave the pension fund ‘frozen’ and start paying into a new one. If you ‘freeze’ your pension, you'll get your retirement benefits when you retire, as usual.
If you've been paying into the company scheme for less than two years, you'll get your contributions back, minus tax and National Insurance.
You can also transfer a private personal pension fund from one pension scheme to another. There are charges associated with this, surprise, surprise, but if your pension is really awful it may be worthwhile.
Bear in mind: when you transfer money from a pension scheme, the money can’t go into your own bank account and sit there for six months while you make up your mind about what to do next.
Moving pension providers can be complicated and costly and in this case it may be worth seeking (fee-based) professional advice.
Other useful Moneymagpie articles on this subject are:
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