When you change job, your pension options change too. It’s a great time to look at your pension provision and make some improvements.
Typically, you’ll have three options for your pension when you leave your job.
You can do nothing. You can move it into the pension that comes with your new job. Or you can move it away from your old company and into an account in your own name (known in Ireland as a Personal retirement bond, or a Buyout bond).
You’ll usually receive something called a ‘leaving service options letter‘, or ‘pensions benefits options form’ or something similar, setting out the choices available in your specific situation.
We’ve examined the advantages and downsides of each one below.
But before we start – remember everyone’s circumstances are different. There may be other pension alternatives for you if you’re leaving your job. So it’s worth talking to Moneycube to make the most of your specific situation.
1. Do nothing
This is the obvious one, and the easiest choice. Your money stays within your old company’s pension scheme. If that was good enough then, why change it now?
But before you slip into the default option, check a few things out.
Firstly, how much control will you have over your pension? Will you be able to make investment choices? There are cases where employees’ pension savings are moved out of investments, and into pure cash when they leave the company.
If that happens, your pension has no hope of growing – after management charges and inflation, it will almost certainly lose money each year.
Secondly, now is a great time to review the quality of the pension in the job you’re leaving. Has it performed well? Are the charges reasonable? Is the provider responsive, informative and transparent?
If the answer to these questions is now, now is a great time to take your pension funds with you.
And thirdly, is there any way to receive advice on the pension? If your old job offered advice in the workplace, it’s unlikely you’ll have that benefit if you’re working elsewhere.
2. Move your pension to your new employer
Not all pension schemes will allow it, but moving your pension from an old job into your new one has the benefit of keeping everything in one place.
On the other hand, the same arguments about control, charges and investment choice apply. You are missing an opportunity to squirrel away a pension pot which is not tied to any employer, and in your name only.
And if you change job a second time, you’ll have the same questions about dealing with old pensions on your hands again.
3. Move your pension into an account in your own name
It’s also possible to move your pension into an account with only your name on it. This is called a Personal retirement bond, or sometimes a Buyout bond. (You can also use a PRSA but it’s usually more expensive).
Taking control of pensions from your old jobs has several advantages.
This route enables you to cut the cord with your old job. And at the same time, your pension stays independent from your new employer.
If you move your money into a Personal retirement bond, you control the investment choice (aided by your financial advisor). You also have the benefit of transparency on charges (which are generally competitive by comparison to many company pensions), and the ability to move from one pension provider to another if you wish.
Taking control is also a great starting point for tracking down pensions from jobs you had years ago – it’s never too late to reclaim those pension contributions, however small.
And lastly, by moving your pension into a personal fund, you’ll increase your options for drawing on that money when retirement day finally comes.
Have you received a leaving service pension options letter? We’d love to help you make sense of it. You can get in touch using the form below.