I’ve moved jobs and have received a letter from my previous employer but have no idea if I should take my pension with me. Is this possible/ advisable?
– Anonymous, Dublin
The last fifteen months have seen a lot of career changes, and many of us are receiving letters concerning our pensions from old jobs. If you’ve recently moved on, should your pension come too?
Typically, when you leave a job, you’ll receive a letter a few weeks later setting out options for your pension. There are broadly three: do nothing, transfer it to the pension with your new position, or transfer it to a standalone account which gives you more control.
We’ll look at each option in turn.
Option 1 – do nothing
Doing nothing is easy. And if the pension scheme you’re in is particularly attractive, it could be right for you. For example, you might find that the pension in your old job is great value, offers solid investment options, and comes with great support from the pension administrator. If that’s the case, there are strong reasons to remain where you are.
In practice, many people find it hard to keep up-to-date with pensions from their old jobs, and as a result they are often neglected. So where might you move your pension?
Option 2 – moving your pension with your new job
Moving your money into the pension that comes with your new job will keep everything under one roof. But it can reduce your flexibility. For example, if you expect to stay in your new position until retirement, you’ll be unable to access any of your combined pension pot before then. By keeping the two pots separate, you could access a tax-free lump sum from your old pension starting at age 50.
Option 3 – a standalone pension account
That’s a major reason many people choose to move their old pension into a new, standalone account. This cuts the cord with your old employer, and gives you much more control over your pension. That could mean, for example, moving your money into more appropriate funds, building up a self-invested portfolio of shares and bonds, or consolidating several old pensions with the help of ongoing investment advice.
Finally, remember you can move pensions from posts you left many years ago. With most people in Ireland working in more than ten jobs during their career, a career move is a good time to dust down your overall pension position and assess where there’s room to improve.
This article is adapted from a Moneycube article which appeared in the Sunday Times on 4 July 2021.