Pension consolidation pros and cons

the_amazing_raisin

So I'm 35 and I've 5 pension funds

That might sound good but I'm not quite at the point where I can retire to a life of luxury, and with inflation and economies going the way they are I should be on track to retire to a life misery around age 80

Anyway, that's beside the point

So I've changed jobs a couple of times in the past 10 years and each time I end up with a new pension plan

I now have one tiny defined benefit pension and 4 defined contribution pension funds

I've just left them as they are because there didn't seem to be any reason to transfer them. But it's starting to get a bit unmanageable and I think it's likely I'll change jobs at least once or twice more in my career, so I'll have another fund every time

The DB pension I'm not touching, but I'm considering consolidating the DC funds into a single pension fund

I'm wondering what the pros and cons of this are?

Pros seem to be that it's easier to manage and fewer funds to keep track of. There doesn't seem to be any penalty fees or costs to transfer the DC funds to another pension

I guess the main con is that whatever fund I transfer them to won't do as well as the others. But they're all on the autopilot setting and frankly they tend to just follow market performance, so chances are there won't be a significant difference in performance

What are people's thoughts on this?

Henry Ford III

It depends on the size of the funds tbh.

In general I'd say your thinking is fairly reasonable.

walterking

Many people have several pension funds. I have five too for similar reason, but have them all in various blends of Zurich Prisma funds (currently mostly p2 and p3)

I can switch between different Prisma funds without penalty and means I only need to keep an eye on one set of funds.

A chat with an independent financial advisor is probably the best route

micar

You can transfer the 4 DC into 1 or 4 separate Buy Out Bonds of which you'd be the owner of....can have 2&2 or 3&1.

You can draw down from a Buy Out Bond from age 50.

For each DC transfer, you'd need to get the relevant trustee approval and the new provider would need to know your service period and final salary for each employment.

When you go to draw down, you could draw down under salary & service route (max lump sum and any balance into an annuity) or the 25% lump sum & balance to ARF or as taxable cash.

Under the salary and service route, you might be able to take the relevant full amount as a lump sum

If you go with 1 combined Buy Out Bond, you would not be able to mix how benefits are taken.

If you go with separate Buy Out Bonds, you can draw them at different periods and how you draw down can differ.

As someone said.....speak to a financial advisor

The J Stands for Jay

As it stands, you can retire each pension separately from age 50 (for the jobs you've left). If you transfer them all into your current employment's schemes you loose that ability.

You'd also need to consider the charges on each scheme. No point moving out of a lower charge scheme into a higher charging scheme (not to say paying more is never worth it).

Soneone mentioned above getting trustee approval and sending all the details to the new administrator. In practice, some providers don't do this, or some financial advisors will push to get it done without the information to avoid any delays (I don't see a 3/4 day delay making a difference on a 20/25 years investment horizon). If you don't get all your ducks in a row now, you could be storing up a headache for retirement.

micar

https://www.boards.ie/discussion/comment/119900528#Comment_119900528

The provider at New Business stage should be getting full (correct) service and salary details of the relevant employment.

I worked in pension claims and the amount of times issues arise regarding inaccurte or non existent service and salary details was really annoying.....it delays everything as clients end up having to go to Revenue asking for a letter with correct details.

The service and salary information is needed to do a funding check which is a Revenue requirement regardless of how benefits are to be taken.

Ideally you want to get the correct service period and provide highest salary within last 5 years for the relevant employment....Dec payslip or P60 (pre 2019) or Employment Detail Summary (2019 onwards)

The J Stands for Jay

https://www.boards.ie/discussion/comment/119902821#Comment_119902821

In reality, when the new provider asks for those details the broker often kicks off asking why anyone would need that information. Then 10 years later, the exact same person willmick off because that same information isn't on file.

micar

https://www.boards.ie/discussion/comment/119904749#Comment_119904749

Exactly .....happens all the time.

If only said broker had done their job properly at the outset.

https://www.boards.ie/discussion/comment/119892043#Comment_119892043

My understanding is that it has to be 4 separate Buy out Bonds as the salary/service etc. will be different on all schemes. If you've done this I'd be interested to hear with who.