lumin news Issue 10 / Winter 2024

lumin news 10 / winter 2024 Page 11
OPINIONS
Guest column:
Baroness
Ros Altmann
Former Pensions Minister and consumer champion
Ros Altmann outlines the potential benefits of combining
multiple workplace pension plans.
What are the possible benefits of
bringing defined contribution pensions
together?
Combining several smaller defined
contribution pensions into one larger
fund can lead to lower annual fees, so
you can keep more of the investment
returns. Even small reductions in the
amount you pay a company or adviser
annually can make a significant difference
over time.
Joining different pension funds together
means you can select the company
you feel offers the best value. For
example, the best range of investment
options to match your goals, the ability
to easily see how your pension is performing,
reasonable costs of holding /
managing your fund, and high-quality
information, guidance or advice. This
way, you can put your money somewhere
that suits your needs and build a
better pension fund for the long term.
Why is caution warranted before
transferring a pension?
Although there are many advantages
to combining your past workplace
pensions, there are several reasons why
this might not be right for everyone.
Some past pensions have valuable guarantees
– such as minimum returns, guaranteed
annuity rates, or a lower minimum
age of withdrawal. These benefits
should not be given up lightly. Certain
providers may also charge exit fees.
Older pensions are more likely to have
some of these features. You should really
get advice before moving your fund.
Is it worth retaining smaller pots?
It is definitely worth considering
keeping small pension pots (worth less
than £10,000) that you have. You are
able to cash in up to three small pots,
without losing the full £60,000 annual
pension contribution allowance. If you
only have one non-small fund, and you
have taken out more than your 25%
tax-free cash entitlement, you can’t contribute
more than £10,000 per year into
a pension.
What should you be mindful of if
you’re invested in a ‘default’ workplace
pension fund?
‘Default’ workplace pension funds
are designed for an ‘average’ person, so
may not cater to your individual requirements.
Your own needs depend on
factors such as how long you intend to
keep working, when (and if) you plan
to start with drawing money, your health
and age, and any other pensions you
may have (eg. defined benefit pensions
and the State Pension). Default funds
often assume a pre-determined retirement
age and will usually reallocate
towards ‘safer’ assets, such as bonds, in
your fifties, which reduce expected
long-term returns. If you intend to carry
on working, and want to keep your
money invested for longer, you run the
risk that your pension will deliver
sub-optimal investment returns.
What investment opportunities can
combining multiple pots provide?
Uniting multiple pension pots allows
you to invest in a range of assets,
which can help to smooth out investment
returns over time. This diversification
could deliver higher returns too,
as you can reap potential rewards from
allocating towards less mainstream markets.
A larger fund simplifies the monitoring
/administration process, particularly
if the funds are managed according
to one master in vestment plan that suits
your needs.
ROS ALTMANN
Baroness Altmann is an awardwinning
expert on all aspects
of pensions and later life policy.
She is a consumer cham pion,
and was awarded a CBE in 2014
for services to pensioners and
pension provision. She served as
UK Minister of State for Pensions
from 2015 to 2016.