One of the most common things we get asked by Phoenix staff is:
‘Should I transfer all my defined contribution pensions into my Phoenix pension?’.
This is a difficult thing to answer as there are many variables and every single pension scheme is different. We’ve therefore written below some things to consider if you are thinking about transferring and consolidating your pensions.
A good place to start is checking what the charges are on your pensions and what these are compared to Phoenix. Due to the discount you get on the Phoenix scheme it is likely that the Phoenix scheme is very competitive, however we have recently been working with a current staff member where the charges on their current schemes are even lower and therefore it is not appropriate for them to transfer. You need to take into account all the charges, there may be a mix of plan costs and fund costs, or the costs may all be bundled into one.
You should also consider the range of investments available within your current scheme compared to the Phoenix pension. The Phoenix pension offers a good selection of passive index funds which we are big fans of, as well as various other funds to suit your own personal risk preferences. You should check how this compares to your other pension plans.
If you are approaching retirement, it’s important you understand how you can access your pension in retirement. Pension freedom rules were introduced in 2015 which greatly increased the options available to you in retirement. In particular it allowed flexi-access drawdown to be taken by anyone.
However, not all pension schemes offer these options, nor do they all allow you to take benefits in multiple stages. Some schemes will only allow you to take an annuity or if not force you to take the money in one go, which could be inappropriate for you. You should therefore check whether your current schemes offer you the full range of options in retirement. The Phoenix pension scheme does allow you to take flexi-access drawdown.
Another important point to consider is the options available to your beneficiaries on your death. It is possible to inherit pensions as beneficiaries’ pensions (the pension carries on in the way it operates for you, for your beneficiaries). This can be better than your beneficiaries inheriting the pension as a cash lump sum, as the money will remain outside of their estates for inheritance tax while the investments continue to grow free of income and capital gains tax.
If you die before age 75 they will be able to access the pension fund at any time completely free of tax. However, not all schemes offer the option to inherit the pension as a beneficiaries pension and they may force your beneficiaries to take a cash lump sum instead. Therefore, this is an important point to check – the Phoenix scheme does allow the pension to be inherited as a pension rather than forcing a lump sum.
You must check whether there are any guarantees on any of your current pensions. A guarantee can include (but not limited to) guaranteed growth rates, minimum fund values, protected pension age, guaranteed annuity rates, scheme specific tax-free cash etc. Once a pension is transferred all guarantees are lost and cannot be undone.
There is no going back on a pension transfer and so be careful about the decision. If you are in any doubt whatsoever about transferring a pension, please do get in touch and we will be able to help. If we can’t, we will try to find you someone who can.
