Are all your different pensions driving you potty?
How many pensions do you have? If you’ve been working for a while the answer’s probably at least two. What happens to each pot when you move jobs and why isn’t it easier to lump them together? Soon, it might be…
How many jobs have you had in your career so far? I’m 27 and have chalked up three ‘proper’ jobs plus my fair share of side jobs like bar work.
Two of these offered a pension scheme, which I readily took up, so I now have two pension pots with relatively small amounts in them.
The multiple pension pots conundrum
Gone are the days when we took a job at graduation and stuck it out till retirement. Given that the average person now has 11 job changes in their career, I’m looking at accruing another handful of pension pots before I retire.
It’s no wonder that lots of people lose track of them, or have no idea how much is in each one, and have very little idea of what to do with them all on reaching retirement.
What’s worse is that lots of us are paying administration fees on our previous job’s pension schemes in the form of ‘deferred member penalties’. These admin fees sometimes double after you change jobs and are no longer an ‘active member’ of your scheme.
We think this is really unfair and have been asking the government for years to stop unfair charges and find a solution for all these pesky small pots. That’s why we were quite chuffed when the government announced a number of different proposals to combine people’s pensions pots, in a bid to help people create one big fat pot for themselves.
This will save money by reducing administration fees and make dealing with retirement income much simpler than it is at the moment.
How will new pension proposals work?
There are basically two proposals. The first is that your pot – no matter how big or small – automatically follows you around from job to job. The second is that employees who leave a job with a small pension pot, (under a certain amount of money) will automatically have their small pot transferred to a low-charging third party scheme.
A quick straw poll of nearby colleagues tells me that all of them have at least two pension pots. Most can’t remember where they are held or what the charges are and only a few of them know what to do with them on reaching retirement.
Have you accrued more than one pension pot? Have you kept on top of them all? Do you know how to go about accessing the money in them when you reach retirement? And what do you think the government should be doing to simplify this process?
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