Is it time to spring clean your pensions?
Hello again!
Nearly two thirds of UK adults have multiple pension pots and, as work patterns continue to evolve (the average person has around 11 jobs over their lifetime), the number of people with multiple pension posts is likely to increase further.
“Why on earth should I care about that?” I hear you all asking! Well, three reasons spring to mind:
- Reduced admin burden (and better insight) as a result of having fewer pots to keep track of
- Reduction in charges
- Eligibility for HUB retirement service, giving you direct advice, paid for by Royal Mail.
Let’s look at each of those reasons in a bit more detail.
Reduced admin burden (and better insight)
Obviously, the more pension pots you have, the more difficult it is to keep track of them all! It’s estimated that more than 6.6 million people in the UK have lost track of at least one pension pot. It might be time to track down your old pension pots and, if you’re still an employee member, consider whether to transfer them into the RMDCP to reduce the admin burden of keeping track of multiple pots and to have better insight into your overall pension provision. If you’ve already lost track of one or more pots, this website might be able to help you find them.
Lower charges
Recent calculations by Quilter (an investment house) indicated that someone with six pots of £20,000 (worth a total of £12,000) could save £41,000 over the course of 20 years if they were to transfer them all to the cheapest of a range of providers charging between 0.75% and 2.5% a year rather than leaving them spread across the six providers.
Each of your pots is likely to have a different fee (known as a Total Expense Charge [TEC] or Total Expense Ratio [TER]). There has been pressure on fees - older pension pots may have much higher charges than more up to date arrangements such as the RMDCP. The RMDCP’s Blended Equity Fund (which members’ pots are invested in during the initial phase of the lifecycle) has a TER of 0.45%. This means that, if you have a £20,000 pot, the total amount charged each year (for investment management and administration) is £90. The charges figure would have been £500 a year if the TER was 2.5% rather than 0.45% for RMDCP.
Eligibility for HUB service, paid for by Royal Mail
It can be difficult to decide how to take your pension pot if you don’t get help. If you have more than £10,000 in your RMDCP pension pot, Royal Mail will pay for you to receive retirement advice from HUB – their experts will guide you through your options and help you to decide what’s right for you.
Next steps
If those three reasons have inspired you to investigate the possible transfer of your old pension pots to the RMDCP, please contact the Royal Mail Service Team by calling them on 0800 092 8263 between 09:00 and 17:00 Monday to Friday or by email at royalmailserviceteam@scottishwidows.com.
Wishing you all the very best,
Ben