Small Pension Pots

I’ve had a number of different jobs over the years, mostly for about 2-3 years each, before I joined my current firm where I’ve been for about 15 years.  I joined the pension scheme for each job I had so I have several different schemes, some of which are worth no more than £2,000.  I have also lost details of one of the schemes and the business I worked for doesn’t exist anymore so I can’t trace it.  Can you advise me what I should do with all these different schemes?  I’m age 59 and don’t plan to retire until at least age 68.

Carl responds

This is something we see quite often, particularly now that workplace schemes are compulsory.  It is certainly worth reviewing all your pensions and working out which ones are giving you valuable returns and which might benefit from being transferred elsewhere.

One thing about some older pension schemes is that they might offer guaranteed benefits which may not be able to be replicated in a newer scheme.   However, it is also the case that some older schemes may not now be actively managed, so performance may be less than you might hope.

There are opportunities to take small pension pots as lump sums, once you have reached the minimum retirement age (currently age 55).  The rules vary according to the type of pension schemes you have, but generally they can be taken with 25 per cent free of tax and the rest taxed as income.  They can be taken before you retire, if required, without affecting your entitlement to continue to build up your pension savings:  once you start taking flexible benefits from larger pension funds, your annual pension contributions allowance will drop to just £4,000.

Your missing pension fund can be traced using the Government’s tracing service, which can be accessed online at https://www.gov.uk/find-pension-contact-details.  You’ll just need some basic information such as the company name and the dates when you worked there.

I strongly recommend that you enlist the help of an independent financial adviser to pull together the information you need about all of your schemes and to help you decide your best strategy.  Your pension savings should be working for you to achieve your retirement goals.  An adviser can, for example, use lifetime cashflow planning tools to project your income needs in retirement and to assess what you need to be putting aside to provide the income you need.

Any opinions expressed in this article do not constitute advice.  The value of an investment and the income from it could go down as well as up.  The return at the end of the investment period is not guaranteed and you may get back less than you originally invested.