Are you one of the 10 million Brits with an old pension?

Brits hold 10 million pension accounts in old ‘closed book’ non-workplace pensions worth a total of £250 billion, a Freedom of Information request from AJ Bell has found.

Closed book pensions are no longer open to new customers. Although some products may still represent good value, closed book providers have limited incentive to compete on cost and service as they’re no longer seeking to market themselves to new customers.

The figures were collected as part of a 2019 review of non-workplace pensions. The total value of closed book pensions is likely to be far greater when workplace pensions are factored in.

The regulator’s findings from the reports indicate that older products and smaller pots tend to attract higher charges and that consumers can pay significantly different charges for similar products. It also highlighted a lack of product switching among pension savers, leading to limited pressure on firms to compete on cost.

Keeping your costs and charges as low as possible is absolutely crucial if you want to squeeze as much value as possible out of your retirement pot. Even seemingly small differences in charges can add up to tens of thousands of pounds of extra cash in your pension over the course of your life – sums that could make a huge difference to your quality of life in your later years.

Those who bought pensions in the 1990s or early 2000s who now find themselves with policies administered by firms no longer open to new business are particularly at risk of being hit with higher charges. Indeed, it is not uncommon for these types of policies to charge double or even treble the fees levied by more modern, lower cost platforms.

Transferring a pension is usually relatively straightforward and the benefits, in terms of lower costs, increased choice and better service, can be substantial. Just make sure to check if there are any valuable guarantees attached to your policy that would be lost if you transferred.

What to do if you’re in an old pension

Find out the name of the provider

Many people hold old pensions that they may have lost track of or haven’t thought about for a number of years. Often the company they originally opened the product with will have rebranded, been sold on to another company, or both.

So, the first step in getting to grips with your pensions is finding out how many pension pots you have and which company manages them. You could start by looking through your paperwork and getting together all the pension pots you think you have. Alternatively, there are services that can help make this easier, including the government’s own tool, or AJ Bell’s pension finding service.

Get an updated statement

Once you’ve tracked down your pension pots you should be able to request an updated statement. That should include a valuation, outline the charges you’re paying and details of past investment performance.

You should receive these statements annually anyway, but many people have lost the documents, or don’t receive them if they’ve lost contact with their pension provider.

Decide if you want to switch

Once you know where your pensions are and have the key information about the charges and performance, you should be in a position it decide what to do next.

Some older pensions will still be offering decent investment performance and reasonable charges. It’s up to you to decide if you think it’s worth switching provider to get a better deal. Things to look out for include accounts with high charges above 1.5%, or those which have delivered weak performance over a sustained period. Your statements should show whether the fund or funds in the pension are performing better or worse than similar funds, which is often described as a ‘benchmark’. Many people decide to combine their pensions simply to make it easier to manage all their pensions in one place.

Consider whether you need advice

It’s worth considering whether you want to pay a financial professional to help you with this process and give them responsibility for managing your pension. A financial adviser can recommend a pension account for you and should be able to outline clearly the potential benefits of moving to a new provider. They’ll also be able to review your financial circumstances and give you an idea of what your retirement income will look like, and help you plan the most efficient way to take money from your pension when the time comes.

In some cases if one or more of your pension pots hold special benefits such as a Guaranteed Annuity Rate you may need to speak to an adviser before you can move the account anyway. This is to ensure that you don’t inadvertently give up valuable protections without first seeking expert advice.

Start the transfer process

If you decide you want to switch then you’ll need to find a new company to move to. There are lots of investment platforms that allow you to manage your account online easily, with apps and websites that allow you to manage your pension, pick investments, view an up-to-date valuation and take income once you retire.

It’s important to research the options available and consider factors like the cost of the product, the service and ease of use, and the investment options available. Once you’ve decided which company to move to, you should be able to give them some basic details about your existing pension pots. Normally your policy number and the name of the company is enough. Your new investment platform can then start the process of moving the money to your new pension account.