Pension risk for savers who take a one-pot shot

SAVERS in pension schemes risk losing valuable benefits such as guaranteed income and one-off cash bonuses if they switch or consolidate their pots without taking regulated financial advice, experts warn.

- Harvey Jones

Growing numbers of providers and platforms are encouraging savers to switch their existing defined contribution company and personal pensions, claiming it will cut charges and make them easier to manage.

Pension consolidation, as it is called, also reduces the risk of losing track of the many company pensions workers build up during their career.

While it works well for some, it can be a huge financial mistake for others, who may sacrifice some generous “safeguarded benefits” that are unavailable on today’s schemes.

Many do not know they have these benefits, because they are buried in the small print of a scheme they joined decades ago. Yet these can be very generous by today’s standards, as they were offered in the 1980s and 1990s, when investment growth and interest rates were far higher.

Pensions expert Stuart Feast, chairman of Zippen, which offers low-cost “simplified advice” on transfers and switches, is warning of costly errors that could wreck your retirement plans.

GENEROUS OLD SCHEMES

Consolidating your pensions into a single pot can make sense, said Feast: “It is easy and convenient to have everything in one place but it can also lead to extremely poor outcomes.”