Things to consider when transferring your pension
Anyone with a workplace pension may at some point find themselves asking: should I transfer it? It could be when you’ve moved practice, or you’re nearing retirement and want to consolidate a number of employer-sponsored pension schemes that the question arises.
The RIBA has partnered with Smart Pension to create a market-leading auto-enrolment pension solution tailored for architects' practices and their employees. The good news is that those in the RIBA’s Smart Pension scheme, if they choose to do so, can use the scheme to consolidate their other pensions (and Smart do not charge for this, although other providers may).
What should you consider when thinking about transferring a pension to another provider?
Stuart Stroud, managing director of Corpad Employee Benefits, who offer independent financial advice and employee benefit consultancy as well as being an advisor to the RIBA and its staff on pensions, says that with the introduction of automatic enrolment in 2012, the number of people with pension funds has increased substantially, and so more people are considering their transfer options.
“When an employee leaves service and their pension contributions cease, these pension arrangements are often forgotten about or are not reviewed,” says Stroud. They could benefit by transferring - either lower fees or better fund performance could mean more money at retirement. The RIBA’s Smart Pension scheme offers a dedicated app that makes the process of bringing all pensions together simple. You don’t even need to know all the information about a previous pension as there is an easy tracing service too.
Is there a reason why we’re not referring to it as the RIBA Pension Solution? I’m assuming it’s because we refer to the Smart Pension specifically below and don’t want to confuse matters?
Explains Stroud: “Pension scheme members are able to add information about existing pension funds, track their fund values and transfer existing pension funds should they choose to do so.”
There is no notice period required by the RIBA Smart Pension Scheme to transfer in and having it all in one place makes it much easier to keep track of.
Potential benefits to transfer
One reason members may want to transfer their existing pensions into their Smart Pension account is to take advantage of its extremely low annual management charge of 0.25% of the fund per annum – a very competitive rate in the market. You might find for example, that you are paying higher fees on other existing pension pots, which is not justified by a higher rate of growth.
Smart Pension’s annual growth rate for its default fund ‘Smart Growth’ has been impressive and can be viewed online. This is something financial advisors can compare for you, but you should also be able to access this information from your provider. You may feel you don’t have the time to review pension returns regularly and by having just one pot, it’s much easier to understand how your money is growing and as such plan for your retirement.
Another of the scheme’s key attractions is its stance on ethical and green investment. The pension scheme’s default option has 71% of funds adhering to good environmental, social, and governance (ESG) criteria, which is one of the highest offerings on the market. Those enrolled in the scheme can choose to remain in the default fund or select from 17 alternative funds including ethical, Shariah and ESG funds.
But no one should take the step of transferring a pension without independent advice, Stroud cautions.
“Within practices, we often see employees who have accumulated a number of pension pots with different pension providers. We advocate a review of these arrangements and our team are able to provide independent financial advice to employees on the merits of transferring the pension funds.”
Staying put
Transferring pensions may not always be beneficial, particularly where there are guarantees or early exit penalties, which is where independent advice is so crucial.
Anyone making a decision about their pension must think carefully. You should weigh up the financial pros and cons before deciding to transfer. Seeking independent help, which could be through your employer or the RIBA, is strongly advisable.
But for those who decide to move, the process of switching to the RIBA Smart Pension Scheme could not be easier. The pension transfer can either be processed through the member account/app or a standalone paper application process.
If you would like to find out more about the RIBA Pension Solution or Corpad’s services please contact a member of the RIBA Pension Team now.
