Shall I combine my final salary pension with my other pension pots?

25 March 2021

Question by Garry

Hi, I am currently combining a few bits and bobs of old pensions into one easy to manage fund. The ones I have already merged amount to a nominal sum - circa £15k, however I have a final salary pension that is currently at £48.5k. This was from a job I did in my 20's which I was at for a maximum of 5 years. Is it worth combining this too or should I just leave it where it is? I am 52 years of age.

Answered by Dennis Hall

Hi Gary. Transferring and combining those older ‘money purchase’ (Defined Contribution - DC) pension schemes is easier than transferring an old final salary (Defined Benefit - DB) pension. It’s relatively easy to compare DC arrangements when looking at charges and fund performance to determine whether it’s a good idea.

It’s different when it comes to DB schemes, and the consequences of getting it wrong are potentially much worse. Consequently it is a requirement that you take advice from an authorised pension transfer specialist if the transfer value is over £30,000.

The Financial Conduct Authority have also stated that the starting point when transferring a DB pension is to assume that it is not in your best interests. The pension transfer specialist must undertake appropriate analysis to show that transferring is in your ‘best’ interests. That’s a pretty high bar to get over. To avoid any conflicts of interest the cost of this analysis must be paid for regardless of the outcome of the analysis i.e. if the analysis says don’t transfer, you must still pay the fee for the advice.

It wouldn’t be unreasonable to expect a charge of around £2,000 for this analysis, and at this level the costs of the analysis are a big slice of the transfer value, making it more unlikely that transferring is in your best interests. Based on the limited information you have provided, and the sensitivity around DB pension transfers I am unable to tell you to ‘just leave it where it is’. What I will say is that if you came to me as a paying client, I would not take the case on.

Answered by

Dennis Hall

Chartered Financial Planner

I’ve only ever had two careers, Royal Marines Commando and Financial Planner. The physical requirements between the two roles are a world apart, but what I learned in the Marines about high standards, ethical behaviour and purposefully serving others has served me well as a financial planner.